In addition the Company is seeking to have a Placing and Offer made avaliable to existing shareholders who may also wish to take up further shares in the Company, which will be put forward to shareholders at a later date. This will be on similar terms of the Issue for IPEART Shareholders.

The Board believes that the Issue is in the best interests of shareholders as it would increase the size of the fund, provide it with greater liquidity, and decrease the expense ration per share.

Resolution 1 being proposed at the EGM will grant a new authority for the Directors to allot up to 40,000,000 Shares, equivalent to 65.7 per cent. of the issued share capital of the Company on a pre-emptive basis in connection with the Issue, subject to maximum Issue proceeds of £40 million.

In considering such proposals PIRC takes into account the level of justification and disclosure, as well as the level of independent scrutiny that is was subject to. Although there is sufficient independent representation on the Board, we are concerned that the details of the balance between the allocation of shares for the Scheme, Placing and Offer is not disclosed. The company states that these details will be published on 5th October, but given that shareholder authority is being requested before that time, we do not consider this to be acceptable. Therefore an abstain vote is recommended.

The Acquisition provides that, if the Scheme becomes effective, all of the Scheme Shares will be transferred to Sinochem and, in exchange, all Scheme Shareholders will be entitled to receive for each Emerald Share 750 pence in cash. The Acquisition values the entire issued and to be issued share capital of the Company at approximately £532.1 million. The Cash Consideration represents a premium of approximately 33.81% to the Closing Price of 560.50 pence per Emerald Share on 10 July 2009, the last Business Day prior to the announcement by Emerald that it had received an approach.

With current upstream operations in the United Arab Emirates, Yemen, Tunisia, Ecuador, China and Indonesia, the Sinochem group is focused on enhancing its overseas oil and gas asset portfolio, particularly in the Middle East and Latin America. Emerald’s established presence in Colombia and Syria offers a substantial reserves base and promising exploration prospects. Sinochem believes that the combination of Emerald’s assets with the assets of the Sinochem group would consolidate the Sinochem group’s presence across the Middle East and Latin America as well as provide a solid platform to create further value. Sinochem is well placed to provide the technical and financial resources to develop the asset base.

Irrevocable undertakings to vote in favour of the Resolutions have been secured in respect of an aggregate total of 23,516,755 Emerald Shares, representing approximately 37.53% of Emerald’s existing issued share capital.

PIRC has concerns over the balance of independence on the board as we find none of the directors to be independent. PIRC believes this raises the risk that the board proposal was not subject to sufficient objective scrutiny in the decision making process. We recommend abstention to reflect this concern.

The board seeks shareholder approval to make market purchases of up to 3,248,232 of its ordinary shares, representing 30% of the company's issued share capital as of 12 August, 2009, pursuant to the Tender Offer. The offer is being made by Winterflood Securities, who will purchase the shares tendered by means of on-market purchases and, immediately upon completion of those purchases, sell them to the company at the tender price. All the shares acquired by the company under the tender offer will be cancelled. The tender price will be equal to 92% of the tender NAV per share determined on the calculation date (2, October, 2009), that is, a discount of 8% to the tender NAV per share.

The company explains that it will cancel the shares to improve shareholders' liquidity. A consequence of the 30% share buy-back will be that the share capital of the company will be reduced, and thus the company will become smaller and an increase in the company's total expense ratio will occur. We note that the directors state that they will not be tendering any of their benefitial shareholding in the company (1.02% of the issued share capital. The repurchase of shares by the company will be funded from cash resources and the proceeds of sale of investments in the company's portfolio.

PIRC is concerned that the company has not provided an explanation as to why the share buy-back is being offered through a third party, Winterflood Securities. Furthermore, we are concerned about the level of independence on the board, which, according to our guidelines, is below one-third. Based on the above, we recommend an abstain vote.

Secondly, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Act has abolished the requirement to have an authorised share capital.

Thirdly, the Act allows companies to change their name by a procedure set out in its articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Act continues to provide for. We do not support this element of the proposal and therefore recommend abstention.

The new articles will also include provisions related to conflicts of interest. PIRC considers changes to be reasonable and safeguards under the Companies Act adequate. However, given the importance of avoiding significant conflicts of interest, we would like to see the Company commit to reporting on an annual basis on the operation of its procedures for authorising conflicts and potential conflicts. As the Company has not made such a commitment we recommend abstention.

In addition, when it comes to the Business Review, no non-financial KPIs are disclosed, which we consider a significant omission for a MidCap electronic equipment company. An adequate environmental policy is in place but we consider reporting on environmental performance inadequate given the absence of environmental KPIs.

The company states that the Rights issue will be used to repay existing debt and to complete the acquisition of the Harrow Estates. Net debt will be reduced by repaying and cancelling up to £135m under the group’s existing Syndicated Facility Agreement. This resolution is subject to the approval of resolution 2 and 3. Although the four resolutions are inter-dependent, PIRC considers the approval regarding the acquisition and the approval regarding the Rights issue a different matter. Redrow has provided sufficient information however PIRC has some corporate governance concerns at the company. During the year under review, the board was reconstructured after the founder of the company Steve Morgan was re-appointed as an executive chairman in March 2009. The Chairman Alan Bowkett and Chief Executive Neil Fitzsimmons both resigned from the board in June 2009 and March 2009, respectively. The three non-executive directors and one executive director also resigned between August and September. John Tutte, the previous Regional Chairman has been appointed as the Group Managing Director. Currently the company does not have a Chief Executive but the company states one will be appointed during the course of the current financial year. In August 2009, three non-executive directors were appointed to the board. Following the changes to the board during the year under review there is sufficient independent representation on the board in our view. However, Mr. Morgan, the current chairman holds a 29.92% stake in the issued share capital and excercises an executive function, which in our view could make it difficult for him objectively to oversee board proceedings. PIRC believes this raises the risk that the board proposal was not subject to sufficient objective scutiny in the decision making process.

PIRC’s concerns over the terms of the capital raising relate to dilution. As a result of the structure of the capital raising, existing shareholders, subject to subscribing pro-rata to their existing holdings, face considerable dilution at 92.9%.

PIRC takes into account the level of information provided in justification of the proposal as well as the level of independent representation on the board. The board is deemed suitably independent but we have identified some governance concerns which lead us to recommend shareholders to abstain the proposal.

In March 2009, Redrow announced that Bridgemere and Durcan, two companies controlled by Steve Morgan, the founder of the company, had increased their aggregate interest in the company to 29.9%. Subsequently Mr. Morgan re-joined the board and on 30 June 2009 was appointed executive Chairman. We note Mr. Morgon is both the Chairman of Harrow Estates and the executive Chairman of Redrow. Mr. Morgan states that his return to the board was a result of deterioriation of the company’s profitability due to the reduction in activity of the UK housebuilding industry which began in 2007. Since the change of management in end of March 2009, the company has undertaken a complete product and land review as well as a debt refinancing process.

The rights issue is underwritten by a syndicate of banks led by Merrill Lynch International and J.P. Morgan Cazenove. Bridgemere and Durcan, the controlling shareholders support the Rights Issue and will vote in favour of the Rights Issue.

Although PIRC does not support the position of the Chairman as he is a representative of the controlling shareholder, the level of independence of the board is acceptable. The company has provided PIRC with additional information stating that Mr. Morgon, the chairman and controlling shareholder did not participate in the discussions related to the acquisition. The proposed acquisition is conditional upon the passing of resolutions 1,2 and 3. PIRC believes that the resolution on the acquisition should not have been conditional upon the passing of the rights issue. As a result, we recommend shareholders abstain the proposal.

Combined awards under the annual bonus and long term incentives are considered excessive in the year under review and considered highly excessive on a potential basis, particularly in light of the lack of an upper limit on the LTIP share scheme. Rating: CDB.

The chief executive requested he not be considered for a bonus this year. The finance director received a cash bonus of GBP 420,000 which is equivalent to four times his salary, although this is taken within the contact of the very low salaries.

A mandatory and voluntary level of deferral is in place with further TSR targets attached. Awards worth over three times salary were awarded under the Omnibus Incentive Plan to satisfy deferred and matched bonuses. However, given the level of award in absolute terms deferred during the year the performance targets are considered challenging. Rating: BCB

PIRC considers both the minimum and the maximum vesting targets to be sufficiently challenging in light of brokers' forecast. However, in our view, the ESOS has too narrow vesting scale. There is only one performance condition applied to awards and there is no stated comparator group. PIRC believes that all long-term schemes should employ at least two performance criteria, one with a comparator group. There is no evidence of a scheme enabling all employees to benefit from success without subscription, and no shareholding requirement is in place.

The Company states that in the future executive directors' contracts will be for a maximum of 12 months rolling. We would welcome information on the newly appointed Group Finance Directors contractual arrangements and the length on her notice period. Rating: CCC

Shareholder approval is sought for the acquisition of a portfolio of properties and for the issuance of 163,764,000 shares to partially satisfy the acquisition.

The sought properties, which belong to Phoenix Life Limited ("PLL"), conform a diversified portfolio of principally retail properties, managed by Ignis Investment Services Ltd., and with an aggregate market value of £145.98m. We note that PLL belongs to the Pearl Group Company ("PGC"). PGC is the controlling shareholder of UK Commercial Property Trust Ltd., currently owning 35.9% of its issued share capital. Furthermore, Ignis Investment Services Ltd. is the investment manager of the company.

