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DIRECTORS’ REPORT CONTINUED

The remuneration of non-executive
directors for the year ended 30 June 2007
is detailed on page 35.

The Company also has a Directors’
Retirement Plan. The Directors’ Retirement
Plan was suspended in respect of any
new director appointments, on 15 May
2003 and directors appointed to the
Board after that date are not entitled to
participate in the Directors’ Retirement
Plan. Under the Directors’ Retirement
Plan, directors with more than three
years service receive a retirement lump
sum based on the length of service. The
plan benefits accrue on a monthly basis
and reach the maximum amount after
12 years service. The benefit is capped
to a maximum lump sum per director
of $165,000. There were no benefits
paid under the plan during the year
ended 30 June 2007.

The amounts accrued in respect of the
Directors’ Retirement Plan are as follows:

2007 2006
Director $ $
AJ Clark
TC Ford
RM Graham
165,000
165,000
165,000
142,420
165,000
165,000
Total 495,000 472,420

As at 30 June 2007, the maximum
benefit amount has been accrued for
each participating director and no further
Directors’ Retirement Plan expense
accruals will occur in future years.

Managing Director and executive
remuneration

Objective

The Group aims to reward the Managing
Director and executives with a level and
mix of remuneration commensurate with
their position and responsibilities within
the Group, and so as to:

•
reward executives for Group,
business unit and individual
performance against targets
set by reference to appropriate
benchmarks and key performance
indicators (“KPI’s”);
•
align the interests of executives with
those of shareholders;
•
link reward with the strategic goals
and performance of the Group; and
•
ensure total remuneration is
competitive by market standards.
Structure

In determining the level and make-up of
executive remuneration, the Nomination
and Remuneration Committee
obtains independent advice on
the appropriateness of remuneration
packages for executives, given
remuneration trends in other companies,
from which the recommendations are
made to the Board.

It is the Nomination and Remuneration
Committee’s policy that employment
contracts are entered into with the
Managing Director and other executives.
Details of these employment contracts
are provided on page 34.

Remuneration consists of both fixed and
variable remuneration components. The
variable remuneration component consists
of a Short Term Incentive Plan and a
Long Term Incentive Plan.

The proportion of fixed remuneration
and variable remuneration (potential
short term and long term incentives)
is established for each senior executive
by the Nomination and Remuneration
Committee.

Fixed annual remuneration

Objective

Remuneration levels for executives are
reviewed annually to ensure that they
are appropriate for the responsibility,
qualifications and experience of each
executive and are competitive with
the market.

The Nomination and Remuneration
Committee establishes and issues an
appropriate guideline for the purposes
of the annual review of fixed remuneration
levels. The guideline is based on both
current and forecast CPI and market
conditions. There are no guaranteed
fixed remuneration increases in any
senior executives’ contracts.

Structure

Executives have the option to receive
their fixed annual remuneration in cash
and a limited range of prescribed fringe
benefits such as motor vehicles and car
parking. The total employment cost of
any remuneration package, including
fringe benefits tax, is taken into account
in determining an employee’s fixed
annual remuneration.

Variable remuneration —
short term incentive (“STI”)

Objective

The objective of the STI program is to
link the achievement of the operational
targets with the remuneration received
by the executives charged with meeting
those targets. The total potential STI
available is set at a level so as to provide
sufficient incentive to the executive to
achieve the operational targets and
such that the cost to the Group is
reasonable in the circumstances.

Structure

Actual STI payments granted to each
executive depend on the extent to
which specific operating targets, set at
the beginning of the year, are met. The
operational targets consist of a number
of KPI’s covering both financial and
non-financial measures of performance.
Typically, KPI’s and assessment criteria
include:

•
meeting of pre-determined growth in
Group earnings over the prior year;
•
meeting of strategic and operational
objectives; and
•
assessed personal effort and
contribution.
The Company has pre-determined
benchmarks which must be met in order
to trigger payments under the STI. The
measures were chosen as they directly
align the individual’s STI reward to the
KPI’s of the Group and to its strategies
and performance.

On an annual basis, after consideration
of performance against KPI’s, an overall
performance rating for the Group and
each individual business unit is approved
by the Nomination and Remuneration
Committee. The individual performance
of each executive is also rated and all
three ratings are taken into account when
determining the amount, if any, of the
STI pool to be allocated to each executive.

The aggregate of annual STI payments
available for executives across the
Group is subject to the approval of
the Nomination and Remuneration
Committee. STI payments are delivered
as a cash bonus.

For the Managing Director and named
executives, the general target bonus
opportunity range is from 0% to
100% of the executives’ fixed annual
remuneration. The target bonus range
for the Managing Director and named
executives is as follows.

