Proxy
Statement
and notice of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Duke Energy Corporation | ||||
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Proxy Statement | |
and notice of |
| 526 South Church Street Charlotte, NC 28202-1802 |
March 31, 20042005
Dear Shareholder:
I am pleased to invite you to our annual meeting to be held on May 13, 2004,12, 2005, in the O. J. Miller Auditorium located in our Charlotte headquarters building. We will discuss our 20032004 performance and our goals for 20042005 and respond to any questions you may have. Enclosed with this proxy statement are your proxy card, voting instructions, Duke Energy's 20032004 Summary Annual Report and Duke Energy's 20032004 Form 10-K.
As in the past, we are offering you the opportunity to cast your vote by telephone or online via the Internet. Whether you choose to vote by proxy card, telephone or Internet, it would help if you would vote as soon as possible.
I look forward to seeing you at the annual meeting.
Sincerely,
Paul M. Anderson
Chairman of the Board
and Chief Executive Officer
| 526 South Church Street Charlotte, NC 28202-1802 |
Notice of Annual Meeting of Shareholders
May 13, 200412, 2005
| March 31, | |||
We will hold the annual meeting of shareholders of Duke Energy Corporation on Thursday, May | |||
The purpose of the annual meeting is to consider and take action on the following: | |||
1. | Election of | ||
| 2. | Approval of amendments to Duke Energy's Restated Articles of Incorporation to eliminate classification of Duke Energy's Board of Directors. | ||
| 3. | Ratification of Deloitte & Touche LLP as Duke Energy's independent | ||
Shareholders of record as of March | |||
Your vote is very important. If voting by mail, please sign, date and return the enclosed proxy card in the enclosed prepaid envelope and allow sufficient time for the postal service to deliver your proxy before the meeting. If voting by telephone or on the Internet, please follow the instructions on your proxy card. | |||
By order of the Board of Directors. | |||
  Acting Group Vice President, General Counsel and Secretary | |||
Table of Contents
| Commonly Asked Questions and Answers About the Annual Meeting | 1 | ||||
Proposals to be Voted Upon | |||||
Proposal 1: | Election of Directors | 3 | |||
Proposal 2: | 3 | ||||
Proposal 3: | |||||
The Board of Directors | 5 | ||||
Beneficial Ownership | 9 | ||||
Information on the Board of Directors | 11 | ||||
Report of the Audit Committee | |||||
Report of the Compensation Committee | |||||
Performance Graph | |||||
Executive Compensation | |||||
Summary Compensation Table | |||||
Option Exercises and Year-End Values | 28 | ||||
Long-Term Incentive Plan—Awards in Last Fiscal Year | 29 | ||||
Employment Contracts and Termination of Employment and Change-in-Control Arrangements | |||||
Retirement Plan Information | |||||
Other Information | |||||
Appendix A — | Declassification Amendment to the Restated Articles of Incorporation of Duke Energy Corporation | A-1 | ||
Appendix B — | Charter of the Audit Committee |
Commonly Asked
Questions and
Answers About the
Annual Meeting
If you elect not to vote by proxy,provide voting directions to the plan trustee, shares allocated to your plan account willare to be voted by the plan trustee in the same proportion as those shares held by the plan for which the plan trustee has received directionvoting directions from plan participants. The plan trustee will follow participants' voting directions, and the plan procedure for voting in the absence of voting directions, unless it determines that to do so would be contrary to its fiduciary responsibility.
1
Commonly AskedQuestions andAnswers About theAnnual Meeting
Commonly Asked
Questions and
Answers About the
Annual Meeting
2
PROPOSAL 1:
Election of Directors
The Board of Directors recommends a vote FOR each nominee.
The Board of Directors of Duke Energy currently consists of 11 members,13 members. Two directors, Robert J. Brown and Leo E. Linbeck, Jr., will be retiring at the 2005 annual meeting pursuant to Duke Energy's Board of Directors retirement policy, and one director, George Dean Johnson, Jr., has notified Duke Energy that he will be resigning at the 2005 annual meeting. These three directors have served Duke Energy for many years, and Duke Energy thanks them for their years of service. Following the 2005 annual meeting, the Board will consist of 10 members. However, as discussed below under the caption "Corporate Governance Committee and Nomination of Directors" under "Information on the Board of Directors," the Corporate Governance Committee has recently recommended to the Board of Directors the appointment of James H. Hance, Jr., the recently retired vice chairman of Bank of America Corporation, as a director upon the receipt of a required regulatory approval, which is not expected prior to the 2005 annual meeting. The Board of Directors will consider the appointment of Mr. Hance only after the regulatory approval is obtained, and thus Mr. Hance's nomination is not being submitted to the shareholders for election at the 2005 annual meeting. If appointed, Mr. Hance will stand for election by the shareholders at the 2006 annual meeting.
The Board of Directors is divided into three classes. The three-year terms of the classes are staggered so that the term of one class expires at each annual meeting. The terms of the four Class III directors will expire at the 20042005 annual meeting, including Paul M. Anderson,Roger Agnelli, who was appointed as a Class III director by the Board of Directors on October 7, 2003,August 24, 2004, and effective November 1, 2003.19, 2004, and Dennis R. Hendrix, who was appointed as a Class II director by the Board of Directors on December 16, 2004. Mr. Agnelli and Mr. Hendrix were recommended to the Corporate Governance Committee by Duke Energy's Chief Executive Officer and by nonmanagement directors, respectively.
The Board of Directors has nominated the following Class III directors for election:
Paul M. Anderson, Ann M. Gray, Michael E. J. PhelpsRoger Agnelli, G. Alex Bernhardt, Sr., and James T. Rhodes.Dennis R. Hendrix, as Class II directors; and A. Max Lennon as a Class III director.
The terms of the Class II directors elected at the 2005 annual meeting will expire in 2008. The term of the Class III director elected at the 2005 annual meeting will expire in 2006.
If any director is unable to stand for election, the Board of Directors may reduce the number of directors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director. We do not expect that any nominee will be unavailable or unable to serve.
PROPOSAL 2:
Approval of Amendments to Duke Energy's Restated Articles of Incorporation to Eliminate Classification of Duke Energy's Board of Directors.
The Board of Directors recommends a vote FOR this proposal.
The Board of Directors has unanimously approved, and recommends that the shareholders approve, amendments to Duke Energy's Restated Articles of Incorporation to declassify the Board of Directors and to provide for annual election of directors.
Article VIII of the Restated Articles of Incorporation currently provides for the Board of Directors to be divided into three classes, as nearly equal in number as possible, with each class serving staggered three-year terms. The classification of the Board of Directors was adopted by amendment to the Restated Articles of Incorporation in 1991 following approval of the amendment by holders of over 80% of the then-outstanding Duke Energy Common Stock. Classification is intended to preserve the continuity and experience of Board members and to allow Duke Energy a level of protection against unfair treatment in takeover situations by eliminating the threat of abrupt removal and making it more difficult and time consuming to take control of the Board of Directors.
Some shareholder groups believe that classified boards reduce accountability and responsiveness of the Board of Directors by eliminating the ability to evaluate and elect all directors each year. A shareholder proposal seeking declassification of the Board of Directors was presented to shareholders at Duke Energy's 2004 annual meeting, and a majority of shareholders who voted on the proposal voted in favor of it.
Proposals to be
Voted Upon
Proposal 2 Continued
After careful consideration of the issue, and in light of the shareholders' approval of last year's declassification proposal, the Board of Directors has determined that it would be in the best interests of Duke Energy to eliminate classification of the Board. While the Board of Directors believes that the benefits of a classified board are important, the Board is committed to ensuring maximum accountability by the Board and by management to Duke Energy's shareholders, and annual elections of directors would provide shareholders with a means of evaluating each director each year.
In connection with declassification of the Board, the Board of Directors has also approved, and recommends that shareholders approve, an amendment to the Restated Articles of Incorporation that conforms the provision for the filling of vacancies to the declassification of the Board. The Board of Directors has also approved conforming amendments to Duke Energy's By-Laws that would automatically take affect upon shareholder approval of Proposal 2. A copy of the proposed amendments to the Restated Articles of Incorporation is attached to this proxy statement as Appendix A.
If the shareholders approve Proposal 2, all directors, including those elected at this 2005 annual meeting of shareholders, would continue to serve the remainder of their terms, such that approximately one-third of the directors will stand for election in 2006, approximately two-thirds of the directors will stand for election in 2007 and all directors will stand for election in 2008, with their successors being elected for one-year terms that expire at the next annual meeting. However, the Board of Directors has unanimously adopted a resolution that, if shareholders approve Proposal 2, encourages all directors whose terms continue past the 2006 annual meeting of shareholders to resign effective with the 2006 annual meeting, so that all directors would stand for election in 2006.
Approval of the amendments to the Articles of Incorporation requires the affirmative vote of holders of at least 80% of the voting power of outstanding Duke Energy Common Stock.
PROPOSAL 3:
Ratification of Deloitte & Touche LLP as Duke Energy's Independent AuditorsAuditor for 20042005
The Board of Directors recommends a vote FOR this proposal.
The Board of Directors concurs with the reappointment, subject to shareholder ratification, by the Audit Committee of the firm of Deloitte & Touche LLP, certifieda registered public accountants,accounting firm, as independent auditors to examine Duke Energy's accounts for the year 2004.2005. If the shareholders do not ratify this appointment, the Audit Committee will consider other certifiedregistered public accountants.accounting firms.
A representative of Deloitte & Touche LLP will attend the annual meeting and will have the opportunity to make a statement and be available to respond to appropriate questions.
PROPOSAL 3:
Declassification of Duke Energy's Board of Directors
The Board of Directors recommends a vote AGAINST this shareholder proposal.
A shareholder has informed Duke Energy that it intends to submit the following proposal at the 2004 annual meeting of shareholders. Upon oral or written request, we will promptly furnish the name and address of the shareholder submitting this proposal, as well as the number of shares the shareholder held at the time the proposal was submitted.
The shareholder's proposal is as follows:
RESOLVED, That the shareholders of Duke Energy Corporation ("the Company") urge that the Board of Directors take the necessary steps to declassify the Board of Directors for the purpose of establishing annual elections for directors. The Board of Directors declassification shall be done in a manner that does not affect the unexpired terms of directors previously elected.
Stockholder's Statement of Support
The election of corporate directors is a primary avenue for shareholders to influence corporate affairs and ensure management is accountable to the Company's shareholders. However, under the classified voting system at the Company, individual directors face election only once every three years, and shareholders only vote on roughly one-third of the Board of Directors each year. In our opinion, such a system serves to insulate the Board of Directors and management from shareholder input and the consequences of poor financial performance.
By eliminating the classified Board of Directors, we believe shareholders can register their views annually on the performance of the Board of Directors and each individual director. We feel this will promote a culture of responsiveness and dynamism at the Company, qualities necessary to meet the challenge of increasing shareholder value.
We submit that by introducing annual elections and eliminating the classified Board of Directors at the Company, management and the Board of Directors will be more accountable to shareholders.
3
Nominees for election at the annual meeting are marked with an asterisk (*). The following table indicates how much Duke Energy Common Stock was beneficially owned by the Beneficial The following table indicates how much and what percentage of Duke Energy Common Stock was beneficially owned as of December 31, 2004, by each person known to Duke Energy to be the beneficial owner of five percent (5%) or more of Duke Energy's Common Stock Information on Board Meetings and Attendance The Board of Directors had 12 meetings during Independence of Directors The Board of Directors may determine a director to be independent if the Board has affirmatively determined that the director has no material relationship with Duke Energy or its subsidiaries (references in this proxy statement to Duke Energy's subsidiaries shall mean its consolidated subsidiaries), either directly or as a shareholder, director, officer or employee of an organization that has a relationship with Duke Energy or its subsidiaries. Independence determinations will be made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the annual proxy statement and, if a director joins the Board between annual meetings, at such time. The Board of Directors has determined that the following directors are independent under the listing standards of the New York Stock Exchange: R. Agnelli, G.A. Bernhardt, Sr., R.J. Brown, W.T. Esrey, A.M. Gray, D.R. Hendrix, A.M. Lennon, L.E. Linbeck, Jr., J.G. Martin, M.E.J. Phelps and J.T. Rhodes. In reaching this conclusion, the Board of Directors considered all transactions and relationships between each director or any member of his or her immediate family and Duke Energy and its subsidiaries. To assist in this determination, the Board of Directors adopted the following categorical standards for relationships that are deemed not to impair a director's independence: Information on *An "associated" company is one (a) for which the director or immediate family member is a general partner, principal or employee, or (b) of which the director and his or her immediate family members together own more than 5%. An "associated" charity is one for which the director or immediate family member serves as an officer, director, advisory board member or trustee. For purposes of these standards, immediate family members include a director's spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers-and sisters-in-law, and anyone (other than domestic employees) who shares the director's home. For purposes of the contribution relationship described under "Charitable Relationships" above, payments exclude amounts contributed or pledged to match employee contributions or pledges. Board Committees The Board of Directors has the five standing committees described below: Information on Each committee operates under a written charter adopted by the Board of Directors. The charters are posted on Duke Energy's Internet Web site:http://www.duke-energy.com/investors/corporate.htm and are available in print to any shareholder upon request. Information on Audit Committee and Audit Committee Financial Expert All the members of the Audit Committee have been affirmatively determined to be independent within the meaning of the listing standards of the New York Stock Exchange and Duke Energy's categorical standards of independence. In addition, each Audit Committee member meets the independence and expertise requirements for audit committee membership under existing New York Stock Exchange rules as well as the rules and regulations of the The Audit Committee B. The Board of Directors has determined that the Audit Committee has two Compensation Committee All the members of the Compensation Committee have been affirmatively determined to be independent within the meaning of the listing standards of the New York Stock Exchange and Duke Energy's categorical standards of independence. Corporate Governance Committee and Nomination of Directors All the members of the Corporate Governance Committee have been affirmatively determined to be independent within the meaning of the listing standards of the New York Stock Exchange and Duke Energy's categorical standards of independence. The Corporate Governance Committee Any shareholder who desires to nominate or recommend an individual as a nominee to the Board of Directors should submit the recommendation in writing to the Corporate Secretary, Duke Energy Corporation, P. O. Box 1006, Charlotte, NC 28201-1006 with the proper notice, as provided in the By-Laws, as amended, between 90 and 120 days prior to the first anniversary of the previous year's annual meeting (for the Information on The Corporate Governance Committee considers individuals recommended by shareholders in the same manner and to the same extent as it considers director nominees identified by other means. The Chairman of the Corporate Governance Committee will make exploratory contacts with those nominees whose skills, experiences, qualifications and personal attributes satisfy those that the Corporate Governance Committee has identified as essential for a nominee to possess, as described above. Then, an opportunity will be arranged for the members of the Corporate Governance Committee or as many members as can do so to meet the potential nominees. The Corporate Governance Committee will then select a nominee to recommend to the Board of Directors for consideration and appointment. Board members appointed in this manner will serve, absent unusual circumstances, until their election by Duke Energy's shareholders at the next annual meeting of shareholders. The Corporate Governance Committee has retained Spencer Stuart & Associates, a global executive search firm, to identify and evaluate potential candidates for the Board of Directors. The Corporate Governance Committee has recently recommended to the Board of Directors the appointment of James H. Hance, Jr., the recently retired vice chairman of Bank of America Corporation, as a director. Duke Energy is in the process of submitting an application to the Federal Energy Regulatory Commission (FERC) for a waiver of its regulation concerning interlocking directorates. Once that waiver has been obtained, the Board of Directors will consider the appointment of Mr. Hance as a director. Since the FERC waiver is not expected to be received until after the 2005 annual meeting, Mr. Hance is not being submitted as a nominee for election as director at the 2005 annual meeting. If appointed, Mr. Hance will stand for election at the 2006 annual meeting. Resignation and Retirement Policies Members of the Board of Directors are required to submit their resignations when they change employment or have another significant change in their professional roles and responsibilities. The normal retirement of those individuals who were members of the Board of Directors when the policy was adopted in 1998 is not considered a change for this purpose. The Corporate Governance Committee will determine whether any such resignation will be accepted. In 2004, the Corporate Governance Committee considered, and declined to accept, resignations tendered by two directors upon a change in their employment. Duke Energy's Board of Directors retirement policy states that normal retirement for each director will occur at the annual shareholders meeting following his or her seventieth birthday. Robert J. Brown and Leo E. Linbeck, Jr., will be retiring at the 2005 annual meeting. George Dean Johnson, Jr., has tendered his resignation, effective as of the 2005 annual meeting. Information on Compensation of Directors Annual Retainer and Fees.In 2004, compensation for each outside director was comprised of the following:Proposals to beVoted UponProposal 3 ContinuedWe believe that by aligning the interest of the Board of Directors and management with the interests of shareholders, our Company will be better equipped to enhance shareholder value.For the above reasons, we urge a vote FOR the resolution.Opposing Statement of the Board of DirectorsIn 1991, Duke Energy's shareholders approved amendments to Duke Energy's Articles of Incorporation and By-Laws classifying the Board into three classes of directors serving staggered three-year terms, with each class being as nearly as possible equal to one-third of the total directors. The amendments were approved with the affirmative vote of holders of over 80% of the then outstanding Duke Energy Common Stock. In order to declassify the Board of Directors, the Restated Articles of Incorporation would need to be amended by the affirmative vote of holders of at least 80% of the combined voting power of the then outstanding Duke Energy Common Stock and any other classes of capital stock then outstanding at a subsequent annual or special meeting of the shareholders.As explained when originally approved by the shareholders, the general purpose of the classified Board is to assure the continuity and stability of Duke Energy's management and policies. It ensures that a majority of directors at any given time will have prior experience with and in-depth knowledge of Duke Energy. Directors who have experience with Duke Energy and are familiar with its policies, strategies and businesses are a valuable resource and are better positioned to make decisions that are best for Duke Energy and its shareholders.The classified Board also serves to protect Duke Energy against unfair treatment of Duke Energy's shareholders in takeover situations, by making it more difficult and time-consuming to take control of the Board of Directors. By preventing third parties from replacing a majority of the Board at any given time, and thus eliminating the threat of abrupt removal, the Board can evaluate takeover proposals with the diligence required, appropriately consider alternatives and negotiate effectively, all in the best interests of the shareholders.The Board of Directors believes that its interests and those of management are specifically aligned with shareholders' interests, through the fiduciary duty owed by Board members and management to act in shareholders' best interests. In addition, directors and executives are compensated partially in the form of Duke Energy Common Stock, and are required to own prescribed amounts of Duke Energy Common Stock, specifically in order to align their financial interests with those of shareholders. The Board also strives to be responsive to input from shareholders through the annual shareholders meeting, and through Duke Energy's Investor Relations Department.The Board does not believe that declassification of the Board is necessary to achieve the goals of accountability to shareholders and alignment with their interests. The Board also believes that it is important to retain the classified Board structure for the same reasons that it was originally approved by the shareholders, namely to preserve the continuity and experience of Board members and to allow Duke Energy a level of protection against unfair treatment in takeover situations.The Board of Directors recommends a vote AGAINST this proposal for the reasons set forth above.4
Roger Agnelli*
Director since 2004
President and Chief Executive Officer
Companhia Vale do Rio Doce (CVRD), Brazil,
global mining company and the world's largest
producer of iron ore
Age 45
Mr. Agnelli was elected President and CEO of CVRD in 2001. He served in various positions at Bradesco, a Brazilian financial conglomerate, from 1981 to 2001 and was President and CEO of Bradespar S.A. from March, 2000, to July, 2001. He is a director of Asea Brown Boveri (ABB. Ltd).
Paul M. Anderson *
Director since 2003
Chairman of the Board and CEO, Duke Energy Corporation
Age 5859
Mr. Anderson became Chairman of the Board and CEO in November 2003. He served as Managing Director and CEO of BHP Billiton LTD and BHP Billiton PLC from 1998 to his retirement in 2002, was President and Chief Operating Officer of Duke Energy from 1997 to 1998 and Chairman, President and Chief Executive Officer of PanEnergy Corp from 1995 to 1997, prior to the 1997 merger of PanEnergy Corp and Duke Energy. He is a director of Temple-Inland Inc. and Qantas Airways Limited. He is also a Global Counselor for The Conference Board Inc. He is a Class I director with a term expiring in 2007.
G. Alex Bernhardt, Sr.*
Director since 1991
Chairman and CEO, Bernhardt Furniture Company,
furniture manufacturer
Age 6162
Mr. Bernhardt has been associated with Bernhardt Furniture Company of Lenoir, North Carolina, since 1965. He was named President and a director in 1976 and became Chairman and CEO in 1996. He is a Class II director with a term expiring in 2005.
Robert J. BrownDirector since 1994Chairman and CEO, B&C Associates, Inc.,marketing research and public relations firmAge 69Mr. Brown founded B&C Associates, Inc., High Point, North Carolina, in 1960, served as its President from 1960 until 1968 and has been its Chairman and CEO since 1973. He is a director of Wachovia Corporation, Sonoco Products Company and AutoNation, Inc. He is a Class III director with a term expiring in 2006.5
William T. Esrey
Director since 1985
Chairman Emeritus, Sprint Corporation,
a diversified telecommunications holding companyChairman, Japan Telecom,a diversified telecommunications holding company
Age 6465
Mr. Esrey, Chairman Emeritus of Sprint Corporation, served as its CEO from 1985 to 2003, and as its Chairman from 1990 to 2003. Mr. Esrey becameHe also served as Chairman of Japan Telecom in 2003.from 2003 to 2004. Mr. Esrey is a director of General Mills, Inc., and served as a director of PanEnergy Corp since 1985. He is a Class III director with a term expiring in 2006.
Ann Maynard Gray *
Director since 1994
Former Vice President, ABC, Inc. and Former President,
Diversified Publishing Group of ABC, Inc.,
television, radio and publishing
Age 5859
Ms. Gray was President, Diversified Publishing Group of ABC, Inc. from 1991 until 1997, and was a Corporate Vice President of ABC, Inc. and its predecessors from 1979 to 1998. She is a director of JP Morgan Funds, Elan Corporation, plc, and The Phoenix Companies, Inc. and served as a director of PanEnergy Corp since 1994. She is a Class I director with a term expiring in 2007.
George Dean Johnson, Jr.Dennis R. Hendrix*
Director since 19862004CEO, Extended Stay America, Inc.,development, ownership and managementRetired Chairman of extended-stay lodging facilitiesthe Board, PanEnergy Corp
Age 6165
Mr. JohnsonHendrix rejoined the Board of Directors in December 2004, having previously served from 1997 to 2002. He was a co-founderChairman of Extended Stay America, Inc.the Board of PanEnergy Corp from 1990 to 1997, CEO from 1990 to 1995 and has served as its CEO since 1995. HePresident from 1990 to 1993. Mr. Hendrix is a director of Extended Stay America,Allied Waste Industries Inc., Boca Resorts,Grant Prideco, Inc. and Norfolk Southern Corporation. He is a Class III director with a term expiring in 2006.Newfield Exploration Company.6
A. Max Lennon, Ph.D.*
Director since 1988
President, Education and Research Services,
nonprofit economic development organization
Age 6364
Dr. Lennon was appointed to his present position in 2002.2003. He was President of Mars Hill College from 1996 until 2002. He served as President of Eastern Foods, Inc. from 1994 through 1995. Dr. Lennon was previously involved in higher education from 1966 to 1994, his last tenure being at Clemson University where he served as President for eight years. He is a director of Delta Woodside Industries, Inc. and Delta Apparel. He is a Class II director with a term expiring in 2005.
Leo E. Linbeck, Jr.Director since 1986Senior Chairman, Linbeck Corporation,holding company of two construction-related firmsAge 69Mr. Linbeck assumed his present position in 2003. He was Chairman, President and CEO of Linbeck Corporation from 1990 to 2003, after serving as Chairman, President and CEO of Linbeck Construction Corporation from 1975 to 1990. He served as a director of PanEnergy Corp from 1986. He is a Class II director with a term expiring in 2005.
James G. Martin, Ph.D.
Director since 1994
Corporate Vice President, Carolinas HealthCare
System, largest healthcare system in the Carolinas
Age 6869
Dr. Martin was named to his present position in 1995. He served as Governor of the State of North Carolina from 1985 to 1993 and was a member of the United States House of Representatives, representing the Ninth District of North Carolina, from 1973 to 1984. Dr. Martin is a director of Palomar Medical Technologies, Inc., aaiPharma Inc. and Family Dollar Stores, Inc. He is a Class III director with a term expiring in 2006.7
Michael E.J. Phelps*
Director since 2002
Chairman, Dornoch Capital Inc., investment company
Chairman, Duke Energy Canadian Advisory Council
Age 5657
Mr. Phelps was named Chairman, Dornoch Capital Inc. in 2003 and Chairman, Duke Energy Canadian Advisory Council in 2002. He served as Chairman and Chief Executive OfficerCEO of Westcoast Energy Inc. from 1992 to 2002. He is a director of Canfor Corporation, Canadian Pacific Railway Company and Fairborne Energy Ltd. He is a Class I director with a term expiring in 2007.
James T. Rhodes, Ph.D. *
Director since 2001
Retired Chairman, President and CEO, Institute of Nuclear Power Operations, a nonprofit
corporation promoting safety, reliability and excellence in nuclear plant operation
Age 6263
Dr. Rhodes was Chairman and CEO of the Institute of Nuclear Power Operations from 1998 to 1999 and Chairman, President and CEO from 1999 until 2001. He served as President and CEO of Virginia Electric & Power Company, a subsidiary of Dominion Resources, Inc., from 1989 until 1997. HeDr. Rhodes is a member of the Advisory Council for the Electric Power Research Institute's Advisory Council.Institute. He is a Class I director with a term expiring in 2007.8current directors, the current and former executive officers listed in the Summary Compensation Table under "Compensation""Executive Compensation" below (referred to as the Named Executive Officers), and by all current directors and executive officers as a group as of March 2, 2004.February 15, 2005.March 2, 2004,February 15, 2005, in Duke Energy's employee benefit plans. current directors and executive officers as a group represents beneficial ownership of less than 1% of the outstanding shares of Duke Energy Common Stock. Name or Identity of Group Total Shares
Beneficially Owned1 P.M. Anderson2R. Agnelli 454,75462P.M. Anderson 801,421 G.A. Bernhardt, Sr. 46,146R.W. Blackburn682,887R.P. Brace410,32124,355 R.J. Brown 31,00239,870 W.T. Esrey 70,38479,554 F.J. Fowler 2 964,5191,115,244 A.M. Gray 54,06461,282 D.L. Hauser 195,336 D.R. Hendrix 300,993 2 G.D. Johnson, Jr. 852,362823,3093 A.M. Lennon 44,88522,237 L.E. Linbeck, Jr. 65,01874,284 J.G. Martin 26,79922,103 R.J. Osborne2J.W. Mogg 402,962448,002 M.E.J. Phelps 75,079R.B. Priory1,818,34346,536 J.T. Rhodes 11,37715,503 R.G. Shaw 2 472,215559,654 Directors and executive officers
as a group (19)(22) 4,344,0525,683,608 March 2, 2004:February 15, 2005, including conversion of vested stock equivalents and exercise of vested options (including options that are not in-the-money) upon voluntary termination: P.M. Anderson, 631,667; G.A. Bernhardt, Sr., 42,544; R.W. Blackburn, 647,650; R.P. Brace, 408,306;20,753; R.J. Brown, 24,888;31,886; W.T. Esrey, 31,459;39,783; F.J. Fowler, 849,908;989,309; A.M. Gray, 36,236;41,781; D.L. Hauser, 172,330; D.R. Hendrix, 11,760; G.D. Johnson, Jr., 47,144;16,900; A.M. Lennon, 43,569;20,875; L.E. Linbeck, Jr., 30,684;37,818; J.G. Martin, 24,368; R.J. Osborne, 365,300;16,256; J.W. Mogg, 374,552; M.E.J. Phelps, 5,055; R.B. Priory, 1,771,991;46,536; J.T. Rhodes, 3,721;5,524; R.G. Shaw, 458,950;546,075; directors and executive officers as a group (19)(22), 2,635,789.3,943,456. Number of shares that directors have a right to acquire based on conversion of phantom stock is based on the closing price of Duke Energy Common Stock on March 2, 2004.February 15, 2005. See "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" for information about in-the-money options.Current Named Executive Officers also own Common Stock equivalents, including phantom stock and performance shares, under Duke Energy executive compensation and benefits arrangements asMr. Hendrix disclaims beneficial ownership of March 2, 2004, in the following amounts: P.M. Anderson, 600,000; F.J. Fowler, 90,329; R.J. Osborne, 66,544; R.G. Shaw, 50,727.20,895 shares.9
Ownershipas of February 13, 2004, the date upon which such holderbased on information provided in Schedule 13G/A filed a Schedule 13G with the Securities and Exchange Commission.Commission (SEC) by Capital Research and Management Company on February 11, 2005, and Schedule 13G filed with the SEC by Dodge & Cox on February 10, 2005. Shares of Common Stock Shares of Common Stock Name and Address of Beneficial Owner Beneficially
Owned1 Percentage1 Beneficially
Owned Percentage Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071 73,225,940 8.1% 52,574,690 1 5.6% Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104 52,888,566 2 5.6% theits Schedule 13G, Capital Research and Management Company reported it is deemed to be the beneficial owner of 73,225,940 shares or 8.1% of the 909,298,840 shares of Duke Energy Common Stock that Capital Research and Management Company believed to be outstanding as of the date of the Schedule 13G as a result of acting as investment adviser to various investment companies. The shares of Duke Energy Common Stock reported by Capital Researchcompanies, and Management Company onhas no voting power and sole dispositive power with respect to these shares.include 1,765,840filed by Dodge & Cox, these shares resulting from the assumed settlement of the purchase contracts underlying 2,753,100 Duke Energy Equity Units, which settlement is scheduled for May 18, 2004, pursuant to the terms of the Equity Units.The following table shows how many units of limited partnership interests in TEPPCO Partners, L.P. were beneficially owned as of March 2, 2004, by Named Executive Officers, and by current executive officers of Duke Energy as a group. No directors of Duke Energy owned such units on that date. TEPPCO Partners, L.P. is a publicly traded master limited partnership, and Texas Eastern Products Pipeline Company, LLC, an indirect subsidiary of Duke Energy, is its general partner. As of March 2, 2004, the number of unitsare beneficially owned by current executive officers of Duke Energy as a group was less than 1% of the outstanding units. None ofits clients, and Dodge & Cox has sole voting power with respect to 49,615,836 shares, shared voting power with respect to 735,200 shares, and sole dispositive power with respect to all these persons had the right to acquire units within 60 days after March 2, 2004. Name or Identity of GroupNumber of UnitsBeneficially OwnedF. J. Fowler3,100R. J. Osborne2,000R.G. Shaw900Executive officers as a group (9)9,51410
the Board of
Directors2003.2004. No director attended less than 75% of the total of the Board meetings and the meetings of the committees upon which he or she served. The average overall attendance percentage for meetings of the Board of Directors in 20032004 was 94.6%94% and for meetings of Board committees was 94.1%94%. Ann M. Gray was appointed as lead director on May 12, 2004. The lead director is responsible for presiding director for each meetingat Board meetings when the Chairman/Chief Executive Officer is not present, presiding at executive sessions of the nonmanagement directors, is chosen on an ad hoc basis byassisting in developing the Board agenda in collaboration with the Chairman/Chief Executive Officer, calling special meetings of the Board of Directors, and serving as a liaison between the independent directors present at each such meeting.and the Chairman/Chief Executive Officer. Directors are encouraged to attend the annual meeting of shareholders. AllTen directors except one attended the 20032004 annual meeting of shareholders.Relationship Requirements for Immateriality of Relationship Personal Relationships
The director or immediate family member resides within a service area of, and is provided with utility service by, Duke Energy or its subsidiaries.
