## Executive Remuneration 

Executive Remuneration includes a number of components including total fixed remuneration (TFR), short term incentive (STI) opportunity, deferred STI (for the Managing Director) and long term incentives (LTI) in the form of deferred shares (Managing Director only), performance rights and options over ordinary shares. LTIs are subject to appropriate, pre-determined performance hurdles. Each of these forms of remuneration is described in detail below. 

## Total Fixed Remuneration (TFR) 

TFR includes a combination of base salary, superannuation and other fringe benefits that an individual employee could choose to salary sacrifice (eg superannuation, motor vehicle). TFR is based on what is appropriate to the position taking into consideration expertise, accountability, knowledge, experience and market competitiveness. 

## Short Term Incentive Opportunity (STI) 

The STI is a cash-based incentive forming part of the executive’s total compensation opportunity, the value of which is tied to the successful achievements of a set of performance scorecard objectives (including financial and strategic objectives) for the annual performance period. Select individuals also have a deferred component to their STI incentive (detailed further below). STI opportunities vary for each individual. For the Managing Director, the maximum STI is up to 80% of base salary. The other executives’ maximum STI opportunity is up to 40% with the exception of Mr Merlicek who has up to 100% if additional Key Performance Indicators (KPIs) on the performance of the investment management business are satisfied. 

Goals for each participant are drawn from the following categories: 

• Financial measures 

Performance measures include Underlying Profit After Tax, Total Shareholder Return and Return on Equity. 

• Business excellence 

Performance measures for the year ended 30 June 2012 included operational targets such as long-term structural reductions to the cost base of the Group, balance sheet and liquidity initiatives and improvements to the performance of business units. 

• Strategy 

Implementation of specific longer-term strategic initiatives including platform consolidation and product rationalisation. 

## Long Term Incentive Opportunity (LTI) 

The Board considers a long-term performance-related incentive component to be an important element of the executive reward framework. The Group utilises equity based incentives in the form of deferred shares (Managing Director only), performance rights and options over ordinary shares. These LTIs are subject to the achievement of appropriate performance hurdles. The purpose of equity based remuneration is to: 

• drive medium to long-term performance outcomes; 

• link the interest of senior management to those of shareholders; 

• provide competitive rewards to attract and retain employees; 

• strengthen the link between remuneration and performance; and 

• reward senior management for improvements in the Group’s performance. 

Early vesting may occur in certain circumstances, subject to the performance hurdle being achieved: 

• On a person/entity acquiring more than 20% of the voting shares in the Company pursuant to a takeover bid that has become unconditional; 

• On the termination of employee due to death or permanent disability; or 

• In other circumstances where the Board determines appropriate. (Note: such discretion has never been exercised by the Board and would require exceptional circumstances). 

The performance hurdle for current LTI plans has been linked to Company Total Shareholder Return (TSR) compared to S&P ASX200 companies at the date of grant. TSR represents the change in the value of a share plus the value of dividends paid. TSR was chosen as the most appropriate comparative measure as it focuses on the delivery of shareholder value and is a well understood and tested metric of performance. 

The Group engages the services of an external organisation (Value Adviser Associates) to calculate the Group’s performance against the TSR hurdles. The LTI element of Managing Director’s remuneration is described in detail in the next section of this report. 

## Deferral Arrangements 

The Board has implemented deferral arrangements and look back provisions on a portion of the STI and LTI for the Managing Director in the 2011-12 year. The deferral element of the Managing Director’s remuneration is described in detail in Section 6 of this report. 