The acquisition (£145.98m) will be satisfied partially with a cash payment of £35m and the issue of 163,764,000 shares of 67.76p each (which represents a premium of 3.48% to the adjusted NAV as at 31 August 2009). PLL will be issued the 100% of the newly issued shares. Following the acquisition, PGC will become the controlling shareholder of the company, owning 72.62% of the issued share capital of UK Commercial Property Trust Ltd.

We are satisfied that: 1) the interested parties, Mr. John Robertson who is an employee of the investment manager and a director of a number of funds advised by the manager, and PGC have agreed to abstain from voting at the EGM; and 2) that the company's sponsor and legal advisor, Dickson Minton W.S, has stated that the proposal is "fair and reasonable as far as shareholders are concerned". Furthermore, the interested parties have entered into a Relationship Agreement with the company (the terms of which are fully disclosed).

PIRC does not recommend support for proposals when there is the potential that a controlling shareholders' stake could increase beyond 50%, due to the reduced protections that apply to minority shareholders when a majority stake exists. Given that the proposed acquisition will increase the stake of PGC in UK Commercial Property Trust Ltd. from 35.9% to 72.67% of its issued share capital, we recommend opposition.

In presenting the background to the proposals, the Chairman refers back to the company’s launch in 1998, when it invested only in closed-end investment funds (‘CEIFs’). This provided opportunities to invest at a discount to Net Asset Value and generated ‘impressive returns’ by exploiting discount anomalies. The company then observed a decline in the universe of closed-funds, whereby the markets in which the company wished to invest were not represented at all among CEIFs or were represented only in a limited way. As a result, the company has since 2002 invested in open-ended investment funds (‘OEIFs’), pursuing a strategy of identifying ‘best of breed’ managers and benefiting from greater flexibility in asset allocation. 46.1% of the company’s portfolio was invested in OEIFs as at 30 September 2009.

The company is concerned that OEIFs may be treated as non-distributing funds for tax purposes, giving rise to liability for corporation tax on the disposal of those investments at a rate of 28%. Re-location to Guernsey would eliminate any liability for corporation tax. Also, the company notes that the need to comply with section 842 of the Taxes Act so as to maintain investment trust status, and remain exempt from capital gains tax, is restricting investments which the company might otherwise make and potentially constraining investment returns. Specifically, not more than 15% of its assets may be in an investment company and its income must wholly or mainly comprise eligible investment income, which restricts the use of derivatives. Furthermore, the need to ensure compliance with these requirements is taking up a significant amount of management time. The company believes that the re-domicile will provide the manager with greater investment flexibility and the potential to enhance further the investment returns available.

As well as the background and reasons for the proposals, the company provides information on its costs and the prospective composition of the board of ATMF, along with the operation of the successor vehicle. The costs relating to the proposals are estimated to amount to GBP 1.6 million (excluding VAT), which includes an estimated GBP 1.3 million tax charge on the crystallisation of unrealised gains on the company’s investment in non-distributing funds. These costs will be borne by the company. There will also be an estimated GBP 0.9 million (excluding VAT) payable in connection with the launch of ADMF and its listing, which will be borne by the latter company.

As for the board, Peter O’Connor, Angus Bonsor and Terry Mahony will stay on as Chairman and directors respectively of the successor vehicle, while James Robinson will stand down. Richard Hotchkis and John Hawkins, who are both based in Guernsey, will join the ADMF board in line with the requirement for the company to have a majority of non-UK directors to be tax resident offshore. Mr Hotchkis is a director of Advance Frontier Markets Fund Ltd, which is managed by Progressive Developing Markets Ltd, the current manager of the company and prospective manager of ADMF. ADMF will put him forward for annual re-election because of his links with the manager. In terms of broader governance policy, the company states that ADMF will comply with the Combined Code and the AIC Code of Corporate Governance ‘in the same way as the company does currently’.

Following admission to the LSE, the board of ADMF will have at their disposal an authority granted on 28 September 2009 to issue shares for cash up to 5% of the issued share capital. They will also be authorised to repurchase shares up to 14.99% of the issued share capital. The company states that this authority will only be utilised where it will increase NAV per share or narrow any discount to NAV at which the shares are being traded.

ADMF is intended as a long-term investment vehicle, but every five years after admission shareholders will be asked to approve its continued existence. If shareholders do not pass an ordinary resolution to continue the life of the fund, the board will put forward proposals about its future within four months.

We welcome the company’s commitment that ADMF will comply with the Combined Code. We also consider that sufficient information has been provided to allow shareholders to make a reasonable choice. However, we are concerned that none of the current board of the company is independent according to our guidelines in view of their length of tenure. This in turn raises concerns that there has not been objective oversight of the formulation of the proposals. In addition, we note that, with Mr Hotchkis joining the board of ADMF, four of the five directors of the successor vehicle will not be independent according to our guidelines. In view of these concerns, we recommend an abstain vote.

The Directors believe that following the Capital Raising, the Group's cash and undrawn committed financing facilities will provide management with greater operational flexibility and, in particular, will allow the Company to reduce its reliance on the availability of supplier credit and will provide sufficient working capital to rebuild stock levels into 2010.

In addition, the Directors believe that the Capital Raising will provide the necessary funds for the implementation of the first two phases of the Group's redefined "Serious about Sport" strategy which will include developing the Group's internet offering and marketing (at a total cost of approximately ￡5 million), refurbishing 30 key stores (at a total cost of approximately ￡15 million), relaying the remaining store portfolio (at a total cost of approximately ￡5 million) and the opening of up to 30 new stores (at a total cost of approximately ￡24 million).

The Company states that if the Capital Raising does not proceed, the Company will be dependent on the Current BoS Facility that matures on 30 September 2010. If the Capital Raising does not proceed and if there is a relatively small deterioration in the Group's current trading performance or the anticipated timing for the receipt of certain cash proceeds, the Directors believe that it is likely that the Group will have a funding shortfall and breach the headroom covenant and/or the operating margin covenant in the Current BoS Facility as early as the end of October 2009.

Upon completion of the Capital Raising, the New Ordinary Shares will represent approximately 159.5% of the Company's Existing Issued Share Capital and approximately 61.5% of the Company's Enlarged Issued Share Capital. Following the issue of the New Ordinary Shares to be allotted pursuant to the Capital Raising, Qualifying Shareholders who take up their full entitlements in respect of the Open Offer will experience a dilution of 30.6% of their interests in the Company as a result of the Firm Placing. Qualifying Shareholders who do not take up any of their entitlements in respect of the Open Offer will experience greater dilution of approximately 61.5% to their interests in the Company as a result of the Firm Placing and Open Offer.

A claw back policy is in place regarding the Placing and Open Offer, although not regarding the Firm Placing. The Placing and Open Offer and the Firm Placing are fully underwritten by Panmure Gordon and Numis.

As part of the Capital Raising, the Remuneration Committee has resolved that each of the Executive Directors should be paid a one-off special bonus of ￡100,000 upon completion of the Capital Raising in recognition of the significant additional individual contribution they will each have made in relation to the Capital Raising and its success and the benefits the Capital Raising will bring to the Group.

PIRC considers that the Company has disclosed sufficient information regarding the Capital Raising and that it was subject to sufficient independent scrutiny. However we have concerns over the decision by the Remuneration Committee to pay a one-off special bonus of £100,000 to each director in recognition of completing the Capital Raising. PIRC does not agree with transaction bonuses in principle, but rather considers that such incentives should capture value creation and a return for shareholders. We do not consider that completing the Capital Raising in itself qualifies as a value-creating achievement, and therefore we recommend abstaining on the proposal. This one-off bonus will also be considered as part of our assessment of the remuneration report at the next AGM.

In presenting the background to the proposals, the Chairman refers back to the company’s launch in 1998, when it invested only in closed-end investment funds (‘CEIFs’). This provided opportunities to invest at a discount to Net Asset Value and generated ‘impressive returns’ by exploiting discount anomalies. The company then observed a decline in the universe of closed-funds, whereby the markets in which the company wished to invest were not represented at all among CEIFs or were represented only in a limited way. As a result, the company has since 2002 invested in open-ended investment funds (‘OEIFs’), pursuing a strategy of identifying ‘best of breed’ managers and benefiting from greater flexibility in asset allocation. 46.1% of the company’s portfolio was invested in OEIFs as at 30 September 2009.

The company is concerned that OEIFs may be treated as non-distributing funds for tax purposes, giving rise to liability for corporation tax on the disposal of those investments at a rate of 28%. Re-location to Guernsey would eliminate any liability for corporation tax. Also, the company notes that the need to comply with section 842 of the Taxes Act so as to maintain investment trust status, and remain exempt from capital gains tax, is restricting investments which the company might otherwise make and potentially constraining investment returns. Specifically, not more than 15% of its assets may be in an investment company and its income must wholly or mainly comprise eligible investment income, which restricts the use of derivatives. Furthermore, the need to ensure compliance with these requirements is taking up a significant amount of management time. The company believes that the re-domicile will provide the manager with greater investment flexibility and the potential to enhance further the investment returns available.

As well as the background and reasons for the proposals, the company provides information on its costs and the prospective composition of the board of ATMF, along with the operation of the successor vehicle. The costs relating to the proposals are estimated to amount to GBP 1.6 million (excluding VAT), which includes an estimated GBP 1.3 million tax charge on the crystallisation of unrealised gains on the company’s investment in non-distributing funds. These costs will be borne by the company. There will also be an estimated GBP 0.9 million (excluding VAT) payable in connection with the launch of ADMF and its listing, which will be borne by the latter company.