Utility service must be provided in the ordinary course of the provider's business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm's-length terms.
The director or immediate family member holds securities issued publicly by Duke Energy or its subsidiaries.
The director or immediate family member can receive no extra benefit not shared on a pro rata basis.
The director or immediate family member receives pension or other forms of deferred compensation for prior service, or other
•
The compensation cannot be contingent in any way on continued service, andcompensation unrelated to director or meeting fees, from Duke Energy or its subsidiaries. • the director has not been employed by Duke Energy or any company that was a subsidiary of Duke Energy at the time of such employment for at least three years, or the immediate family member has not been an executive officer of Duke Energy for at least three years and any such compensation that is not pension or other forms of deferred compensation for prior service cannot exceed $10,000 per year.
the Board of
DirectorsRelationship Requirements for Immateriality of Relationship Business Relationships
Payments for property or services are made between Duke Energy or its subsidiaries and a company associated* with the director or
•
Payment amounts must not exceed the greater of $1,000,000 or 2% of the associated company's revenues in any of its last three fiscal years, andimmediate family member who is an executive officer of the associated company. • Relationship must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.
Indebtedness is outstanding between Duke Energy or its subsidiaries and a company associated* with the director or immediate
•
Indebtedness amounts must not exceed 5% of the associated company's assets in any of its last three fiscal years, andfamily member. • Relationship must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.
The director or immediate family member is a nonmanagement director of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.
The business must be done in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.
An immediate family member is an employee (other than an executive officer) of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.
If the immediate family member lives in the director's home, the business must be done in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.
The director and his or her immediate family members together own 5% or less of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.
NoneCharitable Relationships
Charitable donations or pledges are made by Duke Energy or its subsidiaries to a charity associated* with the director or immediate family member.
Donations and pledges must not result in payments exceeding the greater of $100,000 and 2% of the charity's revenues in any of its last three fiscal years.
A charity associated* with the director or immediate family member is located within a service area of, and is provided with utility service by, Duke Energy or its subsidiaries.
Utility service must be provided in the ordinary course of the provider's business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm's-length terms.
Payments for property or services are made between Duke Energy or its subsidiaries and a charity associated* with the director or immediate family member.
Relationships must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms or subject to competitive bidding.auditors;auditor; provides independent oversight for financial reporting and internal controls, the internal audit function and the independent auditors;auditor; determines the independence of auditors; and makes recommendations on audit matters and internal controls to the Board of Directors.
the Board of
DirectorsIndependenceBoard Committee Membership Roster (as of DirectorsMarch 31, 2005)Name Audit Compensation Corporate
Governance Finance and Risk
Management Nuclear
OversightR. Agnelli X X P.M. Anderson G.A. Bernhardt, Sr. X X R.J. Brown ** X X W.T. Esrey X * A.M. Gray X X * X D.R. Hendrix X X G.D. Johnson, Jr.** X A.M. Lennon X L.E. Linbeck, Jr.** X X J.G. Martin X * X X M.E.J. Phelps X X * J.T. Rhodes X X * Number of meetings in 2004 17 6 6 8 5 The* Chair
** Retiring or resigning from Board of Directors may determine a director to be independent if the Board has affirmatively determined that the director has no material relationship with Duke Energy, either directly or as a shareholder, director, officer or employee of an organization that has a relationship with Duke Energy. Independence determinations will be made on anat 2005 annual basis at the time the Board of Directors approves director nominees for inclusion in the annual proxy statement and, if a director joins the Board between annual meetings, at such time.meetingThe Board of Directors has determined that all but one of its nonemployee directors are independent under the listing standards of the New York Stock Exchange. In reaching this conclusion, the Board of Directors considered all transactions and relationships between each director or any member of his or her immediate family and Duke Energy and its subsidiaries.11
the Board of
DirectorsAs part of this determination, the Board of Directors adopted the following categorical standards for relationships that are deemed not to impair a director's independence:RelationshipRequirements for Immateriality of RelationshipPersonal RelationshipsThe director or immediate family member resides within a service area of, and is provided with utility service by, Duke Energy or its subsidiaries.Utility service must be provided in the ordinary course of the provider's business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm's-length terms.The director or immediate family member holds securities issued publicly by Duke Energy or its subsidiaries.The director or immediate family member can receive no extra benefit not shared on a pro rata basis.The director or immediate family member receives pension or other forms of deferred compensation for prior service, or other•The compensation cannot be contingent in any way on continued service, andcompensation unrelated to director or meeting fees, from Duke Energy or its subsidiaries.•the director has not been employed by Duke Energy or any company that was a subsidiary of Duke Energy at the time of such employment for at least three years, or the immediate family member has not been an executive officer of Duke Energy for at least three years and any such compensation that is not pension or other forms of deferred compensation for prior service cannot exceed $10,000 per year.Business RelationshipsPayments for property or services are made between Duke Energy or its subsidiaries and a company associated* with the director or•Payment amounts must not exceed the greater of $1,000,000 or 2% of the associated company's revenues in any of its last three (or current) fiscal years, andimmediate family member who is an executive officer of the associated company.•Relationship must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.Indebtedness is outstanding between Duke Energy or its subsidiaries and a company associated* with the director or immediate•Indebtedness amounts must not exceed 5% of the associated company's assets in any of its last three (or current) fiscal years, andfamily member.•Relationship must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.The director or immediate family member is a nonmanagement director of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.The business must be done in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.An immediate family member is an employee (other than an executive officer) of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.If the immediate family member lives in the director's home, the business must be done in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms.The director and his or her immediate family members together own 5% or less of a company that does business with Duke Energy or its subsidiaries or in which Duke Energy or its subsidiaries have an equity interest.NoneCharitable RelationshipsCharitable donations or pledges are made by Duke Energy or its subsidiaries to a charity associated* with the director or immediate family member.Donations and pledges must not result in payments exceeding the greater of $100,000 and 2% of the charity's revenues in any of its last three (or the current or any future) fiscal years.12Information onthe Board ofDirectorsRelationshipRequirements for Immateriality of RelationshipA charity associated* with the director or immediate family member is located within a service area of, and is provided with utility service by, Duke Energy or its subsidiaries.Utility service must be provided in the ordinary course of the provider's business and at rates or charges fixed in conformity with law or governmental authority, or if the service is unregulated, on arm's-length terms.Payments for property or services are made between Duke Energy or its subsidiaries and a charity associated* with the director or immediate family member.Relationships must be in the ordinary course of Duke Energy's or its subsidiary's business and on arm's-length terms or subject to competitive bidding.*An "associated" company is one (a) for which the director or immediate family member is a general partner, principal or employee, or (b) of which the director and his or her immediate family members together own more than 5%. An "associated" charity is one for which the director or immediate family member serves as an officer, director, advisory board member or trustee.For purposes of these standards, immediate family members include a director's spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers-and sisters-in-law, and anyone (other than domestic employees) who shares the director's home. For purposes of the contribution relationship described under "Charitable Relationships" above, payments exclude amounts contributed or pledged to match employee contributions or pledges.Compensation Committee Interlocks and Insider ParticipationGeorge Dean Johnson, Jr., has a brother who has a material interest in a private corporation that was paid $145,105 in 2003 by a Duke Energy affiliate for construction services that were not provided pursuant to a competitive bid.Board Committee Membership RosterName Audit Compensation Corporate
Governance Finance and Risk
Management Nuclear
OversightP.M. Anderson G.A. Bernhardt, Sr. X X R.J. Brown X X W.T. Esrey X A.M. Gray X X X X G.D. Johnson, Jr. X * A.M. Lennon X * L.E. Linbeck, Jr. X * X J.G. Martin X X * X M.E.J. Phelps X X J.T. Rhodes X X * Number of meetings in 2003 14 10 5 13 0** * Chair** Established in 2004Securities and Exchange Commission.SEC.operates under a written charter adopted by the Board of Directors, which is attached hereto as Appendix A and is available through the Duke Energy website atwww.duke-energy.com.13Information onthe Board ofDirectorsaudit"audit committee financial experts," within the meaning of the regulations of the SEC: William T. Esrey and James T. Rhodes, who are independent directors.Rhodes.The Compensation Committee operates under a written charter adopted by the Board of Directors, which is available through the Duke Energy website atwww.duke-energy.com. operates under a written charter adopted by the Board of Directors, which is available through the Duke Energy website atwww.duke-energy.com.The Corporate Governance Committee of the Board of Directors recommends nominees to the Board of Directors, within the limits of the Restated Articles of Incorporation and By-Laws, as amended. The Corporate Governance Committee believes that each nominee for election to the Board of Directors should:20052006 annual meeting, the Corporate Secretary must receive this notice on or after January 13, 2005,12, 2006, and on or before February 12, 2005)11, 2006), and should include the following information:,;nominee,nominee;Committee,Committee;
the Board of
Directors14Information onthe Board ofDirectors•management,management;,;director,director; andSecurities and Exchange Commission.SEC.
the Board of
Directorspays outside directors1998 Long-Term Incentive Plan. One award for 1,500 phantom stock units was approved on February 24, 2004. Following approval of changes to directors' compensation in May, which included an annual stock retainer with an explicit target value of $50,000, a second award for 900 phantom stock units was granted on May 13, 2004, to make up for the difference between the annual target value and the value of the award made in February.$40,000. Duke Energy also pays an outside director serving as Chairman$20,000, effective May 1, 2004, concurrent with establishment of a lead director.Nuclear Oversight or Finance and Risk Management Committee an additional $4,000 per year. An outside director serving as Chairmanand Nuclear Oversight Committees, and $8,000 for the chair of the Audit Committee is paid $8,000 per year. Outside directors also receive aCommittee. Annual committee chair retainers were increased effective May 1, 2004 to $7,500 for the chairs of the Compensation, Corporate Governance, Finance and Risk Management and Nuclear Oversight Committees, and $20,000 for the chair of the Audit Committee.each committee meeting except the Audit Committee, and other functions requiring their presence, togetherpresence. For meetings of committees other than the Audit Committee, the attendance fee for meetings held in conjunction with expensesa particular Board of attendance. OutsideDirectors meeting was $1,000, increased to $1,500 effective May 1, 2004; and, effective May 1, 2004, is $2,500 for special, in-person meetings not held in conjunction with a particular Board of Directors meeting. The attendance fee for directors serving on the Audit Committee receive a fee ofwas $2,000 for attendance at each meeting.meeting until May 1, 2004, at which time the attendance fee was increased to $3,000 for in-person attendance at meetings held in conjunction with a particular Board of Directors meeting, with the fee for telephonic meetings, or telephonic participation in meetings held in conjunction with a particular Board of Directors meeting remaining at $2,000. Fees for attendance at committee meetings are not limited for attendance at different committee meetings held on the same day, but are limited for attendance at multiple meetings of the same committee when held in association with a particular Board of Directors meeting.
AEffective May 1, 2004, an outside director may elect either to receive 50% of his or her retainer and attendance fees in the form of Duke Energy Common Stock or to defer, until termination of his or her service on the Board of Directors, that portion to an unfunded
15
Information onthe Board ofDirectors
account for the director's benefit, the balance of which is adjusted for the performance of a phantom investment option that is based on Duke Energy Common Stock or for the performance of such other phantom investment option to which the director has subsequently elected to transfer all or a portion of annual compensation, consisting of retainers (other than in the balance. Similarly,form of stock awards) and attendance fees, in cash on a director may elect eithercurrent basis, or defer all or a portion of such compensation. Up to receive the remaining 50% of such annual compensation in cash or to defer, until termination of his or her servicemay also be received on the Board of Directors, that portion toa current basis as Duke Energy Common Stock. Any amounts deferred go into an unfunded account for the director's benefit, the balance of which is adjusted for the performance of those phantom investment options, including the Duke Energy Common Stock phantom investment option, that the director elects. The outside director will receive, generally uponfollowing termination of his or her service from the Board of Directors, deferred retainer and attendance fees in shares of Duke Energy Common Stock equal in market price to the portion of his or her account balance then "invested" in the Duke Energy Common Stock phantom investment option, with any remaining balance received in cash, on the basis of the distribution schedule that he or she has chosen.
Prior to May 1, 2004, an outside director was able to elect either to receive up to 50% of his or her retainer and attendance fees in the form of Duke Energy Common Stock Awards andor to defer, until termination of his or her service on the Board of Directors, that portion to an unfunded account for the director's benefit, the balance of which is adjusted for the performance of a phantom investment option that is based on Duke Energy Common Stock Options.or for the performance of such other phantom investment option to which the director subsequently elects to transfer all or a portion of the balance. Similarly, a director was able to elect either to receive the remaining 50% of such compensation in cash or to defer, until after termination of his or her service on the Board of Directors, that portion to an unfunded account for the director's benefit, the balance of which is adjusted for the performance of
Information on
the Board of
DirectorsIn
those phantom investment options, including the Duke Energy Common Stock phantom investment option, that the director elected.
