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## D. EXECUTIVE KMP COMPENSATION (continued) 

## 5. Variable Remuneration — Long Term Incentive (“LTI”) (continued) 

## (b) Structure (continued) 

## (ii) 2008 Option Plan for CEO (“2008 OP”) (continued) 

All options under the 2008 OP have either lapsed or been exercised and none of these 2008 options remain. 

The options were not transferable and did not confer any right to participate in bonus issues or cash issues of ordinary shares. The option exercise price would have been adjusted for discounted cash issues, and the number of shares issued on exercise of an option would have been adjusted for bonus issues of shares. The options did not carry voting or dividend rights and were not listed for quotation on ASX. 

Two million options were exercisable subject to certain performance conditions not earlier than 1 March 2011; two million options were exercisable subject to certain performance conditions not earlier than 1 March 2012; and two million options were exercisable subject to certain performance conditions not earlier than 1 March 2013. 

The earnings per share (“EPS”) performance hurdle had a starting point of 27 cents per ordinary share on 31 December 2007 and the dividend per share (“DPS”) performance hurdle had a starting point of 9 cents per ordinary share on 31 December 2007, with growth measured on calendar year performance. 

For all options to vest, the Company’s performance must have met a minimum 10% cumulative average growth rate (“CAGR”) in EPS over the 3 year vesting period for half of each tranche to vest, and must have met a minimum 10% CAGR in dividends paid over 2 out of the 4 year vesting period for the other half of each tranche to vest. For half of the options to vest, the Company’s performance must have met a minimum 5% CAGR in EPS over the 3 year vesting period for one quarter of each tranche to vest, and must have met a minimum 5% CAGR in dividends paid over 2 out of the 4 year vesting period for another quarter of each tranche to have vested. Below 5% CAGR in either DPS or in EPS, no options would vest, with a pro-rata straight line vesting scale between 5% and 10% CAGR for each performance condition. 

The effect of the performance hurdles on the potential vesting of the options can be illustrated as follows: 

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$^{#}$ Subject to ‘2 out of 4 years’ test * 

A pro rata straight line vesting scale applies. 

All the options were exercisable no later than 1 March 2015. In the event of termination without cause, Mr. Burke could have exercised the options that had already vested or that vested during the following 12 month period, or he could have exercised vested options within 7 days of cessation of employment in the event of termination for cause. 

During the prior year all of the remaining options under Mr. Burke’s 2008 Option Plan were exercised or lapsed and no options remained at 30 June 2013. 603,863 third tranche EPS options vested and 396,137 third tranche EPS options lapsed during the prior year, the second tranche DPS options were retested in 2013 resulting in 1,000,000 DPS options vesting in March 2013, with the 1,000,000 third tranche DPS options also vesting in March 2013. 

The terms of the grant of the options provided that should the Board determine that Mr. Burke had entered into a hedging transaction or other transaction having the effect of limiting or eliminating the economic risk associated with the options as a result of the DPS and EPS growth vesting hurdles to which they were subject, the options would have expired. 

On 21 February 2013 Mr. Burke exercised 2,250,036 first and second tranche vested options into ordinary shares at $2.00 per share, and on 

1 March 2013 Mr. Burke exercised the remaining 2,603,863 second and third tranche vested options, also at $2.00 per share. The value at exercise date of the options exercised by Mr. Burke during the 2013 year, based on the original valuation amounts, was $1,307,772. Accordingly all options under the 2008 OP have either lapsed or been exercised and none of these 2008 options remain. 

## (iii) 2012 Option Plan for CEO (“2012 OP”) 

The extension in October 2012 of the employment contract of Mr. Graham Burke, an Executive Director KMP, to December 2017 included a proposed grant of up to 4.5 million options over ordinary shares. The resulting 2012 OP is similar in design to the 2008 OP and was approved by the Company’s shareholders on 15 November 2012. The options were issued on 29 November 2012 with the options being exercisable at $3.76 per share, with vesting subject to performance hurdles relating to growth in earnings per share and growth in dividends. Following the $0.25 per share reduction of share capital approved by shareholders at the Annual General Meeting on 29 November 2013, the exercise price of the options was reduced to $3.51 per share, effective from 31 December 2013. 

The options are not transferable and do not confer any right to participate in bonus issues or cash issues of ordinary shares. The option exercise price is adjusted for discounted cash issues, and the number of shares issued on exercise of an option is adjusted for bonus issues of shares. The options do not carry voting or dividend rights and are not listed for quotation on ASX. 

One and a half million options are exercisable subject to certain performance conditions not earlier than 1 March 2016; one and a half million options are exercisable subject to certain performance conditions not earlier than 1 March 2017; and one and a half million options are exercisable subject to certain performance conditions not earlier than 1 March 2018. Accordingly no options were eligible to vest during 2014 (2013: nil). 

The EPS performance hurdle has a starting point of 34.4 cents per ordinary share, being diluted earnings per share before material items and discontinued operations for the year ended 30 June 2012, with growth measured on financial year performance, and the DPS performance hurdle has a starting point of 22 cents per ordinary share inclusive of franking credits, being the actual dividends paid in the 2012 calendar year, with growth measured on calendar year performance. 

For all options to vest, the Company’s performance must meet a minimum 8% cumulative average growth rate (“CAGR”) in EPS over the 3 year vesting period for half of each tranche to vest, and must meet a minimum 8% CAGR in dividends paid over 2 out of the 4 year vesting period for the other half of each tranche to vest. For half of the options to vest, the Company’s performance must meet a minimum 4% CAGR in EPS over the 3 year vesting period for one quarter of each tranche to vest, and must meet a minimum 4% CAGR in dividends paid over 2 out of the 4 year vesting period for another quarter of each tranche to vest. Below 4% CAGR in either DPS or in EPS, no options vest, with a pro-rata straight line vesting scale between 4% and 8% CAGR for each performance condition. 

The effect of the performance hurdles on the potential vesting of the options can be illustrated as follows: 

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$^{#}$ Subject to ‘2 out of 4 years’ test * 

A pro rata straight line vesting scale applies. 

All the options are exercisable no later than 1 March 2019. In the unlikely event of the termination of Mr. Burke’s contract for cause, Mr. Burke may exercise vested options within one month of cessation of employment and all unvested options will lapse. In the event of termination without cause prior to December 2017, including by way of redundancy, all option terms continue as if Mr. Burke’s employment had not ceased and all options will 

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