As for the board, Peter O’Connor, Angus Bonsor and Terry Mahony will stay on as Chairman and directors respectively of the successor vehicle, while James Robinson will stand down. Richard Hotchkis and John Hawkins, who are both based in Guernsey, will join the ADMF board in line with the requirement for the company to have a majority of non-UK directors to be tax resident offshore. Mr Hotchkis is a director of Advance Frontier Markets Fund Ltd, which is managed by Progressive Developing Markets Ltd, the current manager of the company and prospective manager of ADMF. ADMF will put him forward for annual re-election because of his links with the manager. In terms of broader governance policy, the company states that ADMF will comply with the Combined Code and the AIC Code of Corporate Governance ‘in the same way as the company does currently’.

Following admission to the LSE, the board of ADMF will have at their disposal an authority granted on 28 September 2009 to issue shares for cash up to 5% of the issued share capital. They will also be authorised to repurchase shares up to 14.99% of the issued share capital. The company states that this authority will only be utilised where it will increase NAV per share or narrow any discount to NAV at which the shares are being traded.

ADMF is intended as a long-term investment vehicle, but every five years after admission shareholders will be asked to approve its continued existence. If shareholders do not pass an ordinary resolution to continue the life of the fund, the board will put forward proposals about its future within four months.

At this meeting a special resolution will be proposed to sanction any modification of the rights attaching to the ordinary shares to be effected by the approval and implementation of the proposals. The company has confirmed that these rights will remain substantively the same when they attach to ordinary ADMF shares and we therefore do not have concerns about this resolution in and of itself. We welcome the company’s commitment that ADMF will comply with the Combined Code. We also consider that sufficient information has been provided to allow shareholders to make a reasonable choice. However, we are concerned that none of the current board of the company is independent according to our guidelines in view of their length of tenure. This in turn raises concerns that there has not been objective oversight of the formulation of the proposals. In addition, we note that, with Mr Hotchkis joining the board of ADMF, four of the five directors of the successor vehicle will not be independent according to our guidelines. In view of these concerns, we recommend an abstain vote.

The proposed amendments include changes in relation to: redeemable shares, share certificates, transfer of shares, authority to purchase own shares, adjournments, removal of the chairman’s casting vote, the voting record date and the validity of proxy votes.

The new articles also include amendments to provide greater scope for members to participate in meetings of the company, even if they are not present at the meeting venue, through attendance at satellite meetings and any other electronic means of participation. This is in line with amendments made to the Act to implement the Directive which provide for the holding and conducting of electronic meetings.

Another amendment to the articles allows a director to vote on a resolution which relates to giving him an indemnity or funding for expenditure incurred in defending proceedings provided all the other directors have been given or are to be given arrangements on substantially the same terms. The company states that this has become a common provision for listed companies to include.

There are other amendments relating to directors about which we have concerns. A new article requires any non-executive director other than the Chairman who has held office for nine years or more to put himself up for re-election. We do not support exemption of the Chairman from this requirement. Secondly, the Act allows companies to change their name by a procedure set out in its articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal. In view of our concerns about these last two proposed amendments, we recommend an abstain vote.

The Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles. In addition, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital.

Finally, concerning name changes, the Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and therefore recommend shareholder abstain on the resolution.

One of the more significant changes responds to the way in which the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles.

There is also an amendment widening the scope of the indemnities that the company may provide to directors, in particular to cover directors who are trustees of an occupational pension scheme. There is no indication that the extended power to indemnify covers the company’s auditors. In addition, a change in the new articles removes a provision limiting the age at which a director can be appointed, as this provision could fall foul of recent age discrimination legislation.

A further proposed amendment is linked to the discretion afforded to companies under the Act to change their name by a procedure set out in their articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. The company has told us that it does not intend ever to change the name of the company, but if this is so we consider that the article change need not be included in the proposal at all. We do not support this element of the proposal.

At the same time, the new articles increase the aggregate of fees that may be paid to non-executive directors ‘in view of the continuing increase in the scope and nature of the responsibilities of the Chairman and Non-Executive Directors’ and to ‘provide flexibility for the future size and structure of the Board’. The company have not disclosed in the notice what the existing limit is or what the increased limit would be. This makes it difficult to assess whether it is appropriate to raise the existing limit or whether the proposed increase is proportionate. In view of our concerns about these last two amendments we recommend abstention.

The remuneration policy goes beyond the objective to attract, retain and incentivise executives, and PIRC welcome the decision of executive board members to reduce their basic salaries by 3% from 1 January 2009, increasing the reduction to 5% from 1 July 2009. We also welcome the commitment to ensure that the incentive structure does not raise environmental, social or governance risk by motivating irresponsible behaviour.

Although we welcome the cut in maximum awards available under the LTIP from 200% to 150% of the annual salary, potential aggregate variable pay is still considered excessive in our view. However, actual awards to directors were not excessive for the year under review. With regard to the LTIP, the TSR upper target is challenging in our view, together with a sufficiently wide vesting scale, however, the TSR lower target is not. We do not consider the changes applied to the performance underpin to be adequate, as it would operate absolute share price appreciation as one of the targets, while there is insufficient disclosure with regard to the other target utilised. Executive contracts provide for 12 months rolling contract and no termination payments will apply. PIRC Rating: BCB

The LTIP currently provide that an employee may be granted awards worth in aggregate up to a maximum of 50% of salary or in exceptional circumstances up to 100% of salary. The board proposes to increase the individual annual limits under the LTIP up to 200% of salary to the Chief Executive and up to 150% to the other NEDs.

Currently, the LTIP has two performance conditions attached, TSR and NAVps, each with an equal weighting of 50% each. Both vest following a three-year performance period. The proposed new performance conditions to awards made under the LTIP in 2010 will have the following key features: Performance will be measured over three years for 50% of the award and five years for the other 50%. The performance condition will be based solely on the company’s NAV per share growth. 25% of an award will vest for NAVps growth of 10% per annum above the average risk free rate of return increasing to full vesting on a straight line basis for growth of up to and including 15% per annum above the average risk free rate of return. These amendments will continue until at least 2012 when the LTIP expires and the company will return to shareholders with details of a replacement plan.

In addition, the board will following approval of the proposed amendments of the LTIP introduce a shareholding guideline under which all participants in the LTIP will be expected to build a shareholding in the company equal to their annual award level. The annual award level for the Chief Executive is 200% of salary and 150% of salary for the other NEDs. They will have three years to build up this shareholding, which is in line with PIRC guidelines.

PIRC welcomes the proposition to extend the performance period for 50% of the award to five years. However, we consider all long term incentives should use two performance criteria concurrently, one with a comparator group. The company has informed PIRC that it believes that using NAV per share is more favourable due to it being a key determinate of the company’s performance and easier to understand. The company does not believe that TSR is a relevant performance condition any more due to the shrinking insurance industry. The company has also informed PIRC that a consultation with all the major shareholders was carried out during September/October 2009, whom all were in favour of the proposed changes to the LTIP. However, we are also concerned that the company is proposing to increase the individual maximum limits, which can lead to potential excessive payouts. Based on these concerns, we recommend shareholders oppose the amendments to the LTIP.

Additionally the Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is also seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company's value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal. Therefore we recommend a vote to abstain.

In presenting the background to the proposals, the Chairman refers back to the company’s launch in 1998, when it invested only in closed-end investment funds (‘CEIFs’). This provided opportunities to invest at a discount to Net Asset Value and generated ‘impressive returns’ by exploiting discount anomalies. The company then observed a decline in the universe of closed-funds, whereby the markets in which the company wished to invest were not represented at all among CEIFs or were represented only in a limited way. As a result, the company has since 2002 invested in open-ended investment funds (‘OEIFs’), pursuing a strategy of identifying ‘best of breed’ managers and benefiting from greater flexibility in asset allocation. 46.1% of the company’s portfolio was invested in OEIFs as at 30 September 2009.

The company is concerned that OEIFs may be treated as non-distributing funds for tax purposes, giving rise to liability for corporation tax on the disposal of those investments at a rate of 28%. Re-location to Guernsey would eliminate any liability for corporation tax. Also, the company notes that the need to comply with section 842 of the Taxes Act so as to maintain investment trust status, and remain exempt from capital gains tax, is restricting investments which the company might otherwise make and potentially constraining investment returns. Specifically, not more than 15% of its assets may be in an investment company and its income must wholly or mainly comprise eligible investment income, which restricts the use of derivatives. Furthermore, the need to ensure compliance with these requirements is taking up a significant amount of management time. The company believes that the re-domicile will provide the manager with greater investment flexibility and the potential to enhance further the investment returns available.

As well as the background and reasons for the proposals, the company provides information on its costs and the prospective composition of the board of ATMF, along with the operation of the successor vehicle. The costs relating to the proposals are estimated to amount to GBP 1.6 million (excluding VAT), which includes an estimated GBP 1.3 million tax charge on the crystallisation of unrealised gains on the company’s investment in non-distributing funds. These costs will be borne by the company. There will also be an estimated GBP 0.9 million (excluding VAT) payable in connection with the launch of ADMF and its listing, which will be borne by the latter company.