Prior to May 1, 2004, each outside director was credited, in January and July of each year, each outside director is credited with 200 phantom stock units, represented by an amount equal to the market price of a like number of shares of Duke Energy Common Stock, in an unfunded account for the director's benefit. The account balance is adjusted for the performance of the Duke Energy Common Stock phantom investment option or for the performance of such other phantom investment option to which the director has subsequently electedelects to transfer all or a portion of the balance. The outside director will receive, generally uponfollowing termination of his or her service from the Board of Directors, shares of Duke Energy Common Stock equal in market price to his or her account balance then "invested" in the Duke Energy Common Stock phantom investment option, with any remaining balance received in cash, on the basis of the distribution schedule that he or she has chosen. Following the January 2004 credit, this portion of outside directors' compensation was prospectively eliminated. Prior credits will be administered and distributed in accordance with the terms of this arrangement as in effect prior to elimination of this portion of outside directors' compensation.
Awards to outside directors under the Duke Energy 1998 Long-Term Incentive Plan are approved at the same time annual long-term incentive awards to executive officers are approved. During 2003, each outside director was granted an optionAnnual Stock Retainer for 4,000 shares. 2005. The 2004 grant,2005 stock retainer, consisting of 1,5001,820 phantom stock units to each outside director, was approvedgranted on February 24, 2004, consistent with28, 2005, at the approvalsame time as the 2005 grant of 2004long-term incentive awards to executive officers.
Arrangement with Outgoing Westcoast Chief Executive Officer.Pursuant to an arrangement made in connection with Duke Energy's acquisition of Westcoast Energy, director Michael E.J. Phelps, the former Chairman and Chief Executive Officer of Westcoast Energy, entered into a noncompete agreement with Duke Energy that expired inon March 14, 2004, under which he received C$41,000approximately Canadian (C) $41,000 monthly. Pursuant to the agreement, Mr. Phelps received a lump-sum payment in the amount of C$2,000,000 upon expiration of the agreementagreement. In 2004, Duke Energy reimbursed Mr. Phelps C$1,086 for expenses related to his membership on March 14, 2004.the Duke Energy Canadian Advisory Council, which was established in connection with the acquisition of Westcoast Energy and which provides advice on strategic, social, commercial, national and local issues facing Duke Energy's Canadian businesses.
Charitable Giving Program.After ten years on the Board of Directors, eligible directors participate in the Directors' Charitable Giving Program. Under this program, Duke Energy will make, upon the director's death, donations of up to $1,000,000 to charitable organizations selected by the director. A director may request that Duke Energy make donations under this program during the director's lifetime, in which case the maximum donation will be reduced on an actuarially-determined net present value basis. In 2004, donations of $473,500 were made by Duke Energy to charitable organizations at the request of James G. Martin, exhausting the donations available to Dr. Martin under this program. Duke Energy maintains life insurance policies upon eligible directors to fund donations under the program. Eligible directors include only those who were members of the Board of Directors on February 18, 1998, and certain former directors who previously qualified for this benefit. The last three remaining directors who could become eligible for this program became eligible during 2004.
Reimbursement of Certain Expenses; Gifts. In August 2004, in connection with a Board of Directors meeting held in New York City, spouses of certain outside directors attended lunch and dinner events paid for by Duke Energy. In connection with this Board meeting Duke Energy also paid for a social event for spouses, tickets for a sporting event for an outside director, and round-trip transportation for the spouses of certain directors. The total cost of the foregoing was approximately $17,000. Duke Energy also presented a Christmas gift to each outside director in 2004, at a total cost of approximately $1,200.
Stock Ownership Guidelines.Outside directors are subject to stock ownership guidelines which establish a target level of ownership of Duke Energy Common Stock (or Common Stock equivalents) of 4,000 shares. The targeted ownership level has been met by all directors.but one director who, having joined the Board of Directors in 2004, has until 2009 to meet the target level.
16
The Audit Committee of the Board of Directors is composed entirely of nonemployee directors. The Board of Directors has determined that each of the Audit Committee members has met the independence and expertise requirements of the New York Stock Exchange, the Securities and Exchange Commission and Duke Energy's categorical standards for independence, as discussed under the caption "Audit Committee and Audit Committee Financial Expert" under "Information on the Board of Directors" above in this proxy statement. The Audit Committee's responsibilities are described under the caption "Board Committees" under "Information on the Board of Directors" above in this proxy statement. The Board of Directors adopted a revised written charter for the Audit Committee in February 2004, a copy of which is attached as Appendix A to this proxy statement and is also available through the Duke Energy website atwww.duke-energy.com. The Audit Committee held 14 meetings during 2003.
The financial statements of Duke Energy are prepared by management, which is responsible for their objectivity and integrity. With respect to the financial statements for the calendar year ended December 31, 2003,2004, the Audit Committee reviewed and discussed the audited financial statements and the quality of financial reporting with management and the independent auditors.auditor. It also discussed with the independent auditorsauditor the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees) and received and discussed with the independent auditorsauditor the matters in the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee has discussed with the independent auditorsauditor the independent auditors'auditor's independence and has also considered the compatibility of nonaudit services with the auditors'auditor's independence.
Based upon the reviews and discussions referred to above, and pursuant to delegation of authority by the Board of Directors, the Audit Committee authorized the inclusion of the audited financial statements in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2003,2004, for filing with the Securities and Exchange Commission. The Audit Committee also appointed, subject to shareholder ratification, Duke Energy's independent auditorsauditor for 2004.2005.
This report has been provided by the Audit Committee.
A. Max Lennon,William T. Esrey, Chairman
G. Alex Bernhardt, Sr.
Robert J. BrownWilliam T. EsreyA. Max Lennon
James T. Rhodes
17
Report of the
Compensation
Committee
The Committee's Responsibilities
The Compensation Committee of the Board of Directors is composed entirely of nonemployee directors, all of whom are independent under the currently applicable standards of the New York Stock Exchange. The Compensation Committee is responsible for setting and administering policies which govern Duke Energy's executive compensation programs. The purpose of this report is to summarize the compensation philosophy and policies that the Compensation Committee applied in making executive compensation decisions in 2003.2004.
Compensation Philosophy
The Compensation Committee has approved compensation programs intended to:
Stock Ownership Guidelines
To underscore the importance of linking executive and shareholder interests, the Board of Directors has adopted stock ownership guidelines for executive officers and other members of senior management.all key employees who are eligible to receive long-term incentive awards. The target level of ownership of Duke Energy Common Stock (or Common Stock equivalents) is established as a fixed number of shares. The target level for the Chairman of the Board and Chief Executive Officer is 100,000 shares. During 2003, the Compensation Committee approved a newThe target ownership level of 50,000 shares for the President and Chief Operating Officer position created in late 2002 and currently held by Mr. Fowler.is 50,000 shares. The target level for certain other executive officers, including Mr. OsborneMessrs. Mogg and Hauser and Dr. Shaw, and heads of major business units is 28,000 shares. The target level for all other employees subject to the guidelines ranges from 2,000 to 14,000 shares. Each employee subject to the guidelines is expected to achieve the ownership target within five years from the date on which the employee became subject to the guidelines. All executive officers and other employees whose stock ownership guideline target date was on or before January 1, 2004,2005, have met the ownership target. Common Stock beneficially held for an executive'sexecutive under the Duke Energy Retirement Savings Plan, account, Common Stock equivalents earned through nonqualified deferred compensation programs, phantom stock units and certain performance shares awarded as long-term incentives and any other beneficially owned Common Stock can be included by executives in demonstrating compliance with the guidelines. Shares that executives have the right to acquire through the exercise of stock options are not included in the calculation of stock ownership for guideline purposes.
To reinforce the importance of stock ownership, the Compensation Committee implemented in 2004 a policy whereby employees subject to the guidelines who do not achieve their ownership target by their target ownership date may elect to deposit any annual cash payouts under short-term incentive plans into an account and apply such deposits to purchase shares of Duke Energy Common Stock until their target ownership level is achieved. Those employees who make such election but do not retain the purchased shares, and those who do not make such election, become ineligible for future long-term incentive awards until they demonstrate that they have otherwise achieved and maintained their target ownership level. Employees who fail to maintain their ownership target following initial achievement become ineligible for future long-term incentive awards until such time as they again meet the ownership target.
Compensation Methodology
Each year the Compensation Committee reviews data from market surveys, proxy statements and independent consultants to assess Duke Energy's competitive position with respect to the following three components of executive compensation:
Report of the
Compensation
Committee
The Compensation Committee also considers individual performance, level of responsibility, and skills and experience, internal comparisons and other existing compensation awards or arrangements in making compensation decisions for each executive. Decisions regarding adjustments to each of the above three components of executive compensation are made simultaneously in December, concurrent with initial assessments of the executives' performance for the current year. Adjustments become effective January 1 of the following year. The Chief Executive Officer's performance and compensation is discussed in "Compensation of the Chief Executive Officer" below.
In making compensation decisions, the Compensation Committee reviews a variety of market surveys for each executive position, where available, in order to ensure that its compensation actions are appropriate and reasonable and consistent with its philosophy, considering the various markets in which Duke Energy competes for talent. The market surveys reviewed by the Compensation Committee consist of energy services industry data, which includes many of the companies included in the Dow Jones utility index used in the "Performance Graph" below, and general industry data, which includes companies similar in size to Duke Energy across a variety of industries. Additionally, the Compensation Committee reviews special market surveys for certain operations positions for which data is not found in energy services or general industry surveys. In accordance with its compensation philosophy, the Compensation Committee believes that executives' interests are better aligned with shareholders when significant portions of total pay are provided in the form of long-term incentives. Accordingly, the proportion of the 2004 total annual pay opportunity for Messrs. Fowler, Mogg and Hauser and Dr. Shaw provided in the form of stock-based long-term incentives was approximately 60%, which is generally in alignment with general industry survey benchmarks, as compared to lower proportions in the energy services industry.
Components of Compensation
18
Report of theCompensationCommittee
Report of the
Compensation
Committee
| Incentive Goals | Messrs. Fowler, Mogg and Hauser | Dr. Shaw | ||
|---|---|---|---|---|
| Duke Energy EPS | 32% | 16% | ||
| Duke Energy ROCE | 32% | 16% | ||
| Duke Energy Cash Flow | 16% | 8% | ||
| Duke Power EBIT | — | 20% | ||
| Duke Power ROCE | — | 20% | ||
| Individual Objectives | 20% | 20% | ||
19
Report of theCompensationCommittee
Report of the
Compensation
Committee
Compliance with Section 162(m) of the Internal Revenue Code
Under Section 162(m) of the Internal Revenue Code, Duke Energy may not deduct annual compensation in excess of $1 million paid to certain employees, generally its Chief Executive Officer and its four other most highly compensated executive officers, unless that compensation qualifies as performance-based compensation. While the Compensation Committee intends to structure performance-related awards in a way that will preserve the maximum deductibility of compensation awards, the Compensation Committee may from time to time approve awards which would vest upon the passage of time or other compensation which would not result in qualification of those awards as performance-based compensation. It is not anticipated that compensation realized by any executive officer under Duke Energy plans and programs now in effect will result in a material loss of tax deductions.
Compensation of the Chief Executive Officer
The Compensation Committee, based upon input from the Corporate Governance Committee regarding the Chief Executive Officer's performance, reviews and approves annually the compensation of the Chief Executive Officer
20
Report of theCompensationCommittee
and informs the Board of Directors of any adjustments.adjustments or actions. The annual review of the Chief Executive Officer's performance and compensation is conducted in February of each year to assure thorough consideration of year-end results. In 2003,2004, the CompensationCorporate Governance Committee retained the consulting firm of Frederic W. Cook and Co.used an independent consultant to conduct a review of the compensation of the currentChairman and prior Chief Executive Officers. The Chief Executive Officer participates in the same programs and receives compensation based upon the same criteria as Duke Energy's other executive officers. However, the Chief Executive Officer's compensation reflects the greater policy- and decision-making authority that the Chief Executive Officer holds and the higher level of responsibility he has with respect to the strategic direction of Duke Energy and its financial and operating results.
Mr. Anderson was elected Chairmanperformance, in part for purposes of the Board and Chief Executive Officer effective November 1, 2003, concurrent withCompensation Committee's determination of the number of shares, if any, that should vest as of December 31, 2004, under Mr. Priory's resignation from that position. Anderson's performance share award, as described below.
The employment agreement between Duke Energy and Mr. Anderson (as described in "Employment Contracts and Termination of Employment and Change-in-Control Arrangements" under "Executive Compensation" below) establishes that Mr. Anderson's compensation will be provided solely in the form of stock-based compensation in lieu of base salary, annual cash incentives and certain employee benefits. The purpose of the structure of this compensation package is to directly align Mr. Anderson's compensation with shareholders by making his compensation contingent upon stock price, Duke Energy performance and dividend yield. In accordance with his employment agreement, upon commencement of his employment in November 2003, Mr. Anderson received a nonqualified stock option award with respect to 1,100,000 shares, a performance share award for 360,000 shares and a phantom stock award for 285,000 units, as described in the Summary Compensation Table and "Option Grants in 2003" under "Compensation""Executive Compensation" below. All of the awards to Mr. Anderson were granted under the Duke Energy 1998 Long-Term Incentive Plan on November 17, 2003.Plan.
It isMr. Anderson had the opportunity to vest in up to 120,000 of the performance shares based upon 2004 performance associated with goals established by the Compensation Committee's intentionCommittee in February 2004. Mr. Anderson's 2004 performance goals were based on EPS, ROCE, Cash Flow and individual objectives. These goals were weighted 32%, 32%, 16% and 20%, respectively. Mr. Anderson's individual objectives related to strategy development and execution, improvements in operating systems, safety, diversity, employee development, succession planning and performance management, and maintaining and improving credibility and trust of stakeholders. In February 2005 the Compensation Committee determined that when taken together,the goals were exceeded as a result of above-target achievement on each of the EPS, ROCE and Cash Flow goals and aggregate achievement of individual objectives above target, resulting in 120,000 of Mr. Anderson's performance shares vesting as of December 31, 2004.
In 2004, Mr. Anderson earned $9,030,283, based on the value of stock-based award vestings and dividend equivalent payments associated with his phantom stock and performance shares as detailed below.
| Performance Shares1,2 | $ | 3,195,600 | |
| Phantom Stock Units1,2 | $ | 2,235,850 | |
| Stock Options1,2 | $ | 2,889,333 | |
| Dividend Equivalent Payments | $ | 709,500 | |
| Total | $ | 9,030,283 | |
The components of Mr. Priory's 2003 compensation were:
Report of the first four anniversaries
Compensation
Committee
The Committee believes the value of compensation earned by Mr. Anderson during 2004 is appropriate and reasonable considering Duke Energy's outstanding 2004 financial performance.