Allocated between
Maximum
STI calculated
on fixed annual Group Divisional Department Special Quantitative Qualitative
Executive remuneration* earnings earnings costs projects KPI’s KPI’s
DC Seargeant
NC Arundel
GC Dean
MR Duff
HR Eberstaller
RD Entwistle
PW Horton
100%
30%
35%
35%
50%
40%
35%
40%
10%
112⁄3%
171⁄2%
162⁄3%
131⁄3%
15%
—
10%
—
—
162⁄3%
131⁄3%
—
— 50%
— —
— 112⁄3%
41⁄2% 13%
— 81⁄3%
— 55⁄6%
4% 4%
—
10%
112⁄3%
—
—
71⁄2%
12%
10%
—
—
—
81⁄3%
—
—

* Fixed annual remuneration is comprised of base salary, superannuation and benefits provided through salary sacrificing arrangements.
Further additional bonuses may be paid above these levels at
the discretion of the Nomination and Remuneration Committee
and Board, if it is assessed that an exceptional contribution
has been made by an executive. There is no separate profit-
share plan.

Variable remuneration — long term incentive (“LTI”)

Objective

The Executive Performance Share Plan was approved by
shareholders at the 2006 Annual General Meeting. The
Executive Performance Share Plan was designed to link
employee reward with KPI’s that drive sustainable growth in
shareholder value over the long term. The objectives of the
LTI plan are to:

•
align senior employees’ incentives with shareholder
interests;
•
balance the short term with the long term Company
focus; and
•
retain high calibre senior employees by providing an
attractive equity-based incentive that builds an ownership
of the Company mindset.
Only senior employees who are able to directly influence the
long term success of the Company participate in the Executive
Performance Share Plan.

Structure

Executives are awarded performance shares which will only
vest on the achievement of certain performance hurdles and
service conditions. An offer is made under the Executive
Performance Share Plan to senior employees each financial
year and is based on individual performance as assessed by
the annual appraisal process. If a senior employee does not
sustain a consistent level of high performance, they will not be
nominated for Executive Performance Share Plan participation.
The Nomination and Remuneration Committee reviews all
nominated senior employees with participation subject to
final Board approval. In accordance with the ASX Listing
Rules, approval from shareholders is obtained before
participation in the Executive Performance Share Plan
commences for the Managing Director.

Each award of performance shares is divided into equal
portions with each portion being subject to a different
performance hurdle. The performance hurdles are based on
earnings per share (“EPS”) and total shareholder return (“TSR”)
growth of Amalgamated Holdings Limited as determined by
the Board over a three-year period (“Performance Period”).

The extent to which the performance hurdles have been
met will be assessed by the Board at the expiry of the
Performance Period.

The performance hurdles for the awards of performance
shares to executives in the financial year ended 30 June 2007
are based on Amalgamated Holdings Limited’s EPS and TSR
growth over the Performance Period of the three years from
30 June 2006 (being the “Base Year”) to 30 June 2009.

The performance hurdles are as follows:

EPS hurdle

The EPS hurdle requires that the Company’s EPS growth for
the Performance Period must be greater than the target set by
the Board. The EPS hurdle was chosen as it provides evidence
of the Company’s growth in earnings. The hurdle is as follows:

•
if annual compound EPS growth over the Performance Period
is less than 8%, no shares will vest with the executives;
•
if annual compound EPS growth over the Performance
Period is equal to 8%, but less than 12%, the proportion of
performance shares vesting will be increased on a pro-rata
basis between 50% and 100%; or
•
if annual compound EPS growth over the Performance
Period compared to the Base Year is equal to or greater
than 12%, all of the performance shares awarded (and
attaching to this hurdle) will vest with the executive.
If the EPS measure is not achieved within the initial
performance measurement period to a threshold level or
higher, there will no entitlement to shares for a participant.
If the EPS performance measure is achieved to a threshold
level or higher in the initial period, it will not be retested.

TSR hurdle

The TSR hurdle requires that the growth in the Company’s TSR
must be at or above the median of the Company’s comparator
group (“comparator group”). The comparator group is the
S&P/ASX 200 (excluding mining stocks). Growth in TSR
is defined as share price growth and dividends paid and
reinvested on the ex-dividend date (adjusted for rights, bonus
issues and any capital reconstructions) measured from the
time of issue to the time of vesting.

The TSR performance hurdle was chosen as it is widely
recognised as one of the best indicators of shareholder value
creation. The comparator group for TSR purposes has been
chosen as it represents the group with which the Company
competes for shareholders’ capital. The hurdle is as follows: