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The financial services industry consists of companies operating in a similar regulatory environment to IOOF and is considered the appropriate market for comparison as this is the key source of talent for IOOF. 

Short Term Incentive (STI): The STI provides an annual opportunity for individual incentive rewards. The STI reward is assessed against both Group and individual objectives. 

Long Term Incentive (LTI):  The LTI provides an annual opportunity for an equity award that aligns a significant portion of overall remuneration to shareholder value over the medium to longer term. 

For the purposes of this report, the executive KMP (excluding the Managing Director) are as follows: 

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Remuneration report disclosures include Executive KMP with key responsibility for the strategic direction and management of the Company and of the revenue generating businesses or who have the capacity to significantly affect the Company’s financial standing. 

## 3.3 Managing Director Remuneration 

The remuneration of Mr Kelaher is set by the Board and is based on a market review of the level of remuneration required to attract and retain a high calibre individual suitable for the role. During the financial year ended 30 June 2012, Mr Kelaher received a remuneration package comprising total fixed remuneration of $1,090,000. This amount included $65,000 annual Director’s fees paid directly by DKN Financial Group Limited prior to acquisition by the Group which has been incorporated into Mr Kelaher’s remuneration from the Group. Mr Kelaher was entitled to a total STI opportunity of up to a maximum of $870,000 based on achievement of superior performance against set targets determined by the Remuneration Committee. In July 2012 the Remuneration Committee assessed Mr Kelaher’s performance against those targets and determined an STI amount of $626,400, being 72% of the eligible amount. 

In terms of his remuneration arrangements, the STI opportunity was settled two thirds by cash and a third in the form of deferred shares. The number of deferred shares granted to Mr Kelaher was determined on the basis of the STI deferral amount divided by the five day Volume Weighted Average Price up to and including 29 June 2012, which was $5.8038. The number of deferred shares to be issued accordingly is 35,977 (capped at 75,000 annually) and there is no consideration payable for the grant of the deferred shares. 

The Board has determined that the portion of STI that will be deferred will be subject to Board ‘look back’ arrangements. This means the Board will conduct a review of Group performance in June 2013 and assess whether any significant unexpected or unintended consequences have occurred that were not foreseen by the Remuneration Committee when it made its decision in July 2012, and whether it is still appropriate to award the deferred shares. 

During June 2012, the Remuneration Committee performed a ‘look back’ review in regards to the 31,694 deferred shares issued in July 2011. The Remuneration Committee determined that all of the deferred shares were to vest in accordance with the terms of the arrangement. The 31,694 shares have since been transferred to Mr Kelaher. 

The LTI arrangements in place for Mr Kelaher are disclosed further in Section 6 of the report. 

## 3.4 Other Executive KMP Remuneration 

The remuneration of other seniors executives is determined by the Managing Director and is approved by the Board. 

## Mr Abley 

During the financial year ended 30 June 2012, Mr Abley received a remuneration package comprising total fixed remuneration of $319,300. Mr Abley was entitled to a total STI opportunity of up to a maximum of $127,720 based on achievement of superior performance against set targets. Due to Mr Abley’s extended leave of absence during the year, Mr Abley was not awarded an STI for 2012. 

## Mr Carter 

During the financial year ended 30 June 2012, Mr Carter received a remuneration package comprising total fixed remuneration of $330,000. Mr Carter was entitled to a total STI opportunity of up to a maximum of $132,000 based on achievement of superior performance against set targets. In August 2012 the Managing Director assessed Mr Carter’s performance against those targets and determined an STI amount of $65,000. 