As for the board, Peter O’Connor, Angus Bonsor and Terry Mahony will stay on as Chairman and directors respectively of the successor vehicle, while James Robinson will stand down. Richard Hotchkis and John Hawkins, who are both based in Guernsey, will join the ADMF board in line with the requirement for the company to have a majority of non-UK directors to be tax resident offshore. Mr Hotchkis is a director of Advance Frontier Markets Fund Ltd, which is managed by Progressive Developing Markets Ltd, the current manager of the company and prospective manager of ADMF. ADMF will put him forward for annual re-election because of his links with the manager. In terms of broader governance policy, the company states that ADMF will comply with the Combined Code and the AIC Code of Corporate Governance ‘in the same way as the company does currently’.

Following admission to the LSE, the board of ADMF will have at their disposal an authority granted on 28 September 2009 to issue shares for cash up to 5% of the issued share capital. They will also be authorised to repurchase shares up to 14.99% of the issued share capital. The company states that this authority will only be utilised where it will increase NAV per share or narrow any discount to NAV at which the shares are being traded.

ADMF is intended as a long-term investment vehicle, but every five years after admission shareholders will be asked to approve its continued existence. If shareholders do not pass an ordinary resolution to continue the life of the fund, the board will put forward proposals about its future within four months.

We welcome the company’s commitment that ADMF will comply with the Combined Code. We also consider that sufficient information has been provided to allow shareholders to make a reasonable choice. However, we are concerned that none of the current board of the company is independent according to our guidelines in view of their length of tenure. This in turn raises concerns that there has not been objective oversight of the formulation of the proposals. In addition, we note that, with Mr Hotchkis joining the board of ADMF, four of the five directors of the successor vehicle will not be independent according to our guidelines. In view of these concerns, we recommend an abstain vote.

We also have broader concerns about the disclosure of remuneration arrangements and the balance of incentive and reward. The company's statement of over-arching remuneration policy does not indicate an alignment with specific corporate objectives. Performance targets linked to bonus awards made during the year are not disclosed. We are also concerned about the use of the same single performance condition for both the performance share and the matching share components of the Executive Incentive Plan. In addition, we do not consider the consider the upper or lower TSR performance targets to be challenging enough. Combined bonus and share incentive awards have not been excessive during the year in our view, although they have the potential to be excessive at maximum levels. PIRC Rating: DDB.

The company has also put forward various reasons for choosing this option, which would facilitate the conduct of placings, rather than rely other forms of capital raising such as a rights issue or a placing and open offer. These include the lower likelihood of selling shares at a discount, the possibility of avoiding restrictions on issuing shares to overseas shareholders and the greater efficiency of raising finance in this scenario. However, we are not persuaded that the conduct of a placing might not result in a comparable discount to the share price to that which would occur with alternative forms of financing. The company has assured us that if the authority were granted it would make best endeavours to enable the participation of all notifiable shareholders in an issue of shares for cash. While this provides some comfort, we remain concerned that shareholders with a stake of less than 3% would suffer a significant dilution without proportionate benefits accruing to their investment.

In view of the concerns outlined above we recommend an abstain vote.

The Tender offer, if approved, will permit those Shareholders who wish to realise their investment (whether in whole or in part) for cash to do so, subject to the terms of the Tender Offer and the extent to which Shareholders as a whole tender their Shares. Shareholders (other than Restricted Shareholders and certain Overseas Shareholders) will be able to decide whether to tender some or all of their shares within the overall limits of the Tender Offer (but tenders in excess of a Shareholder’s Basic Entitlement (being 41% of their holdings on the Record Date) will only be accepted to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares).

We are concerned that Manchester & Metropolitan Investment Limited (“MMIL”) , which holds approximately 29.8% of the issued share capital of the company, might increase its holding to 50.4% it did not decide to take up its entitlement under the Tender Offer. MMIL at the moment has not disclosed its intention regarding the Tender Offer. If MMIL’s holdings goes beyond 50% of the issued share capital, MMIL will effectively take control of the company, while at the same time not being obliged to make a general offer under Rule 9 of the City Code (which would be the case should MMIL’s holding should be between 30% and 50% of the issue share capital). In our view, this represents a risk for shareholders, who will find themselves holding shares in a controlled company following the Tender Offer, MMIL should decide not to take up its entitlement, and we would expect the company to give shareholders the opportunity to vote on a Rule 9 Waiver in relation to the Tender Offer. As the company fails to do so, we recommend an oppose vote.

We particularly welcome the company's disclosure of future remuneration policy changes and its intention to consult with shareholders. However, based on our concerns over this year's remuneration practices we recommend opposition.

We note, moreover, that the company's previous auditors, PKF (UK) LLP resigned on 13 February following the audit committee's review of the Group and company's external auditors. The company does not disclose any further details on why new auditors were appointed or the tender process involved. PKF's Independent Auditors' Report for financial year 2008 was unqualified. Due to our concerns over the lack of disclosure on the reasons behind the appointment of the new auditors, we recommend shareholders abstain on the proposal.

Based on the above concerns we recommend opposition.

The company has not made any political donations during the year and the authority will expire no later than the next AGM. However, we are concerned that the expenditure of shareholders’ funds covered by the authority is substantially larger than reasonably required for the purposes stated.

In addition, the Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and, therefore, recommend an abstain vote.

The proposed amendments include changes in relation to: redeemable shares, share certificates, transfer of shares, authority to purchase own shares, adjournments, removal of the chairman’s casting vote, the voting record date and the validity of proxy votes.

The new articles also include amendments to provide greater scope for members to participate in meetings of the company, even if they are not present at the meeting venue, through attendance at satellite meetings and any other electronic means of participation. This is in line with amendments made to the Act to implement the Directive which provide for the holding and conducting of electronic meetings.

Another amendment to the articles allows a director to vote on a resolution which relates to giving him an indemnity or funding for expenditure incurred in defending proceedings provided all the other directors have been given or are to be given arrangements on substantially the same terms. The company states that this has become a common provision for listed companies to include.

There are other amendments relating to directors about which we have concerns. A new article requires any non-executive director other than the Chairman who has held office for nine years or more to put himself up for re-election. We do not support exemption of the Chairman from this requirement.

In view of our concerns, we recommend an oppose vote.

With regards to the indemnification of directors, we have concerns that the company has not specifically excluded the auditors. With regard to the provisions regarding directors’ conflict of interest, the company should commit to reporting on an annual basis on the operation of its procedures for authorising conflicts and potential conflicts. We are concerned that the Company has not made a commitment to reporting on an annual basis.

With regard to the change of company name, the Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later, reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for.

In view of our concerns, we recommend an abstain vote.

The 2009 LTIP allows the Compensation Committee to grant free shares to senior executives should one performance target be met. The only performance target used is Average Excess Return on Embedded Value. PIRC would advice the company to adopt two concurrent targets, one of which should be linked to the group's performance in relation to a selected peer group or index. The company does not disclose a sufficient amount of details regarding this performance condition to permit shareholders to assess whether it can be considered a challenging hurdle. The 2009 LTIP has not a clearly fixed maximum award, the company only declares that it is "unlikely to exceed 50% of salary". PIRC cannot assess whether the potential award is excessive due to the lack of full disclosure.

Due to our concerns regarding the lack of disclosure and performance targets, we recommend an oppose vote.

The board is also seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Act continues to provide for. Given our concern over this element of the proposal we recommend an abstain vote.

PIRC rating: DDA

We have concerns that as Invesco (currently the largest shareholder) will participate in the Firm Placing and the Placing and Open Offer, it will acquire an even more significant portion of the voting rights in the Company and will be able to potentially block special resolutions. We therefore recommend an abstain vote on this proposal.

In relation to the deletion of provisions in the Memorandum, the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles. In relation to articles change, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital.

PIRC is concerned about the two following aspects of the proposed changes: conflict of interest and name change. In relation to the former, the company has not provided evidence for its plans to report annually on the operation of conflict of interest procedures; further, we note that a personal loan (£210,000) was provided in November 2007 by Mr. Hargreaves to Mr. Davis, prior to Mr. Davis being appointed to the board as a non-executive director. The loan was repaid in June 2009; however, the loan constituted a relationship or circumstance which could have appeared to affect Mr. Davis's judgment and should have been disclosed as such in the 2008 Annual Report.

In relation to the name change, we consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. Based on the above, we recommend abstention.

The proposed amendments include changes in relation to: redeemable shares; share certificates; transfer of shares; authority to purchase own shares; participation in meetings at different places and by electronic means; adjournments; removal of the chairman’s casting vote; the voting record date; the validity of proxy votes and permitted interests and voting by directors. Other significant changes are set out below.

First, the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles. Secondly, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital.

Thirdly, a new article requires any non-executive director other than the Chairman who has held office for nine years or more to put himself up for re-election. We do not support exemption of the Chairman from this requirement, although the company has informed us that in practice the Chairman has stood for re-election on an annual basis and will continue to do so going forward. Fourthly, the Act allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. In view of our concerns over this last change, we recommend an abstain vote.

The GBP 16.1 million investment will break down as follows: GBP 0.3 million in exchange for 29.5% of the ordinary share capital of MidasEquityCo; GBP 15.8 million in exchange for approximately 18.75% of the preferred equity certificates (PECs) to be issued by MidasEquityCo; and GBP 0.07 million in ‘Ratchet Shares’. The PECs confer upon the holders the right to receive interest at a rate of 12% per annum. As holders of Ratchet Shares, the management team will not be entitled to distributions or a return of capital unless certain performance conditions are satisfied on any disposal of the Bidco Group. The conditions are that the HgCapital Funds have received an internal rate of return of greater than 30% and a return of at least 3 times the amount invested by the HgCapital Funds in Midas EquityCo. If these conditions are satisfied, the management team will be entitled to an additional 5% of the total equity value of MidasEquityCo.

