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Directors’ Report (continued) d) Details of renegotiated executive service contract for the MD As part of the remuneration review a new executive services contract has been negotiated with Mr B Howson, the Managing Director. The broad terms of this agreement remain in line with the terms of all executive services contracts, but now include the specific clauses required to comply with current legislation changes surrounding clawback provisions. 1. Fixed Remuneration Base $1,100,000 Base salary is inclusive of cash, super, insurance, motor vehicle and any other salary sacrificed benefits. In light of the recommendations made by PwC and the wider remuneration review, the Board has negotiated with Mr Howson to agree a new remuneration package that is more closely aligned with the proposed executive structures for FY2013. Mr Howson’s fixed remuneration has not changed in the last two financial years and will continue to be frozen for FY2013. As a result, he will not receive any increase to his fixed base remuneration from the current $1,100,000 package which includes superannuation and motor vehicle allowances. 2. Variable Remuneration Financial STI Financial STI $800,000 (at target) Financial STI at target performance is 73% of base payable. Financial STI is calculated and payable pro-rata between three levels of achievement (threshold, target and stretch) and is capped at 125% of target financial STI. Specific performance targets have been agreed on which financial STI’s are quantified. Targets for FY2013 take into consideration the Group’s historically strong performance achieved in FY2012 and the Board’s expectations for exceeding this performance in FY2013. In setting these targets, consideration has been given to the acquisitions made throughout FY2012 and those expected to occur in FY2013. The requisite Financial performance and STI opportunity available to the MD is set out in the table below: Threshold Performance Minimum Operating profit target achieved 30% of Target STI is payable $240,000 Target Performance Operating profit equals Target 100% of Target STI is payable $800,000 Stretch Performance Operating profit exceeds Target 125% of Target STI is Payable $1,000,000 Pro rata payment: Where actual operating profit exceeds the minimum threshold target STI will be paid on a pro-rata basis up to the maximum $1,000,000. Due to the commercially sensitive nature of these financial targets, actual target figures are not disclosed. Deferral of above target Financial STI For Financial STI, achievement above target is payable 50% cash and 50% deferred as performance rights. The grant of performance rights is subject to shareholder approval at the AGM and are issued under the rules of the AHG Performance Rights Plan. Vesting of these performance rights will be subject to a further one years service condition. Non Financial STI Non- Financial STI $300,000 (maximum) Non-financial STI is a maximum 27% of base payable on achievement of specific KPIs. These KPI’s will be specific and measurable goals which are aligned to achievement of the operational, financial, strategic and cultural goals. These STI’s will be set by the Remuneration and Nomination Committee in conjunction with the Managing Director for each financial year commencing in FY2013. Each KPI will have a percentage weighting of the maximum non-financial STI payable. The level of achievement of each non-financial KPI will be given a progress review in February 2013 following the half year result and the amount paid will be determined by the Remuneration and Nomination Committee following the end of the 2013 financial year. Further information on Non financial STI’s are outlined above in the section titled Executive remuneration FY2013. 46 Automotive Holdings Group
2012 Annual Report For the year ended June 2012 3. LTI LTI $666,667 [maximum] This is the monetary value of performance rights to be issued on the following basis: • Subject to shareholder approval at the AGM. • Issued under the rules of the AHG Performance Rights Plan. • Based on performance assessed over a three year vesting period against measures approved by the Board with no subsequent re-testing. • Performance rights granted prior to departure can be retained post departure subject to compliance with service agreement terms including non-compete restrictions. • For FY2013 the performance rights will vest subject to performance achieved against a relative Total Shareholder Return (TSR) hurdle (50% weighting) and an Earnings per Share (EPS) compound annual growth rate (50% weighting), the details of which are outlined below. Relative TSR AHG’s TSR performance over the relevant performance period will be assessed against a peer group of companies (subject to changes as may be approved by the Board in consultation with an independent party if that is appropriate given changes to the peer group companies): • Amalgamated Holdings Ltd. • AP Eagers Ltd. • ARB Corp. Ltd. • Austal Ltd. • Austbrokers Holdings Ltd. • Austin Engineering Ltd. • Billabong International Ltd. • Bradken Ltd. • Breville Group Ltd. • CSR Ltd. • Emeco Holdings Ltd. • Fleetwood Corp. Ltd. • FlexiGroup Ltd. • GUD Holdings Ltd. • Industrea Ltd. • Mystate Ltd. • Pacific Brands Ltd. • Premier Investments Ltd. • Qube Logistics Holdings Ltd. • Steamships Trading Company Ltd. • Super Retail Group Ltd. • Wide Bay Australia Ltd. • Vesting of the TSR portion of the grant will occur on the following basis: TSR ranking in the comparator group Below 50th percentile At 50th percentile Vesting outcome of TSR portion of grant Nil 25% vesting 50th percentile up to 75th percentile Progressive/pro-rata from 25-100% At or above 75th percentile 100% vesting Operating EPS compound annual growth rate • Baseline operating EPS for assessment of performance over the relevant performance period is set at FY2012 operating EPS (24.6 cents) • Vesting of the EPS portion of the grant will occur on the following basis: Compound annual EPS growth performance Below 7% pa At 7% pa Vesting outcome of EPS portion of grant Nil 25% vesting 7% pa up to 10% pa Progressive/pro-rata from 25-100% At or above 10% pa 100% vesting Automotive Holdings Group 47
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