Mr. Anderson's 2005 performance goals for his opportunity to vest in up to 120,000 performance shares will be based on EPS, ROCE and individual objectives weighted 50%, 30% and 20%, respectively.
Compliance with Section 162(m) of the grant date. Between 50% and 100%Internal Revenue Code
Under Section 162(m) of the performance shares wasInternal Revenue Code, Duke Energy generally may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to vest oncertain employees, generally its Named Executive Officers. Certain performance-based compensation paid pursuant to the second through fifth anniversaries ofDuke Energy 1998 Long-Term Incentive Plan and the grant date based upon achievement of 2003 EPS within a specified range. Based upon 2003 EPS performance, all shares in Mr. Priory's performance share award were forfeited.
TheExecutive Short-Term Incentive Plan is not subject to the deduction limit. While the Compensation Committee conducts its annual review of Chief Executive Officer performancegenerally intends to structure and administer executive compensation in February of each yearplans and arrangements so that they will not be subject to assure thorough consideration of year-end results.
It wasthe deduction limit, the Compensation Committee's intentionCommittee may from time to time approve payments that when taken together,cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs in the componentsinterest of Mr. Priory's pay, including base salary, annual incentives and long-term incentives, would resultshareholders. Payments subject to the deduction limit include those associated with the 2004 phantom stock awards described in compensation which approximated the 50th percentile"Components of the market when incentive plan performance expectations were met and in compensation as high as the 75th percentile of the market when incentive plan performance expectations were exceeded.Compensation—Long-Term Incentive Compensation" above.
This report has been provided by the Compensation Committee, as constituted on December 31, 2003.February 22, 2005.
James G. Martin, Chairman
Roger Agnelli
Ann M. Gray
Leo E. Linbeck, Jr., Chairman
21
Comparison of Five-Year Cumulative Total Return Among Duke Energy Corporation,
S&P 500 Index and DJ Utilities
22
Summary Compensation Table
The following table sets forth information regarding compensation paid to the current Chief Executive Officer the prior Chief Executive Officer,and the other four most highly compensated executive officers of Duke Energy who were serving as executive officers at the end of 2003 and one additional individual (Robert P. Brace) who would have been among the four highest paid executive officers had he been serving in that capacity at the end of 2003,2004, for services to Duke Energy and its subsidiaries for the years ended December 31, 2004, 2003, 2002, and 2001.2002.
| | | Annual Compensation | Long-Term Compensation | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Awards | Payouts | | |||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($)5 | Other Annual Compensation ($) | Restricted Stock Award(s) ($)7,8 | Securities Underlying Options/SARS (#) | LTIP Payouts ($)9 | All Other Compensation ($)10 | ||||||||
| Paul M. Anderson1 Chairman of the Board and Chief Executive Officer | 2003 | 0 | 0 | 0 | 11,255,250 | 1,100,000 | ||||||||||
| Richard B. Priory2 Former Chairman of the Board and Chief Executive Officer | 2003 2002 2001 | 1,200,012 1,191,678 1,088,544 | 1,090,011 0 2,177,088 | 268,857 575,135 319,150 | 2,144,127 1,679,552 996,991 | 490,800 408,400 400,000 | 2,219,167 | 128,725 274,518 224,202 | ||||||||
| Fred J. Fowler President and Chief Operating Officer | 2003 2002 2001 | 670,009 559,996 500,004 | 603,000 0 750,006 | 46,237 63,866 79,305 | 878,113 535,810 | 201,000 42,100 119,000 | 532,600 | 44,102 77,068 209,961 | ||||||||
| Robert P. Brace3 Former Executive Vice President and Chief Financial Officer | 2003 2002 2001 | 579,996 579,996 550,000 | 405,997 0 715,000 | 115,8826 336,731 1,126,722 | 557,410 1,330,759 | 127,600 66,800 406,200 | 37,422 58,872 26,498 | |||||||||
| Richard J. Osborne Group Vice President, Public and Regulatory Policy | 2003 2002 2001 | 540,000 540,000 500,004 | 405,000 0 750,006 | 47,493 69,072 70,960 | 566,222 486,072 | 129,600 28,000 107,800 | 514,847 | 45,933 78,795 69,194 | ||||||||
| Richard W. Blackburn4 Former Executive Vice President, General Counsel, Chief Administrative Officer and Secretary | 2003 2002 2001 | 500,004 500,004 474,996 | 350,003 0 617,495 | 27,264 54,654 44,748 | 480,573 412,596 | 110,000 57,700 91,500 | 248,547 | 30,000 48,525 59,699 | ||||||||
| Ruth G. Shaw President, Duke Power Company | 2003 2002 2001 | 500,004 500,004 474,996 | 223,152 0 617,495 | 25,294 38,282 37,279 | 480,573 412,596 | 110,000 91,500 | 248,547 | 35,249 70,861 62,739 | ||||||||
| Annual Compensation | Long-Term Compensation | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Awards | Payouts | |||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($)4 | Other Annual Compensation ($) | Restricted Stock Award(s) ($)6,7 | Securities Underlying Options/SARS (#) | LTIP Payouts ($)8 | All Other Compensation ($)9 | ||||||||||||||
Chairman of the Board and Chief Executive Officer | 2003 | |||||||||||||||||||||
| 0 0 | 0 | 0 | 5 | 0 11,255,250 | 0 1,100,000 | 0 0 | 0 0 | |||||||||||||||
Fred J. Fowler President and Chief Operating Officer | 2004 2003 2002 | 729,996 670,009 559,996 | 1,055,939 603,000 0 | 67,282 46,237 63,866 | 1,204,413 878,113 0 | 0 201,000 42,100 | 0 0 532,600 | 84,882 44,102 77,068 | ||||||||||||||
| Jimmy W. Mogg2 Group Vice President, Chief Development Officer | 2004 2003 2002 | 491,667 450,000 450,000 | 580,183 365,985 40,095 | 53,356 27,314 36,300 | 562,458 393,134 0 | 0 93,000 7,500 | 0 0 319,560 | 71,084 50,554 69,355 | ||||||||||||||
| David L. Hauser3 Group Vice President and Chief Financial Officer | 2004 2003 2002 | 491,667 285,000 285,000 | 562,710 270,875 73,644 | 22,299 18,253 22,966 | 450,052 149,405 0 | 0 39,600 4,700 | 0 0 159,780 | 56,171 33,469 38,218 | ||||||||||||||
| Ruth G. Shaw President and Chief Executive Officer, Duke Power Company | 2004 2003 2002 | 500,004 500,004 500,004 | 534,254 223,152 0 | 23,533 25,294 38,282 | 625,073 480,573 0 | 0 110,000 0 | 0 0 248,547 | 51,640 35,249 70,861 | ||||||||||||||
23
Executive
Compensation
24
Compensation
Executive
Compensation
2004 Award. One fifth of the 2004 phantom stock award vests on each of the first five anniversaries of the approval date provided the recipient continues to be employed by Duke Energy or his or her employment terminates on account of retirement. There is an accelerated vesting opportunity in early 2007, for units not previously vested on the anniversaries of the approval date, based on achievement of target total shareholder return (TSR) relative to the S&P 500 for the calendar-year period 2004-2006. The target TSR goal is consistent with the target TSR goal for the 2004 performance shares described in "Long-Term Incentive Plan—Awards in Last Fiscal Year" below. If retirement occurs during the 2004-2006 performance period and the TSR goal is subsequently determined to have been achieved, units in the award are adjusted to reflect actual 2004-2006 service and are immediately vested, to the extent not previously vested on the anniversaries of the approval date. If the recipient's employment terminates as a result of death, disability, or by Duke Energy without cause or as a result of a divestiture, units in the award are reduced to reflect actual service during the installment vesting period and are immediately vested, and any remaining unvested units are forfeited. In the event of a "change in control" of Duke Energy, as defined in the plan, all outstanding unvested units will vest.
2002 Award. One quarter of the 2002 phantom stock award vests on each of the first four anniversaries of the grant date provided the recipient continues to be employed by Duke Energy or his or her employment terminates on account of retirement. The awards fully vest in the event of the recipient's death or disability or a change"change in controlcontrol" of Duke Energy as specifieddefined in the plan. If the recipient's employment terminates other than on account of retirement, death or disability, any unvested shares remaining on the termination date are forfeited. The phantom stock award also grants an equal number of dividend equivalents, which represent the right to receive cash payments equivalent to the cash dividends paid on the number of shares of Duke Energy Common Stock represented by the phantom stock units awarded, until the related phantom stock units vest or are forfeited.
| | Number of Phantom Stock Units | Value At December 31, 2003 | |||
|---|---|---|---|---|---|
| Paul M. Anderson | 285,000 | $ | 5,828,250 | ||
| Richard B. Priory | 48,728 | 996,488 | |||
| Fred J. Fowler | 8,690 | 177,711 | |||
| Robert P. Brace | 6,346 | 129,776 | |||
| Richard J. Osborne | 8,030 | 164,214 | |||
| Richard W. Blackburn | 5,476 | 111,984 | |||
| Ruth G. Shaw | 5,476 | 111,984 | |||
| | Number of Phantom Stock Units | Value At December 31, 2004 | |||
|---|---|---|---|---|---|
| Paul M. Anderson | 285,000 | $ | 7,219,050 | ||
| Fred J. Fowler | 59,915 | 1,517,647 | |||
| Jimmy W. Mogg | 21,625 | 547,761 | |||
| David L. Hauser | 28,563 | 723,501 | |||
| Ruth G. Shaw | 31,988 | 810,256 | |||
25
Executive
Compensation
| | Paul M. Anderson | Fred J. Fowler | Jimmy W. Mogg | David L. Hauser | Ruth G. Shaw | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Matching Contributions Under the Duke Energy Retirement Savings Plan | — | $ | 12,300 | $ | 12,300 | $ | 12,300 | $ | 12,300 | |||||
| Make-Whole Matching Contribution Credits Under the Duke Energy Corporation Executive Savings Plan | — | 67,680 | 17,200 | 30,452 | 31,089 | |||||||||
| Above-Market Interest Earned on Account Balances in the Duke Energy Corporation Executive Savings Plan Supplemental Account | — | — | — | 9,181 | 2,606 | |||||||||
| Economic Value of Life Insurance Coverage Provided Under Life Insurance Plans | — | 4,902 | 4,985 | 4,238 | 5,645 | |||||||||
| Supplemental Credit to the Duke Energy Corporation Executive Savings Plan1 | — | — | 36,599 | — | — | |||||||||
Total | — | $ | 84,882 | $ | 71,084 | $ | 56,171 | $ | 51,640 | |||||
| Richard B. Priory | $ | 12,000 | |
| Fred J. Fowler | $ | 12,000 | |
| Robert P. Brace | $ | 12,000 | |
| Richard J. Osborne | $ | 10,940 | |
| Richard W. Blackburn | $ | 12,000 | |
| Ruth G. Shaw | $ | 12,000 |
| Richard B. Priory | $ | 0 | |
| Fred J. Fowler | $ | 27,200 | |
| Robert P. Brace | $ | 22,800 | |
| Richard J. Osborne | $ | 21,460 | |
| Richard W. Blackburn | $ | 18,000 | |
| Ruth G. Shaw | $ | 18,000 |
| Richard B. Priory | $ | 20,434 | |
| Fred J. Fowler | $ | 0 | |
| Robert P. Brace | $ | 0 | |
| Richard J. Osborne | $ | 10,565 | |
| Richard W. Blackburn | $ | 0 | |
| Ruth G. Shaw | $ | 2,354 |
| Richard B. Priory | $ | 23,172 | |
| Fred J. Fowler | $ | 4,902 | |
| Robert P. Brace | $ | 2,622 | |
| Richard J. Osborne | $ | 2,968 | |
| Richard W. Blackburn | $ | 0 | |
| Ruth G. Shaw | $ | 2,895 |
| Richard B. Priory | $ | 149 | |
| Fred J. Fowler | $ | 0 | |
| Robert P. Brace | $ | 0 | |
| Richard J. Osborne | $ | 0 | |
| Richard W. Blackburn | $ | 0 | |
| Ruth G. Shaw | $ | 0 |
| Richard B. Priory | $ | 72,970 | |
| Fred J. Fowler | $ | 0 | |
| Robert P. Brace | $ | 0 | |
| Richard J. Osborne | $ | 0 | |
| Richard W. Blackburn | $ | 0 | |
| Ruth G. Shaw | $ | 0 |
26
Compensation
Option Grants in 2003
This table shows options granted to the Named Executive Officers during 2003, along with the present value of the options on the date they were granted, calculated as described in the footnote to the table. The grant to Paul M. Anderson was awarded on November 17, 2003, in connection with his election as Chairman of the Board and Chief Executive Officer.
Option/SAR Grants in Last Fiscal Year2004
| | | | | | Grant Date Value | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Number of Shares Underlying Options/SARS Granted1,2 (#) | Individual Grants | | |||||||
| Name | % of Total Options/SARS Granted to Employees | Exercise or Base Price ($/Sh) | Expiration Date | Grant Date Present Value3 ($) | ||||||
| Paul M. Anderson | 1,100,000 | 13.3% | 17.45 | 11/17/2013 | 5,500,000 | |||||
| Richard B. Priory | 490,800 | 6.0% | 13.77 | 2/25/2013 | 2,144,796 | |||||
| Fred J. Fowler | 201,000 | 2.4% | 13.77 | 2/25/2013 | 878,370 | |||||
| Robert P. Brace | 127,600 | 1.5% | 13.77 | 2/25/2013 | 557,612 | |||||
| Richard J. Osborne | 129,600 | 1.6% | 13.77 | 2/25/2013 | 566,352 | |||||
| Richard W. Blackburn | 110,000 | 1.3% | 13.77 | 2/25/2013 | 480,700 | |||||
| Ruth G. Shaw | 110,000 | 1.3% | 13.77 | 2/25/2013 | 480,700 | |||||
Duke Energy hasdid not grantedgrant any stock options or stock appreciation rights (SARs) in 2004 to the Named Executive Officers or any other persons.