In principle, we support the alignment of the management team’s interests with those of other shareholders by the acquisition of a significant shareholding. However, we are concerned that the terms of the Ratchet Shares create an incentive for the management team to sell Bidco rather than to hold on to it. In our view disposal of a company should not be a performance objective in itself as it will not always be in the best interests of shareholders; rather, the extent to which it serves shareholders' best interests will depend on the circumstances applying at the time, including the identity of the purchaser. Furthermore, the exercise of the management team’s rights in relation to the Ratchet Shares will be a 5% dilution of the capital gain of other shareholders. While the performance conditions for such an exercise may be challenging, the directors will have an incentive to maximise the value of BidCo already by virtue of their other holdings in it, so it seems that a similar result could be achieved without recourse to this dilutive arrangement. In view of these concerns we recommend an abstain vote.

Furthermore we note that in the new articles, as is permitted by the Companies Act 2006, the company has included a provision whereby it may change its name by a resolution passed by the directors, and accordingly without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and consequently recommend shareholders abstain.

First, the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the provisions of its memorandum, including the objects clause, and to remove them from its articles. Secondly, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital.

Thirdly, the notice period for meetings at which special resolutions are considered has been reduced from 21 days to 14 days, ‘subject to further changes which have been implemented by the Directive’. Under the regulations implementing the Directive, the minimum notice period for general meetings (other than Annual General Meetings) increases to 21 days. However, it is possible to reduce this to 14 days. For a general meeting to be called on 14 days the following conditions must be met: (a) that shareholders have approved the holding of general meetings on 14 clear days' notice by passing an appropriate resolution at an AGM; and (b) that the company offers "the facility for shareholders to vote by electronic means accessible to all shareholders".

PIRC continues to believe that all companies should aim to provide at least 20 working days notice for all general meetings in order to give shareholders sufficient time to consider what are sometimes complex issues. However, we believe that the safeguards that are in place relating to use only in relation to a general meeting not a class meeting, the increased use of electronic communication (including the particular requirement for electronic voting), and annual approval, are all sufficient to allow shareholders to support the amendment. Also, it is open to shareholders to register their concern over the length of a notice period provided in their voting choice on a resolution at the meeting in question. In addition, companies will still be obliged to provide a longer notice period for major transactions such as takeovers and mergers. PIRC will monitor the situation and where the authority is utilised during the year and we believe that shareholders rights have been infringed we will recommend voting accordingly on the renewal of such proposals. Accordingly, this proposed amendment is considered acceptable.

Fourthly, the company sought authority last year to update the articles in relation to authorisation of directors’ conflicts of interest, amendments which we regarded as acceptable. It now seeks to update the provisions relating to directors’ conflicts of interest ‘to comply with the most recent changes to the Act’. The company has provided us with a copy of the relevant section of the proposed amended articles and stated that the amended articles require the director to declare the nature and extent of any interest in the manner set out in the Companies Act. The company is proposing several other changes that we consider acceptable, including in relation to: the Chairman’s casting vote; redeemable share; the closing of the register; and share transfers.

However, there is another other proposed change about which we have concerns. The Act allows companies to change their name by a procedure set out in its articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Act continues to provide for. In view of our concerns over this amendment, we recommend an abstain vote.

In view of our concerns over the performance criterion operated under the BSMP and the remuneration Committee’s discretion over the determination of the awards vesting in case of termination, we recommend an abstain vote.

PIRC is concerned that the performance criteria operated under the scheme replicate in part the one already used under the BSMP. In addition, we are concerned over the level of discretion give to the Remuneration Committee with regards to vesting provisions under the plan in the even of termination of employment or for a change in control.

We recommend an abstain vote.

PIRC is concerned that in case of a change in control, the Remuneration Committee has the discretion to allow accelerate vesting for all outstanding awards.

We recommend an abstain vote.

Of concern is Proposal 20 related to Directors remuneration. There is limited disclosure in terms of the implications for the company. For the year under review Non-executive remuneration was 562,000.00 in agregate.

The board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and therefore and abstain vote is recommended.

We do not have any governance concerns for the proposed changes except for the change of name element of the proposal. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that the Companies Act continues to provide for. We do not support this element of the proposal, and recommend an abstain vote.

The board seeks shareholder approval for the acquisition of the entire issued share capital of Halifax Estate Agencies Ltd. ("HEAL"), a subsidiary of Lloyds Banking Group ("LBG"), subject to the terms and conditions of the conditional acquisition agreement dated 16 October 2009. Pursuant to the agreement, LSL has conditionally agreed to acquire the entire issued share capital of HEAL from Bank of Scotland (BoS), a subsidiary of Lloyds Banking Group, for £1. As the HEAL business is currently loss making, a key part of the purchase is that at completion, HEAL contains sufficient cash to enable LSL to effectively and efficiently carry out its restructuring and rebranding plans.

The company has appropriately disclosed the background and reasons for the proposed acquisition, together with the associated risks. An interim management statement and an assessment of the impact of the acquisition on HEAL's staff have been undertaken.

PIRC is satisfied with all of the above disclosure. However, we are concerned about the level of board independence, which we do not consider enough to provide sufficient independent scrutiny. Therefore, we recommend abstention.

The Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal.

First, the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles. Secondly, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital.

Thirdly, a change in the new Articles removes a provision requiring the disclosure of a Director’s age in the notice convening a meeting at which they are standing for election or re-election if they have attained the age of 70 or more. The purpose of this change is to avoid falling foul of new age discrimination regulations.

Fourthly, since 1 October 2008, under section 175 of the Act, a director of a company is under a duty to avoid a situation giving rise to an actual or potential conflict of interest. The new Articles will enable the Board to sanction conflicts or potential conflicts of interest as broadly defined by the Act subject to certain conditions. We consider the changes to be reasonable and safeguards under the Companies Act adequate. The Board has expressed the intention to report annually on the Company’s procedures for ensuring that the Board’s powers to authorise conflicts are operated effectively and the procedures have been followed.

Fifthly, under the implementing legislation for the directive, companies are required to give 21 clear days’ notice of general meetings unless the company offers an electronic voting facility and a special resolution reducing the notice period to less than 14 days has been passed. AGMs must be held on 21 clear days’ notice in any case. The new articles contain amendments reflecting these requirements.

Sixthly, the company is seeking authority to use website communication for documents such as the annual report and accounts. If authority is given, shareholders will receive a written request to agree to website delivery. Shareholders may decline the invitation if they so wish. PIRC does not consider that the enhanced use of electronic communications poses a risk to shareholder rights, as shareholders may elect to continue to receive hard copies of any communication.

A number of other amendments are also proposed that we consider acceptable, including, among others, in relation to: adjournments for lack of a quorum, the Chairman’s casting vote, distribution of assets otherwise than in cash, electronic conduct of meetings, form of resolution, notice of board meetings, provision for employees on cessation of business, records to be kept, redeemable shares and suspension of registration of share transfers.

However, there is a further proposed change about which we have concerns. The Companies Act 2006 allows companies to change their name by a procedure set out in its articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and therefore recommend an abstain vote.

However, we note that in the new articles, as is permitted by the Companies Act 2006, the company has included a provision whereby it may change its name by a resolution passed by the directors, and accordingly without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and consequently recommend shareholders abstain.

Company disclosure states that C shares have no par value and are convertible into ordinary shares based on the NAV of each share class on the date in question. The terms of any C share issue will provide for conversion into ordinary shares at the prevailing NAV and therefore ‘will not be net asset value dilutive’. Any offer of shares made other than by way of C share issue will be made a price not less than the prevailing NAV. The company also states that since the disapplication sought covers both ordinary shares and C shares, and the basis upon which any tranche of C shares would convert into ordinary shares cannot be known until the point of conversion, it is not possible to express the level of disapplication sought as a percentage of the total ordinary share capital currently in issue.

We have several concerns about this proposal. The ordinary issued share capital as at 31 December 2008 (as disclosed in the latest annual report) was 232,704,455 shares. The company does not provide any information on the number of ordinary and C shares currently in issue. However, if all the shares covered by the authority were issued as ordinary shares and the ordinary share capital were at the same level as at the end of 2008, existing shareholders could experience dilution of nearly 70%. Also, although the company states that the basis upon which any tranche of C shares would convert into ordinary shares cannot be known until the point of conversion, it could provide projected scenarios to assist shareholders in making an informed choice about the dilution implications. In addition, it is not clear why the company could not seek the disapplication authority at the time of any placing and offer. The provision of an authority of this kind at this stage leaves open the possibility that a substantial number of shares will be issued outside of a placing and offer. The timing of the proposal also does not give shareholders an opportunity to consider the terms of the placing that it may facilitate or the identity of the placees who would participate in it. In view of these concerns we recommend an oppose vote.

The company has not made any political donations during the year and the authority will expire no later than the next AGM. However, we are concerned that the expenditure of shareholders’ funds covered by the authority is substantially larger than reasonably required for the purposes stated.

The company does not indicate that it will put in place arrangements at general meetings to facilitate voting by corporate representatives, in line with guidance issued by the Institute of Chartered Secretaries and Administrators. In addition the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and therefore recommend an abstain vote.

Regarding the change of name, the Companies Act 2006 allows companies to change their name by a procedure set out in its Articles. Accordingly the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal.

First, the Act reduces the importance of the memorandum of association and limits the information that companies are obliged to include in it. Also, all the provisions of the memorandum, including the objects clause, are now to be treated as forming part of the articles. However, a company may remove these provisions from its articles by a special resolution. In addition, under the Act a company may proceed as though its objects clause is unrestricted. In line with the legislation, the company is seeking to delete the majority of the provisions of its memorandum, including the objects clause, and to remove them from its articles. Secondly, the company seeks to delete the provisions in its articles relating to the authorised share capital, given that the Companies Act has abolished the requirement to have an authorised share capital. In addition, the company is proposing changes conferring authority on the board to determine the terms and manner of redemption of redeemable shares and removing the Chairman’s casting vote at shareholders’ meetings. We consider the above changes acceptable.

The Act also allows a company to change its name by a procedure set out in its articles. Accordingly the board is seeking to amend the articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that the Companies Act continues to provide for. We do not support this element of the proposal and therefore recommend an abstain vote.

In addition the board is seeking to amend the Articles to give them the authority to change the company’s name without recourse to a shareholder vote. We consider that a name change may have significant implications for a company’s value where the name of a company is an important aspect of its brand. Also, there can be substantial costs associated with the process of changing a name, including advertising and communications with stakeholders, which would be compounded in the event that the change was later reversed. In our view therefore name changes ought to remain subject to a special resolution of shareholders, an alternative that that the Companies Act continues to provide for. We do not support this element of the proposal and therefore recommend an abstain vote.

We therefore recommend an abstain vote.

Although we consider that the reason given by the company for the conversion of grants under the plan is considered to be reasonable, we maintain our concerns over lack of challenging performance targets operated, and the excessiveness of potential awards granted under the plan. In addition, we have concerns over the Remuneration Committee’s discretion in not applying pro-rated vesting of outstanding awards in case of a change in control, although the company gave assurance that any decision taking in regard will be “entirely based on the circumstances and timing of the change in control”. We recommend shareholder oppose this resolution.

We note that the compensation committee can make discretionary awards of cash awards without any performance criteria attached under this plan. PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. The maximum award that the CEO may receive for fiscal 2010 would be $8,329,022 which we consider to be excessive considering it is more than 8 times the basic salary. On this basis we recommend opposition to approval of the plan.

Even though the company is attempting to incorporate amendments in the Ohio law we consider those amendments do decrease shareholders’ rights. In addition, we do not approve of bundled resolutions and would advocate a higher level of disclosure of the changes and potential impacts on shareholders. Therefore, we recommend an oppose vote.

PIRC considers that cumulative voting allows a small shareholder group to have potentially a disproportionate influence over the election of directors. We support the principle of "one vote one share" and therefore recommend opposition.

Although PIRC understands the justification for the authority, we are concerned that the Company does not have performance targets or vesting scales attached to the restricted share awards, and that this is left to the discretion of the Plan Administrator. Therefore opposition is recommended.

Neither the proposed performance measures or the length of the performance period is disclosed. In addition given that the Compensation Committee currently composes of two members, of which only one is considered to be independent by PIRC, it is a concern that the performance measures and performance period are at the Committee's discretion. In light of this opposition is recommended.

The directors argue in response that health care reform is an important, but complex, public policy issue and it is not an appropriate subject for the boardroom or an annual meeting of shareholders whereas the questions raised in the proposal are not directly applicable to self-insured companies such as Cintas.

PIRC considers that the ultimate aim of the proponents which lies behind the request for the company to become a signatory to the guiding principles is for adoption at a national level of a universal health care system. This is a largely political issue outside the remit of the board and their duty to manage the company. We therefore recommend an abstain vote on this proposal.

The Plan is open to only 2,000 employees out of the 51,639 persons employed by the company as of June 30, 2009, of whom approximately 27,917 were employed by foreign subsidiaries. Under the Plan the Compensation Committee has total discretion to grant various types of stock awards: stock options, unrestricted stock awards and RSUs. The Plan has a relatively low burn rate of 1.6% per year, which nonetheless exceeds recommended limit of 1% per year.

In view of our concerns regarding the number of employees eligible to participate in the plan and the plan's burn rate, we do not consider this to be an all-employees plan and we are concerned that it only provides another source for income for top management without any performance conditions attached to it. Therefore we recommend shareholders an oppose vote.

We consider the increase in the number of shares to be highly dilutive for shareholders. Therefore, we recommend opposition to the amendment of the plan.

Performance targets, for awards granted under the plan that are performance based, are not disclosed which prevents shareholder assessment whether future payouts will be commensurate with performance. We therefore recommend shareholders oppose the proposal.

PIRC has concerns that the maximum limit disclosed amounts to USD 7.5 million, which represents over five times the salary of the highest paid executive, the combined Chairman and Chief Executive, Mr. George S. Barrett. We are also concerned that, although the nature of performance criteria that may be applied is disclosed in general terms, specific targets are not. Furthermore, we consider that the tax treatment of performance pay is intended to act as performance incentive itself. However, we do not consider that favourable tax treatment under such schemes can be justified unless it is possible to evaluate the targets that are in use in a more specific fashion. In view of these concerns we recommend an oppose vote for this proposal.

We have concerns that: awards may not be subject to robust enough performance targets, and be insufficiently challenging; the added discretion to make awards from the Executive Bonus Plan, without strict guidelines upon the Plan's use, potentially gives less weight to performance based awards; the performance measures added under the amended Plan make no reference to comparative measures with peer company performance, which PIRC considers best practice; the bonus limit is considered to be quite high; and the target awards become payable in full upon a change-in-control.

In addition we have concerns that the Compensation Committee, which administers the plan, is not considered to have any independent members according to PIRC guidelines.

PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. On this basis we recommend an oppose vote on the proposal.

The Compensation Committee has the power to select employees to receive awards and determine the terms and conditions of awards. As of August 31, 2009 approximately 5,037 other employees were eligible to participate in the Plan. Non-employee directors may also be granted awards under the Plan. The Plan provides for the following types of awards: stock options; restricted stock units; stock appreciation rights; performance stock; performance units; and other share-based awards.

We consider the increase in the number of shares to be highly dilutive for shareholders. The Plan also allows the compensation committee too much discretion to determine the size, type and term of awards. Performance targets, for awards granted under the plan that are performance based, are not disclosed which prevents shareholder assessment whether future payouts will be commensurate with performance. Also, we do not consider that it is appropriate for directors to administer a Plan under which they may receive awards. Therefore, we recommend opposition to the amendment of the plan.

We note that the compensation committee can make discretionary awards of cash awards without any performance criteria attached under this plan. PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. On this basis we recommend opposition to renewal of the Plan.

The Company states that as almost five years have passed since approval of the 2004 Plan they are submitting this proposal to stockholders for reapproval of the material terms of the performance criteria set forth in the 2004 Plan. This is to permit the payment of awards that qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended. They state that if stockholders fail to approve the proposal, "we will still be able to make awards under the 2004 Plan, but some awards paid to our senior executives would not be deductible, resulting in an additional cost to the Company."

PIRC notes that there are no stated performance criteria and only generic headings of possible criteria are provided. Additionally, as performance conditions may be attached to awards at the Compensation Committee’s discretion, there are concerns that the committee will have considerable flexibility in the payout of discretionary awards, which we do not support.

We have concerns that: awards may not be subject to robust enough performance targets, and be insufficiently challenging; the added discretion to make awards from the Stock Incentive Plan, without strict guidelines upon the Plan's use, potentially gives less weight to performance based awards; the performance measures added under the amended Plan make no reference to comparative measures with peer company performance, which PIRC considers best practice; the bonus limit is considered to be quite high; and the target awards become payable in full upon a change-in-control.

In addition we have concerns that the Compensation Committee, which administers the plan, is not considered to have any independent members according to PIRC guidelines.

PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. On this basis we recommend an oppose vote on the proposal.

The 2009 Plan provides that the number of shares of Common Stock of the company available for awards under the 2009 Plan will be 30,000,000 plus the number of shares that have not yet been made subject to awards under the 2002 Plan as of the effective date of the 2009 Plan. It is estimated that there will be approximately 1,347,254 shares remaining available under the 2002 Plan on the effective date of the 2009 Plan, meaning that the total number of shares available for awards under the 2009 Plan will be approximately 31,347,254.The 2009 Plan has been designed to meet the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, regarding deductibility of executive compensation.

Stock Appreciation Rights and Stock Options can be awarded by the ad hoc Committee (not the compensation committee) without any performance criteria attached, which we do not welcome. The plan is an omnibus plan, open to all employees and non-executive directors, however given the level of the maximum awards per year is unclear whether all the employees are effectively likely to benefit from the plan or if it will be de facto reserved for the top executives of the company.

Furthermore the company does not disclose any specific performance hurdle attached to the performance linked awards, therefore impeding any shareholder judgement over the balance between performance and reward at the company. Due to these concerns, we recommend an oppose vote.

Company employees other than the Named Executive Officers and members of the Board would be given the one-time opportunity to exchange stock options with an exercise price no lower than its 52-week high on NASDAQ for a lesser number of new restricted stock units that have approximately the same value as the options surrendered or, under limited circumstances, new stock options, may be issued instead of RSUs.

The Board believes that the Exchange Programme is important particularly given the challenges and difficult operating conditions which currently persist in the global financial and economic climate and the threat to employee retention once conditions improve.