| Input Variable | 1,100,000 Share Option Grant to Paul M. Anderson | All Other Option Grants | ||
|---|---|---|---|---|
| Risk-free Interest Rate | 4.54% | 4.42% | ||
| Dividend Yield | 4.03% | 3.38% | ||
| Stock Price Volatility | 37.37% | 37.71% | ||
| Option Term | 10 years | 10 years |
Option Exercises and Year-End Values
This table shows aggregate exercises of options during 20032004 by the Named Executive Officers and the aggregate year-end value of the unexercised options held by them. The value assigned to each unexercised "in-the-money" stock option is based on the positive spread between the exercise price of the stock option and the fair market value of Duke Energy Common Stock on December 31, 2003, which was $20.45. The fair market value is the closing price of a share of Duke Energy Common Stock on that date as reported on the New York Stock Exchange Composite
27
Compensation
Transactions Tape.Tape on December 31, 2004, which was $25.33. The ultimate value of a stock option will depend on the market value of the underlying shares on a future date.at the time of exercise.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
| | | | Number of Securities Underlying Unexercised Options/SARS at FY-End1 (#) | Value of Unexercised In-the-Money Options/SARS at FY-End ($) | | | Number of Securities Underlying Unexercised Options/SARS at FY-End1 (#) | Value of Unexercised In-the-Money Options/SARS at FY-End1 ($) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Shares Acquired on Exercise (#) | | Shares Acquired on Exercise (#) | | ||||||||||
| Name | Value Realized ($) | Exercisable/ Unexercisable | Exercisable/ Unexercisable | Value Realized ($) | Exercisable/ Unexercisable | Exercisable/ Unexercisable | ||||||||
| Paul M. Anderson | 10,0002 | 39,167 | — / 1,100,000 | — / 3,300,000 | — | — | — / 1,100,000 | — / 8,668,000 | ||||||
| Richard B. Priory | — | — | 1,278,900 / 1,097,100 | — / 3,278,544 | ||||||||||
| Fred J. Fowler | 13,791 | 87,312 | 799,658 / 286,500 | 354,693 / 1,342,680 | 17,106 | 258,749 | 888,552 / 180,500 | 1,018,308 / 1,742,670 | ||||||
| Robert P. Brace | — | — | 209,900 / 390,700 | — / 852,368 | ||||||||||
| Richard J. Osborne | — | — | 332,900 / 209,500 | — / 865,728 | ||||||||||
| Richard W. Blackburn | — | — | 620,150 / 186,650 | — / 734,800 | ||||||||||
| Jimmy W. Mogg | — | — | 346,788 / 86,200 | 343,578 / 780,300 | ||||||||||
| David L. Hauser | — | — | 162,425 / 33,775 | 160,479 / 296,514 | ||||||||||
| Ruth G. Shaw | — | — | 431,450 / 186,650 | — / 734,800 | — | — | 512,725 / 105,375 | 360,215 / 953,700 | ||||||
Long-Term Incentive Plan—Awards in Last Fiscal Year
As explained above in note 7 to the Summary Compensation Table, Messrs. Fowler, Mogg and Hauser and Dr. Shaw received one-half the value of the long-term incentive component of their 2004 compensation in the form of performance shares. The following table provides information concerning those performance share awards, which were made under the Duke Energy 1998 Long-Term Incentive Plan. Additional information in regard to these awards is set out following the table.
| Estimated Future Payouts Under Non-Stock-Price-Based Plans | ||||||||||
| Name | Number of Performance Shares1 | Performance or Other Period | Threshold (#) | Target (#) | Maximum (#) | |||||
| Paul M. Anderson | — | — | — | — | — | |||||
| Fred J. Fowler | 70,450 | 3 years | 28,180 | 56,360 | 70,450 | |||||
| Jimmy W. Mogg | 32,900 | 3 years | 13,160 | 26,320 | 32,900 | |||||
| David L. Hauser | 26,330 | 3 years | 10,530 | 21,060 | 26,330 | |||||
| Ruth G. Shaw | 36,560 | 3 years | 14,625 | 29,250 | 36,560 | |||||
The determination of the actual number of performance shares earned is based on Duke Energy's TSR over the three-year performance period from January 1, 2004, to December 31, 2006, as compared to the TSR of the S&P 500 for that period. The actual number of performance shares that can be earned ranges from 0% to 125% of target award shares. To achieve the threshold, target and maximum payments indicated above, Duke Energy's TSR ranking must be at the 55th percentile, 70th percentile and 80th percentile, respectively. Performance shares earned are interpolated for TSR performance between these percentiles. The threshold and maximum payments represent 50% and 125%, respectively, of the target number of shares. For each performance share earned, participants receive one share of Duke Energy Common Stock. Payment of any shares earned will be made following the determination in early 2007 of the extent to which the performance goal has been achieved, unless an election (to the extent permitted by applicable law) is made by the executive to defer payment of the performance shares until termination of employment. Any shares not earned are forfeited. In addition, following determination that the performance goal has been achieved, participants will receive a cash payment equal to the amount of cash dividends paid on one share of Duke Energy Common Stock during the performance period multiplied by the number of performance shares earned, unless an election (to the extent permitted under applicable law) is made by the executive to defer payment of the performance shares and tandem dividend equivalents until termination of employment. If the recipient's employment terminates during the performance period as a result of retirement, death, disability, or by Duke Energy without cause or as a result of a divestiture, following determination that the TSR goal has been achieved the number of shares earned will be adjusted to reflect actual service during the performance period. If the recipient's employment terminates during the performance period for any other reason, all shares in the award will be forfeited. In the event of a "change in control" (as defined in the Duke Energy 1998 Long-Term Incentive Plan) prior to determination that the TSR goal has been achieved, target TSR performance is assumed and the number of shares earned are adjusted to reflect actual service during the performance period prior to the change in control.
Executive
Compensation
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
Duke Energy entered into an employment agreement ("Agreement") with Mr. Anderson which became effective November 1, 2003, ("Effective Time") upon his election as Chairman of the Board and Chief Executive Officer and which will remain in effect until December 31, 2006 ("Agreement Term"). Mr. Anderson's employment may be terminated earlier as a result of his resignation, with ninety days' notice to Duke Energy, or by Duke Energy (1) due to disability that prevents Mr. Anderson from the full time performance of his duties; (2) for "cause" (as defined in the Agreement); or (3) for any reason other than death, disability or for cause, upon ninety days' notice to Mr. Anderson. The Agreement provides that Mr. Anderson was to be awarded a nonqualified stock option grant with respect to 1,100,000 shares, a performance share grant for 360,000 shares and a phantom stock grant for 285,000 units (collectively, "Equity Awards"), with Equity Awards made under the Duke Energy 1998 Long-Term Incentive Plan. The Agreement further provides that Mr. Anderson's compensation will be provided primarily through these Equity Awards and that Mr. Anderson will not be paid a base salary and will not participate in the Duke Energy Corporation Executive Short-Term Incentive Plan or any other annual cash bonus program. The Equity Awards were granted on November 17, 2003, concurrent with the execution of the Agreement.
Pursuant to the Agreement, the stock options have a term of ten years and will vest one-third each on the first three anniversaries of the grant date. The vested stock options will become exercisable on January 1, 2007, or earlier upon termination of Mr. Anderson's employment with Duke Energy. Forty-five thousand (45,000) units of the phantom stock award vested on January 1, 2004. An additional twenty thousand (20,000) units vested on each of April 1, 2004, July 1, 2004, October 1, 2004 and January 1, 2005. The remaining 240,000160,000 units will vest 20,000 units each on the first day of each quarter beginning April 1, 2004,2005, and ending on January 1, 2007. Up to one-thirdOne hundred twenty thousand (120,000) of the performance share award (120,000 shares)shares vested as of December 31, 2004, based upon achievement of 2004 performance goals, as described in the "Report of the Compensation Committee" above. Up to 120,000 performance shares will vest on each of December 31, 2004, December 31, 2005 and December 31, 2006, but only if the performance goals established by the Compensation Committee with respect to calendar years 2004,year 2005 and to be established for 2006, respectively, are achieved. As specified in the Agreement, the Compensation Committee may establish goals for each calendar year consisting of a combination of financial objectives and strategic objectives. Performance shares will be forfeited and will cease to be outstanding to the extent performance goals are not achieved for any calendar year. Vested performance shares and phantom stock units will be paid to Mr. Anderson in shares of Duke
28
Compensation
Energy Common Stock following termination of his Duke Energy employment. Dividend equivalents granted to Mr. Anderson with respect to the performance share and phantom stock awards provide for payment of dividend equivalents in cash on vested and unvested performance shares and phantom stock units while the awards remain outstanding but unpaid, and at the time that cash dividends are paid on the outstanding shares of Duke Energy Common Stock. Upon termination of Mr. Anderson's employment with Duke Energy, all unvested Equity Awards at the time of termination will be forfeited. However, if Mr. Anderson's employment with Duke Energy is terminated as a result of his death, disability or by Duke Energy without cause"cause" as defined in the Agreement, two events will occur as follows: (1) a portion of each unvested Equity Award will vest immediately, with such portion vesting equal to the number of full calendar months elapsed between the Effective Time and the time of termination, divided by thirty-eight; and (2) all vested stock options will become immediately exercisable. All outstanding Equity Awards will vest immediately upon occurrence of a Change"change in Control, ascontrol" (as defined in the Duke Energy 1998 Long-Term Incentive Plan.Plan).
Mr. Anderson willis not be entitled to any retirement, health or welfare benefits, or perquisites, or to participate in any such plan or program, except for the following: (1) vacation; (2) medical and dental health care to the extent available generally to senior executives of Duke Energy and their eligible dependents; (3) participation in the Duke Energy Retirement Cash Balance Plan for purposes of determining his eligibility to qualify for early or normal retirement, but not for any other purpose, including eligibility for pay credits or other benefits; (4) reimbursement by Duke Energy for the reasonable cost of financial and tax planning and advisory services incurred through December 31, 2005,
Executive
Compensation
including payment forof a tax gross-up;gross-up (such that Mr. Anderson effectively is not taxed on the value of such reimbursement); (5) reimbursement by Duke Energy for certain identified costs associated with the relocation of Mr. Anderson's principal residence to Charlotte, including payment forof a tax-gross up (such that Mr. Anderson effectively is not taxed on the value of such reimbursement) where applicable and consistent with Duke Energy's standard relocation policy; and (6) reimbursement by Duke Energy for any North Carolina income taxes on income realized by Mr. Anderson during the Agreement Term from certain identified sources that would otherwise not have been subject to such taxes but for his relocation to Charlotte.
The benefits to which Mr. Anderson became entitled under various plans and agreements from his previous employment with Duke Energy or its predecessor entities are unaffected by the Agreement. Likewise, Mr. Anderson's employment under the Agreement will not be deemed or counted as service with Duke Energy or a predecessor entity for any purpose, including the determination of retirement dates under such plans and agreements. For security reasons, Mr. Anderson is required by Duke Energy to use Duke Energy aircraft for his business travel. Mr. Anderson is also permitted to use Duke Energy aircraft for his personal travel within North America, withAmerica. Mr. Anderson is responsible for paying any income taxes resulting from such aircraft usage.usage, including income taxes on personal travel by Mrs. Anderson. However, to the extent Mr. Anderson incurs expenses associated with Mrs. Anderson accompanying him on business travel, Mr. Anderson receives reimbursement for those expenses from Duke Energy, including payment of a tax-gross up (such that Mr. Anderson effectively is not taxed on the value of any such reimbursement). The Agreement contains restrictive covenants related to confidentiality that continue following the Agreement Term.
Duke Energy does not have any form of employment agreement with Messrs. Fowler, Mogg and OsborneHauser and Dr. Shaw, either written or oral, that guarantees salaries, salary increases, bonuses or benefits, other than the supplemental compensation agreement with Dr. Shaw and the benefits agreement with Mr. Mogg described below. Salaries and bonuses for Messrs. Fowler, Mogg and OsborneHauser and Dr. Shaw are determined as described in the "Report of the Compensation Committee" above. Duke Energy had entered into severance agreements with Mr. Fowler and Dr. Shaw and change-in-control agreements with Messrs. Fowler, Mogg and OsborneHauser and Dr. Shaw, all which became effective on August 18, 1999, and a severance agreement with Mr. Priory, which became effective on August 19, 1999. The severance agreements for Mr. Fowler and Dr. Shaw and the change-in-control agreements for Messrs. Fowler, Mogg and OsborneHauser and Dr. Shaw currently remain in effect on a month-to-month basis or for such longer period as may be mutually agreed upon by the parties. The principal terms and conditions of the severance agreements and change-in-control agreements are described below.
The severance agreements for Messrs. Priory,Mr. Fowler and Osborne and Dr. Shaw provide for severance payments and benefits to the executive in the event of termination of employment other than upon death or disability or for "cause" (as defined in the severance agreements) by Duke Energy as follows: (1) a lump-sum payment equal to two times the sum of the executive's then-current base salary and target bonus, plus a pro rata amount of the executive's target bonus for the year in which the termination occurs; (2) a lump-sum payment equal to the present value of the amount Duke Energy would have contributed
29
Compensation
or credited to the executive's pension and savings accounts during the two years following the termination date; (3) continued medical, dental and basic life insurance coverage for a two-year period following the termination date or retiree medical benefits, if the executive would have become eligible for such benefits within two years following the termination date, from the date of eligibility; and (4) continued vesting of long-term incentive awards, including stock options or restricted stock but excluding certain performance share awards, held but not vested or exercisable on the termination date, in accordance with their terms for two years following the termination date, with any options or similar rights thereafter remaining exercisable for 90 days, if their term has not expired. If Messrs. Priory,Mr. Fowler and Osborne and Dr. Shaw receive a payment under their severance agreements, no payment will be made under the performance share award. The severance agreements contain restrictive covenants which prohibit Messrs. Priory,Mr. Fowler and Osborne and Dr. Shaw from competing with Duke Energy or soliciting Duke Energy's employees or customers of Duke Energy for one year following termination, and from disclosing certain confidential information.
Severance benefits became payable under Mr. Priory's severance agreement effective November 1, 2003, the effective date of his resignation as Chairman of the Board and Chief Executive Officer. As agreed in connection with his separation, aggregate severance benefits of $4,833,850 were paid to Mr. Priory. Mr. Priory is also entitled to payment by Duke Energy of up to $65,000 for legal fees incurred by Mr. Priory in connection with his separation and to continued access to, and use of, office space and secretarial support at Duke Energy's Charlotte, North Carolina corporate headquarters under the same terms and conditions as such office space and secretarial support is provided to similarly situated, previously retired inside directors of Duke Energy. This obligation to provide continued office space and secretarial support will end upon the earlier of Duke Energy's cessation of this type of support to other similarly situated retired executives or Mr. Priory's acceptance of full-time employment with any third party.
Duke Energy had entered into a severance agreement with Mr. Blackburn with provisions identical to the severance agreements described above for Messrs. Priory, Fowler and Osborne and Dr. Shaw, which became effective August 18, 1999, and expired upon his retirement from Duke Energy effective February 1, 2004. Duke Energy and Mr. Blackburn are currently involved in legal proceedings to resolve differences with respect to severance payments to Mr. Blackburn in connection with his retirement effective February 1, 2004. Severance benefits of $644,406 have been paid to Mr. Blackburn. Pursuant to an agreement with Mr. Blackburn, Duke Energy may pay Mr. Blackburn an additional lump-sum severance payment of $1,360,376 following resolution of, and depending on the outcome of, these proceedings.