Only stock options with an exercise price above the Exchange Price (which, assuming an exchange offer to implement the Exchange Programme were to have commenced 27 June 2009, would have been no lower than $11.90) will be eligible for exchange. In addition, only stock options that were granted at least 12 months prior to the commencement of the Exchange Programme would be eligible for exchange under the Exchange Programme. On 27 June 2009, the per share closing price of its common stock on the NASDAQ National Market was $5.70. Thus, the exercise prices of the stock options eligible under the Exchange Programme, which would range from $11.91 to $1,054.50, which are approximately 2 to 185 times such closing price. At present , approximately 70% of all currently outstanding options were underwater and approximately 44% of outstanding stock options would be eligible for exchange in the Exchange Programme.

The company proposes an option repricing operation. PIRC does not support this practice which undermines the reasons why options are used as part of the company's remuneration. We therefore recommend shareholders vote against this resolution.

The proponents request that the Board is encouraged to enact a policy prohibiting all medically unnecessary surgeries in the teaching program at Ross University School of Veterinary Medicine. They state that: “Such a policy would only permit surgeries to be performed on an animal when that same animal stands to benefit from the surgery or when such a surgery would be deemed appropriate in a clinical context.” They highlight that other facilities have adopted more humane curricula which have attracted greater numbers of qualified applicants.

In response the Board states that the program is structured to provide a veterinary education that is modelled after educational programs at U.S. veterinary schools. The Board explain the procedure which is part of Ross’ curriculum, and that all but one of the procedures included in the Ross curriculum are classified as minor. They state that that the procedures are in accordance with the Guide for the Care and Use of Laboratory Animals, which is used by veterinary schools throughout the U.S., and Ross’ own Animal Use Policy, no animal may undergo more than one major procedure. They also state that the University abides by the policy and guidelines of the American Veterinary Medical Association and that the resolution is micro-management of the business and that the decision is better left to the Ross faculty and leadership. Furthermore, they state that PETA's statement in support of its proposal contains vague terms and relies upon inaccurate and misleading statements.

PIRC sympathises with the moral case for proposal, and considers that it is beneficial for the company to comply with what might be deemed to be best practice from an ethical stance, as well as being in compliance with educational requirements. There are benefits to be found from seeking methods for mitigating risks and reporting these to shareholders. Additionally, the company has not explained how the application of the policy itself would impede the objectives of the school in teaching veterinary medicine, apart from an objection on principle to external intervention. However, rather than requesting a report into the potential for removal of all ‘unnecessary surgeries’ the proposal is more prescriptive., and that the Company has stated they have been in compliance with the required guidelines. PIRC also finds that the proponent’s evidence is insufficient in the light that there are no referenced cases, or findings of noncompliance.

Although the issue is one of that can damage the Company's reputation we believe that the shareholder case in favour of this proposal is insufficient, and while we consider that it is beneficial for the Company to seek alternatives to ‘unnecessary’ animal surgeries, the proponents have not defined the term sufficiently well. We therefore recommend an abstain vote.

The amended and restated version of the 2004 Performance Incentive Plan authorizes an increase in the number of shares of common stock available for award grants under the plan by an additional 14,500,000 shares. As of September 16, 2009, a total of 12,376,750 shares of the company's common stock were subject to outstanding awards granted under the 2004 Performance Incentive Plan, and an additional 1,536,486 shares of the company's common stock were available for new award grants under the 2004 Performance Incentive Plan. The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan is 35,199,313 shares. If stockholders approve this proposal, this limit will be increased to 49,699,313. This figure corresponds to 22% of the company's outstanding stock capital. PIRC believes that this Plan is overly dilutive of shareholders' rights as it largely exceeds the limit of 10% dilution over 10 years. The burn rate of the plan is also considered largely excessive as the Plan was created only 5 years ago. For this reason we recommend an oppose vote.

The Stock Incentive Plan will now expire at the 2012 Annual Meeting. The Company is seeking shareholder approval to the amendment and restatement of the Stock Incentive Plan so as to provide that each one share issued as a stock grant (or pursuant to the vesting of a stock unit) will count as the issuance of 1.5 shares reserved under the Stock Incentive Plan for the purpose of computing shares remaining eligible for issuance Plan. Also to make available for reuse under the Plan shares underlying awards under the Cisco Systems, Inc. 1996 Stock Incentive Plan, the SA Acquisition Long-Term Incentive Plan and the WebEx Acquisition Long-Term Incentive Plan that expire unexercised. Furthermore, the amendment to the Plan would limit the maximum term for stock options and stock appreciation rights to ten years from the date of grant.

The Company has failed to provide specific financial targets attached to the share awards. This handicaps shareholders to determine whether the conditions set are challenging. We are also concerned over the provision that all awards would vest in full when CISCO was acquired by merger or asset sale or in the event there is a hostile takeover, whether through a tender or exchange offer for more than 35% of Cisco’s outstanding voting securities. PIRC has concerns over the Plan and therefore recommends an oppose vote.

"The proponent requests a change to the company's by-laws by adding a new Article 5.08 establishing a Board Committee on Human Rights, which the proponents states could be an effective mechanism for addressing the human rights implications of the company’s activities and policies on issues as they emerge anywhere in the world.

The board argues that a specific board committee on human rights is unnecessary since the company already invest significant time and resources to ensure that its activities and policies promote, and are consistent with, its goals and initiatives regarding the improvement of human rights around the world. The board refer to its support of the United Nations Global Compact, its annual Corporate Citizenship Report, its specific corporate policy on human rights and other codes and policies addressing human rights."

PIRC notes that the company has taken reasonable steps to include human rights related risks into their management structures but due to the nature of the company's business being in the key communications infrastructure area there is an obvious risk of damage to the company’s reputation that may warrant a standalone Committee. PIRC's view is that this could be better addressed by a Committee with a wider remit than Human Rights, and suggest that a Sustainability, or Corporate Accountability Committee would be more appropriate. We consider that the company has shown that it has made progress in the management of this risk area, and that these factors warrant further policy initiatives by the company. However, we find the specific Committee requested by the proponents to be too prescriptive, and we therefore recommend an abstain vote on this proposal.

We are concerned about the potential dilution impact and of the increase in the burn rate of the Plan and therefore recommend and oppose vote.

The MIP permits the grant of performance-based bonus awards, payable in cash at the end of the fiscal year. It is administered by the Remuneration Committee. We consider the performance criteria under the MIP to not be challenging enough; in addition, the company has a “claw-back” provision in place, which we welcome. In the event of change-in-control pro-rata annual bonus entitlement is granted, which we consider acceptable. There are additional concerns that “additional bonuses” may be granted to eligible employees at the discretion of the Compensation Committee. Based on the above, we recommend an oppose vote.

The PIRC Compensation Rating is: ADB (Disclosure Rating of A; Reward Balance Rating of D; and Contracts Rating of B). Based on this rating we recommend an oppose vote.

The proponent requests that the board adopt principles for health care reform based upon principles reported by the Institute of Medicine: 1) Health care coverage should be universal; 2) Health care coverage should be continuous; 3) Health care coverage should be affordable to individuals and families; 4) The health insurance strategy should be affordable and sustainable for society; and 5) Health insurance should enhance health and well being by promoting access to high-quality that is effective, efficient, safe, timely, patient-centered, and equitable. The proponents argue that: “We believe that the 47 million Americans without health insurance results in higher costs, causing an adverse effect on shareholder value for our Company, as well as all other U.S. companies which provide health insurance to their employees”.

In response the directors argue that “while they recognize the ongoing national dialogue related to health care (…), the Board does not believe that the company’s Annual Meeting is the proper forum for this national policy debate, as such issues are best addressed by elected officials, health care and public policy experts, and industry groups.

PIRC considers that the ultimate aim of the proponents which lies behind the request for the company to become a signatory to the guiding principles is for adoption at a national level of a universal health care system. This is a largely political issue outside the remit of the board and their duty to manage the company. We therefore recommend an abstain vote on this proposal.

The Plan caps the maximum bonus award to 150% of base salary or $2 million. The company has disclosed which performance condition will be applied and it discloses the performance targets for the year under review. PIRC commends the decision of the company to submit to shareholders' approval their annual bonus plan. Historically the bonus granted do not seem excessive in our view, however we maintain some concerns over whether the hurdle attached to the bonuses can be considered challenging. The company's disclosure is not sufficient for us to fully evaluate if the annual bonuses are commensurate with the group and/or individual performances. However since the level of disclosure exceeds the market average and the bonus granted are historically not excessive, we recommend shareholders abstain on the proposal.

The Plan, inter alia, permits the Compensation Committee to grant additional units to key employees to match all units they purchase, and to issue one-time bonus grants of units to key employees at the time of their entry into the Management Plan. The Management Plan automatically credits additional units (one to one ratio) to each eligible employee who purchases restricted units as part of their bonus, base salary and/or through cash payments. PIRC has concerns regarding these type of awards which are not connected to any performance hurdle. We therefore recommend an oppose vote.

The company does not disclose any specific performance target attached to the grant of these awards. The stock options vest on equal instalments over four years, which we believe is not a sufficiently long period for long term incentives. In addition we note that in case of a change in control each option outstanding under the Stock Plan on the day preceding the date on which the Change in Control occurs will become immediately and fully exercisable, which we believe it might lead to excessive severance payments. We therefore recommend an oppose vote.