Duke Energy entered into a separation agreement with Mr. Brace in connection with his termination of employment effective March 1, 2004. The separation agreement provides for the following: (1) lump-sum severance payments totaling $700,000; (2) reimbursement of up to $10,000 for attorneys' fees incurred by Mr. Brace in connection with the separation agreement; (3) payment by Duke Energy of an amount equal to the premium for six months of COBRA coverage, including payment for income taxes owed by Mr. Brace as a result of this payment, if such coverage is elected by Mr. Brace; (4) payment for Mr. Brace's accrued but unpaid vacation as of December 31, 2003; and (5) retention by Mr. Brace of a laptop computer and a home computer which had been assigned to him, provided that information designated as confidential or proprietary by Duke Energy is deleted by Duke Energy. The separation agreement contains provisions prohibiting Mr. Brace from disclosing certain confidential business information for a period of two years following his termination of employment, with the exception that the confidentiality of trade secret information will continue to survive after the two-year period.
The change-in-control agreements for Messrs.Mr. Fowler and Osborne and Dr. Shaw provide for payments and benefits to the executive in the event of
Executive
Compensation
termination of employment for "good reason" by the executive or other than for "cause" by Duke Energy within a two-year period following a "change-in-control" (each such term as defined in the change-in-control agreements) as follows: (1) a lump-sum payment equal to the sum of the executive's then-current base salary and target bonus for each year of the three-year period after termination, including a pro rata amount for any partial years in such period, plus a pro rata amount of the executive's target
30
Compensation
bonus for the year in which the termination occurs; (2) a lump-sum payment equal to the present value of the amount Duke Energy would have contributed or credited to the executive's pension and savings accounts during the three years following the termination date; (3) continued medical, dental and basic life insurance coverage for a three-year period following the termination, or retiree medical benefits, if the executive would have become eligible for such benefits within two years following the termination date, from the date of eligibility; and (4) continued vesting of long-term incentive awards, including stock options or restricted stock but excluding certain performance share awards, held but not vested or exercisable on the termination date, in accordance with their terms for three years following the termination date, with any options or similar rights thereafter remaining exercisable for 90 days, if their terms have not expired. If the executive becomeswould have become eligible for normal retirement at age sixty-five within the three-year period following termination, the three-year period mentioned above will be reduced to the period from the termination date to the eligible executive's normal retirement date. In the event that any of the payments or benefits provided for in the change-in-control agreement would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code), the executive is entitled to receive an additional payment such that, after the payment of all income and excise taxes, he or she will be in the same after-tax position as if no excise tax under Section 4999 of the Internal Revenue Code had been imposed.
The change-in-control agreements for Messrs. Mogg and Hauser provide for payments and benefits to the executive in the event of termination of employment for "good reason" by the executive or other than for "cause" by Duke Energy within a two-year period following a "change-in-control" (each such term as defined in the change-in-control agreements) in accordance with provisions identical to the terms of the change-in-control agreements for Mr. Fowler and Dr. Shaw described listed above, except that amounts paid or benefits received that are determined on the basis of a period of time are determined for a two-year period (rather than three-year period) following the termination date.
Duke Energy granted a performance share award to Mr. Mogg on August 18, 1999, which contains restrictive covenants which prohibit him from competing with Duke Energy or soliciting employees or customers of Duke Energy for two years following termination of employment.
Duke Energy had entered into a benefits agreement with Mr. Mogg effective May 25, 1995, as an inducement to accept a transfer to Denver, Colorado to Duke Energy Field Services, LLC. Upon assuming the position, Mr. Mogg ceased to participate in benefit plans of Duke Energy. The agreement was replaced by a new agreement effective August 4, 2001, following Duke Energy's conversion from a final average pay to a cash balance pension plan, and was subsequently clarified on March 29, 2004, following Mr. Mogg's relocation to Charlotte to assume his current role. The agreement requires Mr. Mogg, in the event of his decision to retire from Duke Energy, to provide Duke Energy with no less than 30 days notice in advance of his effective date of retirement. In addition, the agreement provides that Mr. Mogg will receive, following termination of employment as a result of retirement, a supplemental credit to his Executive Cash Balance Plan (ECBP) account, or a cash payment in lieu of the supplemental credit to his ECBP account if such plan is not then active. The amount of the credit, or payment, will be equal to the positive difference, if any, between the following: (1) the present value at such time of the aggregate benefits to which Mr. Mogg would have been entitled under the Duke Energy Retirement Cash Balance Plan (RCBP) and the ECBP upon termination of employment with Duke Energy if his employment since June 29, 1995, had been with Texas Eastern Transmission Corporation, and (2) the present value at such time of the aggregate benefits to which Mr. Mogg is entitled under the RCBP and the ECBP, and under any similar program(s) provided by Duke Energy Field Services, LLC, upon the termination of his employment with Duke Energy, but adjusted to negate the effect of any prior distributions. The RCBP and ECBP are described more fully below under "Retirement Plan Information." Upon Duke Energy's conversion from a final
Executive
Compensation
average pay to a cash balance pension plan for certain employees effective January 1, 1999, Mr. Mogg received a supplemental credit to his ECBP account of $404,536, representing the projected difference in the benefits described above attributable to service earned from the period from May 25, 1995, to December 31, 1998. Assuming Mr. Mogg had retired effective January 1, 2005, the additional amount which would have been credited to his ECBP account for the difference in the benefits described above from January 1, 1999, to December 31, 2004, is estimated to be $3,750.
Duke Energy had entered into a supplemental compensation agreement with Dr. Shaw effective September 1, 1992, to induce her to accept employment with Duke Energy. The agreement was replaced by a new agreement effective January 1, 1997, following Duke Energy's conversion from a final average pay to a cash balance pension plan, to ensure Dr. Shaw's benefits under the agreement were treated consistently with the conversion of benefits of other similarly situated employees, while recognizing the provisions of the previous agreement. The January 1, 1997, agreement provided for the addition of $50,000 to Dr. Shaw's supplemental account in the Duke Energy Corporation Executive Cash Balance PlanECBP effective January 1, 1997. In addition, if Dr. Shaw's employment is terminated by Duke Energy without cause prior to her reaching age sixty-two, upon attaining age sixty-two, Dr. Shaw will be paid a retirement supplement lump sum cash payment equal to $2,475,000, less the sum of her account balances as of her termination date in the Duke Energy Retirement Cash Balance PlanRCBP and Duke Energy Executive Cash Balance Plan,ECBP, with such sum increased at a rate of seven percent7% per year from the date of her termination to age sixty-two. If Dr. Shaw becomes disabled or dies after terminating employment with Duke Energy but before reaching age sixty-two, Dr. Shaw, or in the event of her death Dr. Shaw's designated beneficiary, will be paid a lump-sum cash payment equal to the present value of the age sixty-two retirement supplement discounted at a rate of 7% per year to the date of her disability. If Dr. Shaw dies while employed at Duke Energy, Dr. Shaw's designated beneficiary will be paid an amount equal to 1.5 times Dr. Shaw's annual base pay at the time of her death. An additional provision provided that Dr. Shaw was credited for twenty years of service for the purpose of determining vacation benefits.
Retirement Plan Information
Executive officers and other eligible employees of Duke Energy and its affiliated companies participate in the Duke Energy Retirement Cash Balance Plan,RCBP, which is a noncontributory, qualified, defined benefit retirement plan.plan that is intended to satisfy the requirements for qualification under Section 401(a) of the Internal Revenue Code. In addition, selected managers are eligible to participate in the Duke Energy Executive Cash Balance Plan,ECBP, which is a noncontributory, nonqualified, defined benefit retirement plan. A portionplan that is not intended to satisfy such requirements. In response to the enactment of Section 409A of the Internal Revenue Code, which imposes new requirements for the successful deferral of compensation, the ECBP was divided into two parts, one of which includes only benefits earned and vested before January 1, 2005, to which the new requirements do not apply, and the other of which includes benefits to which the new requirements do apply and which is intended to satisfy those requirements. Benefits earned in the Executive Cash Balance Plan isECBP are attributable toto: compensation in excess of the Internal Revenue Service annual compensation limit ($200,000205,000 for 2003) and2004) under the Internal Revenue Code that applies to the determination of pay credits under the RCBP; certain deferred compensation as well as reductions causedthat is not recognized by the RCBP; restoration of benefits in excess of a defined benefit plan maximum annual benefit limitations that apply to qualified plans from the benefits that would otherwise be providedlimit ($165,000 for 2004) under the Retirement Cash Balance Plan. Internal Revenue Code that applies to the RCBP; and supplemental benefits granted to a particular participant.
The Retirement Benefit Equalization Plan is designedbenefit accrual formula used to restore benefit reductions caused by the maximum benefit limitations that apply to qualified plans from benefits that would otherwise be provideddetermine pay credits under the Retirement Cash Balance Plan for eligible employees who do not participate in the Executive Cash Balance Plan. Benefits under the Retirement Cash Balance Plan, the Executive Cash Balance PlanRCBP and the Retirement Benefit Equalization Plan areECBP is based onupon eligible pay, generally consisting of base pay, overtime, short-term incentives and lump-sum merit increases. The Retirement Cash Balance Plan andRCBP excludes eligible pay in excess of the Retirement Benefit Equalization Plan excludeannual compensation limit under the Internal Revenue Code, while the ECBP excludes eligible pay up to such limit. The RCBP excludes deferred compensation other than
31
Compensation
deferrals pursuant to Sections 401(k) andor 125 of the Internal Revenue Code.
Under the RCBP and ECBP benefit accrual formula, used to determine benefits under the Retirement Cash Balance Plan and the Executive Cash Balance Plan, an eligiblea participating employee's plan account receives a pay credit at the end of each month in which the employee remains eligible for the respective plan and receives eligible pay for services. The monthly pay credit is equal to a percentage of the employee's monthly eligible pay. For most eligible employees, including the Named Executive Officers, theThe percentage depends
Executive
Compensation
on age and completed years of service at the beginning of the year, as shown below:
| Age and Service | Monthly Pay Credit Percentage | |
|---|---|---|
| 34 or less | 4% | |
| 35 to 49 | 5% | |
| 50 to 64 | 6% | |
| 65 or more | 7% |
In addition, there is an additional 4% pay credit for any portion of eligible pay above the Social Security taxable wage base ($87,00087,900 for 2003)2004). Participant accounts also receive monthly interest credits on their balances. The rate of the interest credit is adjusted quarterly and equals the yield on 30-year U.S. Treasury Bonds during the third week of the last month of the previous quarter, subject to a minimum rate of 4% per year and a maximum rate of 9% per year.
Assuming that the Named Executive Officers currently employed by Duke Energy continue in their present positions at their present salaries and target bonus opportunities until retirement at age 65, their estimated annual pensions in a single life annuity form under the applicable plansRCBP and ECBP attributable to such salaries and bonuses would be: Fred Fred��J. Fowler, $299,462; Richard J. Osborne, $327,270;$311,014; Jimmy W. Mogg, $268,642; David L. Hauser, $253,882; and Ruth G. Shaw, $253,688.$254,248. These estimates are calculated assuming interest credits at an annual rate of 4% and using a 20032004 Social Security taxable wage base equal to $87,000,$87,900, increasing 4.5% annually. Richard B. Priory and Richard W. Blackburn retired prior to the normal retirement age of 65 and will be entitled to estimated annual pensions in a single life annuity form commencing at age 65 under the assumptions described above, except for pay credits, of $544,552 and $55,382, respectively. Robert P. Brace was not vested in the Retirement Cash Balance Plan or the Executive Cash Balance Plan at the termination of his employment effective March 1, 2004. Paul M. Anderson only participates in the Retirement Cash Balance PlanRCBP only for purposes of determining his eligibility to qualify for early or normal retirement andretirement; he does not participate in the Executive Cash Balance Plan.ECBP.
32
Discretionary Voting Authority
As of the date this proxy statement went to press, Duke Energy did not anticipate that any matter other than the proposals set out in this proxy statement would be raised at the annual meeting. If any other matters are properly presented at the annual meeting, the persons named as proxies will have discretion to vote on those matters according to their best judgment.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on information furnished to us and contained in reports filed with the SEC, as well as any written representations that no other reports were required, Duke Energy believes that during 20032004 all Securities and Exchange CommissionSEC filings of its directors and executive officers complied with the requirements of Section 16 of the Securities Exchange Act.Act except for the following, all of which were filed late as a result of clerical errors by Duke Energy: a Form 4 for William T. Esrey and Form 4 for George Dean Johnson, Jr., both dated June 28, 2004, and both of which reported the June 22, 2004, acquisition of Duke Energy Common Stock through the Duke Energy dividend reinvestment plan; a Form 4 for Richard J. Osborne, dated February 3, 2005, which reported the December 19, 2004, vesting of phantom stock; a Form 4 for Jimmy W. Mogg, dated February 3, 2005, which reported a one-time credit to Mr. Mogg's ECBP made on May 28, 2004; and a Form 4 for Martha B. Wyrsch, dated March 10, 2005, which reported shares of Duke Energy Common Stock withheld by Duke Energy to pay taxes on a vesting of restricted stock on October 1, 2004.
Fees Paid to Independent AuditorsAuditor
The following table presents fees for professional services rendered by Deloitte & Touche LLP, and the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, "Deloitte") for Duke Energy and its subsidiaries for 20032004 and 2002:2003:
| Type of Fees | FY 2003 | FY 2002 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | (In millions) | |||||||||||
| Audit Fees (a) | $ | 9.7 | $ | 8.4 | ||||||||
| Audit-Related Fees (b) | 1.6 | 6.8 | ||||||||||
| Compliance Tax Fees (c) | $ | 10.1 | $ | 6.9 | ||||||||
| Other Tax Fees (d) | 0.7 | 3.4 | ||||||||||
| Total Tax Fees | 10.8 | 10.3 | ||||||||||
| All Other Fees (e) | 0.3 | 1.1 | ||||||||||
| Total fees: | $ | 22.4 | $ | 26.6 | ||||||||
| Type of Fees | FY 2004 | FY 2003 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | (In millions) | |||||||||||
| Audit Fees (a) | $ | 10.7 | $ | 11.6 | (f) | |||||||
| Sarbanes-Oxley 404 Fees (b) | 14.7 | 0 | ||||||||||
| Total Audit Fees | $ | 25.4 | $ | 11.6 | ||||||||
| Audit-Related Fees (c) | 1.9 | 1.6 | ||||||||||
| Tax Fees (d) | 8.2 | 10.8 | ||||||||||
| All Other Fees (e) | 0.1 | 0.3 | ||||||||||
| Total Fees: | $ | 35.6 | $ | 24.3 | ||||||||
Other
Information
To safeguard the continued independence of the independent auditors,auditor, the Audit Committee has adopted a policy that expands Duke Energy's existing policy preventingprevents Duke Energy's independent auditorsauditor from providing services to Duke Energy and its subsidiaries that are prohibited under Section 10A(g) of the Securities Exchange Act of 1934, as amended. This policy also provides that independent auditors are only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, all audit services require advance approval by the Audit Committee. All other services by the independent auditorsauditor that fall within certain designated dollar thresholds, both per engagement as well as annual aggregate, have been pre-approved under the policy. Different dollar thresholds apply to the three categories of pre-approved services specified in the policy (Audit-Related services, Tax services and Other services). All services that exceed the dollar thresholds must be approved in advance by the Audit Committee. Pursuant to applicable provisions of the Securities Exchange Act of 1934, as amended, the Audit Committee has delegated approval authority to the Chairman of the Audit Committee, who is an independent director.Committee. The Chairman has presented all approval decisions to the full Audit Committee. All services performed by the independent auditors under
33
Other Information
engagements entered into on or after May 6, 2003,auditor in 2004 were approved by the Audit Committee pursuant to its pre-approval policy, except that services comprising 1% of Tax Fees and none was14% of Other Fees were approved pursuant to thede minimus exception to the rules and regulations of the Securities and Exchange CommissionSEC on pre-approval.
Shareholder Communication with Board of Directors
All correspondence addressed to the Board of Directors or to one or more members of the Board of Directors should be sent to the Corporate Secretary at the following address:
Corporate Secretary
Duke Energy Corporation
P. O. Box 1006
Charlotte, NC 28201-1006
All correspondence received by the Corporate Secretary will be promptly acknowledged and reviewed by the Corporate Secretary, who will determine whether the correspondence should be forwarded immediately to the Board of Directors or any member of the Board of Directors or whether the correspondence should be presented to the Board of Directors at its next regular meeting. The Corporate Secretary will consult with the Chairman of the Corporate Governance Committeelead director if there is a question concerning the need for immediate review by the Board of Directors or by any member of the Board of Directors.
Correspondence to the presidinglead director of the nonmanagement directors may be sent to the following address:
PresidingLead Director
Duke Energy Corporation
c/o Corporate Secretary
P. O. Box 1006
Charlotte, NC 28201-1006
The Corporate Secretary will forward any such correspondence, unopened, to the Chairmanlead director.
Code of Ethics and Corporate Governance Principles
Duke Energy has adopted a code of ethics entitled "Code of Business Ethics" that applies to all officers (including the principal executive officers, principal financial officer and controller) and all other employees of Duke Energy and Duke Energy's subsidiaries. The "Code of Business Ethics" is posted on Duke Energy's Internet Web site: http://www.duke-energy.com/investors/corporate/ethics.htm and is available in print to any shareholder who requests it. In satisfaction of the Corporate Governance Committee, whodisclosure requirements of Item 5.05 of Form 8-K, Duke Energy will reviewdisclose on this website any amendments to, or waivers to, provisions of the correspondence"Code of Business Ethics" that apply to its principal executive officers, principal financial officer and make it availablecontroller and that relate to any element of this code enumerated in Item 406(b) of Regulation S-K.
Other
Information
Directors are held to the presiding director who is selectedsame high standards of business conduct as employees. Duke Energy's Board of Directors has approved and Duke Energy has adopted a "Code of Business Conduct and Ethics for the next meeting of nonmanagement directors. The presiding director for each meetingMembers of the nonmanagement directorsBoard of Directors of Duke Energy Corporation," applicable to all members of Duke Energy's Board of Directors, that set forth standards of conduct for directors. This code includes those standards from the employees' code which directly apply to the roles and responsibilities of a director. The directors' code is chosenposted on an ad-hoc basis by the directors present at each such meeting.Duke Energy's Internet Web site:http://www.duke-energy.com/investors/corporate.htm and is available in print to any shareholder who requests it.
Duke Energy also has adopted its "Principles of Corporate Governance," which addresses, among other things, director and board committee responsibilities. These guidelines are posted on Duke Energy's Internet Web site: http://www.duke-energy.com/investors/corporate.htm and are available in print to any shareholder who requests it.
Electronic Delivery of the 20042005 Annual Report and Proxy Materials
If you received a paper version of this year's proxy materials, please consider signing up for electronic delivery of next year's materials. Electronic delivery reduces Duke Energy's printing and postage costs associated with paper publications. You will be notified immediately by e-mail when next year's annual report and proxy materials are available. E-delivery makes it more convenient for shareholders to cast their votes on issues that affect Duke Energy.
In order to enroll for electronic delivery, go towww.icsdelivery.com/duk and follow the instructions. You will need to enter a valid email address along with your social security number.
If you elect to receive your Duke Energy materials via the Internet, you can still request paper copies by contacting Investor Relations at (800) 488-3853 or by e-mail atInvestDUK@duke-energy.com.
34Householding Information
Duke Energy has adopted a procedure called "householding", which has been approved by the SEC, for shareholders of record on February 1, 2003. Under this procedure, a single copy of the annual report and proxy statement is sent to any household at which two or more shareholders reside, unless one of the shareholders at that address notifies us that they wish to receive individual copies. This procedure reduces our printing costs and fees. Each shareholder will continue to receive separate proxy cards, and householding will not affect dividend check mailings, or InvestorDirect Choice Plan statement mailings, in any way.
This year, we are seeking consent to householding from shareholders who became shareholders of record after February 1, 2003, and from shareholders who have previously revoked their consent but wish to now participate in householding. If you provide your consent this year or have already consented to householding, householding will continue until you are notified otherwise or until you notify Investor Relations by telephone at (800) 488-3853, by e-mail atInvestDUK@duke-energy.com, or by mail at P.O. Box 1005, Charlotte, NC 28201-1005, that you wish to continue to receive separate annual reports and proxy statements. You will be removed from the householding program within 30 days of receipt of your notice. If you received a householded mailing this year and you would like to have additional copies of our annual report and proxy statement mailed to you, please submit your request to Investor Relations at the number or address above. We will promptly send additional copies of the annual report and proxy statement upon receipt of such request.
A number of brokerage firms have instituted householding. If you hold your shares in "street name," please contact your bank, broker or other holder of record to request information about householding.
Appendix A
DECLASSIFICATION AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION OF
DUKE ENERGY CORPORATION
Article VIII of the Restated Articles of Incorporation of the Corporation is amended as follows:
(b) Termination ofClassification. The directors, other than those who may be elected by the holders of any class of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, shall be classifieduntil the annual meeting of shareholders to be held in 2006, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in the By-Laws of the Corporation, one class (Class I) to be originally elected for a term expiring at the annual meeting of shareholders to be held in 1992, another class (Class II) to be originally elected for a term expiring at the annual meeting of shareholders to be held in 1993, and another class (Class III) to be originally elected for a term expiring at the annual meeting of shareholders to be held in 1994, with each class to hold office until its successor is elected and qualified. At each annual meeting of the shareholders of the Corporation,until the annual meeting of shareholders to be held in 2006, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election.The terms of office of all directors who are in office immediately prior to the closing of the polls for the election of directors at the 2006 annual meeting of shareholders of the Corporation shall expire at such time. At each annual meeting of shareholders beginning with the 2006 annual meeting of shareholders of the Corporation, the directors shall not be classified, and the directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, shall be elected by the holders of voting stock and shall hold office until the next annual meeting of shareholders and until their respective successors shall have been duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
(d) Newly created directorships; vacancies. Except as may be otherwise provided for or fixed by or pursuant to the provisions of these Articles of Incorporation, as amended from time to time, relating to the rights of the holders of any class of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until thenext succeeding annual meeting of shareholders and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Appendix B
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF DUKE ENERGY CORPORATION
(February 24, 2004)22, 2005)
I. General Focus
The Audit Committee (the "Committee") shall:
II. Structure and Operations
The Committee shall be comprised of three or more members of the Board, each of whom is determined by the Board to be "independent" under the rules of the New York Stock Exchange, Inc. ("NYSE") and the rules promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
All members of the Committee shall have a working familiarity with basic finance and accounting practices (or acquire such familiarity within a reasonable period after his or her appointment) and at least one member shall in the judgment of the Board of Directors have accounting or related financial management expertise as required by the rules of the NYSE. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or by an outside consultant.
The members of the Committee shall be appointed by the Board and shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation or removal. The members of the Committee may be removed, with or without cause, by majority vote of the Board.
The full Board shall elect the Chair of the Committee. The Chair shall be entitled to cast an additional vote to resolve any ties. The Chair will chair all regular sessions of the Committee and set the agendas for Committee meetings.
III. Meetings
The Committee shall meet at least quarterly or more frequently as circumstances dictate. As part of its goal to foster open communication, the Committee shall periodically meet separately with each of management, the vice president of internal audit and the independent auditorsauditor to discuss any matters that the Committee or each of these groups believe should be discussed privately. The Committee may meet privately with the general counsel and the vice president with responsibility for the compliance program, as necessary. In addition, the Committee shall meet with the independent auditorsauditor and management quarterly to review the Corporation's financial statements in a manner consistent with that outlined in Section IV of this Charter.
All nonmanagementnon-management directors that are not members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, management of the Corporation and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.
A majority of the members, but not less than two, will constitute a quorum. A majority of the members present at any meeting at which a quorum is present may act on behalf of the Committee. The Committee may meet by telephone or videoconference and may take action by unanimous written consent with respect to matters that may be acted upon without a formal meeting.
The Chair shall designate a person who need not be a member thereof to act as secretary and minutes of its proceedings shall be kept in minute books provided for that purpose. The agenda of each meeting will be prepared by the secretary and, whenever reasonably practicable, circulated to each member prior to each meeting.
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IV. Responsibilities and Duties
�� The following functions shall be the common recurring activities of the Committee in carrying out its responsibilities outlined in Section I of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board of Directors from time to time related to the purposes of the Committee outlined in Section I of this Charter.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate. In this regard, the Committee shall have the authority to retain outside legal, accounting or other advisors for this purpose, including the authority to approve the fees payable to such advisors and any other terms of retention.
The Committee shall be given full access to the Corporation's internal audit group, Board, corporate executives and independent accountants, as necessary, to carry out these responsibilities. While acting within the scope of its stated purpose, the Committee shall have all the authority of the Board.
Notwithstanding the foregoing, the Committee is not responsible for certifying the Corporation's financial statements or guaranteeing the independent auditor's report. The fundamental responsibility for the Corporation's financial statements and disclosures rests with management and the independent auditors.auditor.
Documents/Reports Review
Independent AuditorsAuditor
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(a) Review the written report of the independent auditor that delineates all relationships between the independent auditor and the Corporation that the auditors believe may impact their independence and objectivity, which report should be submitted to the Committee at least annually, and discuss with the independent auditor and management the scope of any such disclosed relationship and their actual or potential impact on the independent auditor's independence and objectivity;
(b) Obtain and review a report by the Corporation's independent auditor describing: (i) the auditor's internal quality-control procedures; and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditor or by any inquiry or investigation by governmental or professional authorities within the preceding five years, respecting one or more independent audits carried out by the auditor, and any steps taken to deal with any such issues;
(c) Confirm the rotation of the audit partners (as defined in Rule 2-01 of Regulation S-X) to ensure that the independent auditor remains independent under Rule 2-01 of Regulation S-X, and consider whether there should be regular rotation of the audit firm itself; and
(d) Take into account the opinions of management and the Corporation's internal auditors (or personnel responsible for the internal audit function).
Internal Auditors
Financial Reporting Process
engagement and (iii) any "management" or "internal control" letter issued or proposed to be issued by the independent auditor to the Corporation.
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Legal Compliance/General
Reports
V. Annual Performance Evaluation
The Committee shall perform a review and evaluation, at least annually, of the performance of the Committee and its members, including a review of the compliance of the Committee with this Charter. In addition, the Committee shall review and reassess, at least annually, the adequacy of this Charter and recommend to the Board any improvements to this Charter that the Committee considers necessary or valuable. The Committee shall conduct such evaluations and reviews in such manner as it deems appropriate.
  | Directions to Annual Meeting of Shareholders Duke Energy Energy Center 526 South Church Street Charlotte, NC 28202 From 1-77 North: Take the Morehead Street exit - 10A Turn Left onto Morehead Street Turn Left onto Mint Street Mint Street Parking Deck located adjacent to From 1-77 South: Take the 1-277/John Belk Freeway/US-74/Wilkinson Blvd. exit - 9B Merge onto 1-277 N/US-74 E. Take the Carson Blvd. exit - 1 D Stay straight to Carson Blvd. Turn Left onto Mint Street Mint Street Parking Deck located adjacent to Free parking available in the Mint Street Parking Deck. 1 - Energy Center 2 - Mint St. Parking Deck 3 - |
DUKE ENERGY CORPORATION
Annual Meeting of Shareholders
May 13, 200412, 2005 at 10:00 a.m.
Energy Center - O.J. Miller Auditorium
526 South Church Street
Charlotte, North Carolina
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D. L.P.M. Anderson and D.L. Hauser, and M. B. Wyrsch, and each of them, proxies, with the powers the undersigned would possess if personally present, and with full power of substitution, to vote all shares of Common Stock of Duke Energy Corporation of the undersigned at the annual meeting of shareholders to be held in the Energy Center, 526 South Church Street, Charlotte, North Carolina, on May 13, 200412, 2005 and at any adjournment thereof, upon all subjects that may come before the meeting, including the matters described in the proxy statement furnished herewith, subject to any directions indicated on the reverse side of this card.If no directions are given, the individuals designated above will vote for the election of all director nominees, in accord with the directors' recommendations on the other subjects listed on this card and at their discretion on any other matter that may come before the meeting.
Your vote for the election of directors may be indicated on the reverse. Nominees are: Paul M. Anderson, Ann M. Gray, Michael E.J. Phelps and James T. Rhodes.Roger Agnelli, G. Alex Bernhardt, Sr., Dennis R. Hendrix, A. Max Lennon.
| Comments: | | |
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(If you noted any Comments above, please mark corresponding box on the reverse side.)
  C/O PROXY SERVICES P.O. BOX 9112 FARMINGDALE, NY 11735 | VOTE BY INTERNET- Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time, May VOTE BY PHONE -1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time, May VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Duke Energy Corporation, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DUKE ENERGY CORPORATION
| The Board of Directors recommends a vote "For All" Director nominees. |   | For All | Withhold All | For All Except | To withhold authority to vote, mark "For All Except" and write each withheld nominee's number on the line below. | |||||||
1. | Election of | o | o | o | ||||||||
01) 03) | ||||||||||||
The Board of Directors recommends a vote "For" | ||||||||||||
 | ||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||
2. | Approval of amendments to Duke Energy's Restated Articles of Incorporation to eliminate classification of Duke Energy's Board of | o | o | o | ||||||||||||||
3. | Ratification of Deloitte & Touche LLP as Duke Energy's independent auditors for 2005. | o | o | o | ||||||||||||||
I have provided written comments on the back of this card. | o | |||||||||||||||||
| Yes | No | |||||||||||||||||
HOUSEHOLDING ELECTION—Please indicate if you consent to receive certain future investor communications in a single package per household | o | o | ||||||||||||||||
 | | |||||||||||||||||
| For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Ratification of Deloitte & Touche LLP as Duke Energy's independent auditors for 2004. | o | o | o | 3. | A shareholder proposal relating to declassification of Duke Energy's Board of Directors, if properly presented at the annual meeting. | o | o | o | |||||||||
I have provided written comments on the back of this card. | o | |||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||