The PIRC Compensation Rating is: BDB (Disclosure Rating of B; Reward Balance Rating of D; and Contracts Rating of B). Although we commend Microsoft for their voluntary 'say-on-pay' vote for shareholders, the vote recommendation based on this rating is an abstain on the proposal.

The proponent requests that the board adopt principles for health care reform based upon principles reported by the Institute of Medicine: 1) Health care coverage should be universal; 2) Health care coverage should be continuous; 3) Health care coverage should be affordable to individuals and families; 4) The health insurance strategy should be affordable and sustainable for society; and 5) Health insurance should enhance health and well being by promoting access to high-quality that is effective, efficient, safe, timely, patient-centered, and equitable. The proponents argue that: “We believe that the 47 million Americans without health insurance results in higher costs, causing an adverse effect on shareholder value for our Company, as well as all other U.S. companies which provide health insurance to their employees”. In response the directors argue that “while they recognize the ongoing national dialogue related to health care (…), the Board does not believe that the company’s Annual Meeting is the proper forum for this national policy debate, as such issues are best addressed by elected officials, health care and public policy experts, and industry groups.

PIRC considers that the ultimate aim of the proponents which lies behind the request for the company to become a signatory to the guiding principles is for adoption at a national level of a universal health care system. This is a largely political issue outside the remit of the board and their duty to manage the company. We therefore recommend an abstain vote on this proposal.

The Plan is open to a wide range of participants, is capped and has relatively challenging performance criteria. The only main concern is that there are payouts of target bonuses upon a change in control. On this basis we recommend an abstain instead of an oppose vote.

Shareholder approval is sought for the merger agreement between DIRECTV and Liberty Media Corporation, Liberty Entertainment, Inc. (“LEI”), and several wholly-owned subsidiaries of DIRECTV. If approved, the merger will result in the creation of a new public holding company named ‘‘DIRECTV’’, also referred to as “Holdings”. In addition, and necessary for the merger to be implemented, Liberty is planning to execute a split-off transaction that would result in the redemption of 90% of the outstanding shares of both series of its Liberty Entertainment common stock in exchange for all of the outstanding shares of two series of common stock of LEI. LEI will hold Liberty’s entire interest in DIRECTV (currently approximately 57% of the economic interest and approximately 48% of the voting interest).

PIRC evaluates merger decisions based on the information presented and on our view of the independence of the board. We note that, over the time that the merger agreement was approved and until the present time, 44.4% of the board directors were considered independent by PIRC guidelines. In addition, we note that, the directors and executives have a significant financial interest in this transaction taking place, which was not counter-balanced by a sufficiently transparent and independent process. Of note as well is that there are concerns over the succession planning of the company as the CEO resigned recently (July 1, 2009) and the board is making the merger agreement with an interim CEO in place and a committee which is still searching for a replacement CEO. Based on the above concerns, we recommend an abstain vote on the merger proposal.

Shareholder authorisation is sought for the approval of the Voting and Right of First Refusal Agreement by and among The DIRECTV Group, Inc., Liberty Entertainment, Inc., DIRECTV, John C. Malone, Leslie Malone, The Tracy L. Neal Trust A and the Evan D. Malone Trust A.

For the merger agreement to be effective, resolutions 1 and 2 need the favourable vote of a majority of the quorum present at the meeting. PIRC has expressed its concerns in relation to the merger above, and therefore, PIRC also recommends an abstain vote for this resolution.

The board requests authority to adjourn the special meeting until a later date or dates, if necessary, in order to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger.

PIRC recommends an oppose vote to any adjournment or postponement of meetings if a sufficient number of votes are present to constitute a quorum. We consider that where a quorum is present, the vote outcome should be considered representative of shareholder opinion.

The plan is a long-term incentive plan to compensate the top 20 executive directors. The company does not disclose any specific performance target attached to the plan. Also PIRC is concerned that the Remuneration Committee might have excessive discretion since it can determine whether the performance goals were "achieved" (as defined in Section 6 of the Plan) by the Participants in case of a change in control and accelerate the payment of awards. We therefore recommend an oppose vote.

PIRC is concerned that the number of shares available under the plan is potentially overly dilutive, and we also consider the burn rate of almost 3% to be excessive even taking into consideration the large number of employees eligible to participate to the plan. Furthermore, PIRC has concerns about the lack of transparent performance measures and the wide area of discretion over the performance criteria attached to awards under the Plan as these are entirely administered by the Compensation Committee. Therefore, it allows the compensation committee excessive discretion in determining the size, type and term of awards.

In view of our concerns, we recommend an oppose vote.

PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. Performance targets used under the annual bonus are not disclosed, and we have concerns that, as a result, they may not be sufficiently challenging. As shareholders do not have a vote over compensation policy, we advise opposition to the plan under which awards are made.

The Company is seeking shareholder approval to carry out the business integration with Mitsui Sumitomo Insurance Group Holdings, Inc. (MSIGH) and Aioi Insurance Co., Ltd. (Aioi) by way of a Share Exchange to create a new business group.

Aioi shall conduct a share exchange through which MSIGH will become the wholly owning parent company of Aioi and Aioi will become a wholly owned subsidiary of MSIGH and MSIGH shall acquire all of the issued shares of Aioi. The Company shall conduct a share exchange through which MSIGH will become the wholly owning parent company of NDGI (Nissay Dowa General Insurance) and NDGI will become a wholly owned subsidiary of MSIGH and MSIGH shall acquire all of the issued shares of NDGI.

Upon the Share Exchange between NDGI and MSIGH, MSIGH shall deliver to NDGI shareholders in exchange for the NDGI shares held by such shareholders, the number of shares of MSIGH’s shares calculated by multiplying the total number of shares of NDGI’s shares held by shareholders by 0.191 (any fraction of less than one share shall be rounded down to the nearest whole number). In order to ensure the fairness of the Share Exchange Ratio, the Company requested Goldman Sachs Japan Co., Ltd. to perform financial analyses relating to the Share Exchange Ratio.

The date on which the Share Exchanges take effect will be 1 April 2010. The Share Exchange between Aioi and MSIGH and the Share Exchange between NDGI and MSIGH shall take effect on the condition that all of the requirements necessary for the Share Exchange between NDGI and MSIGH and the Share Exchange Between Aioi and MSIGH, respectively, to take effect have been satisfied as of the moment immediately preceding the Share Exchanges taking effect. The trade name of MSIGH after the Share Exchanges take effect shall be MS&AD Inshuaransu Gurupu Horudingusu Kabushiki Kaisha (English name: MS&AD Insurance Group Holdings, Inc.).

The Company has provided sufficient information on the Share Exchange however we are concerned over the level of outside directors on the board. We therefore recommend shareholders abstain on the proposal.

As explained in Resolution 1 regarding the Share Exchange Agreement, the Company is seeking shareholder approval in conducting a Merger between the Company and Aioi.

Aioi shall not grant nor allot any cash or any other consideration to shareholders of Nissay in exchange for Nissay shares upon the Merger. The effective date of the Merger would be 1 October 2010.

As expressed in Resolution 1, we have concerns over the level of outside directors on the board and therefore recommend shareholders abstain.

If Resolution 1 is approved and the Share Exchange takes effect, the Company will have only one shareholder, MS&AD Holdings (MSIGH), the wholly owning parent company in the Share Exchange, as of 1 April 2010; and the Article in relation to the record date for annual shareholders’ meetings will no longer be necessary. For this reason, the Company proposes that Article 14 (Record Date for Annual Shareholders’ Meeting) be deleted and Article 15 and subsequent Articles thereof be renumbered accordingly. As we do not support the Share Exchange Agreement and the Merger Agreement, we recommend abstention.

The company puts forward several social and geographical trends as influencing the decision to merge the two companies, including climate change, declining birthrates and the ageing population in Japan and diversified consumer needs. In view of these trends the two companies ‘decided to establish a new solution service group which provides customers with security and service of the highest quality and contribute to social welfare’.

For the purpose of establishing the joint holding company, which will come to hold 100% of the shares of the parties through the share exchange, the parties have determined the share exchange ratio at which a certain number of shares of common stock of the joint holding company will be allotted in exchange for each share of the parties. According to the ratio, 0.9 shares of common stock of the joint holding company will be allotted for each share of common stock of Nipponkoa, and one share of common stock of the joint holding company will be allotted for each share of common stock of the company. Based on analyses and opinions prepared by Merill Lynch Japan Securities Co, Mitsubishi UFJ Securities Co, Nomura Securities Co, Mizuho Securities Co and Goldman Sachs Japan Co, the companies have each concluded that the ratio is fair.

We consider that sufficient information has been provided to allow shareholders to make an informed choice but there is insufficient outside representation on the board to ensure proper scrutiny of the proposals. We therefore recommend an abstain vote.

It is true that a rejection of the merger would mean the rejection of a significant part of the current executive team’s strategic vision. However, in our view, in the absence of additional detail, it seems harsh to judge a rejection of the merger as grounds for dismissal of a substantial part of that team. If the merger does not proceed the company should be capable of continuing to function as an independent entity and, furthermore, it would not seem to serve the interests of shareholders in that event simultaneously to dismiss four members of the executive team including the head of the company. We therefore recommend an oppose vote.

The other reason for the board's stance is in part that it 'does not believe that the background of this candidate adds depth or additional experience to the current board'. We are inclined to concur on this point as there is no indication that Dr Rooke has board-level management experience at a public company or in the telecoms sector. In addition, insufficient information is available to make a determination as to whether he would be independent. We therefore recommend opposition to the proposal.

The proposed authority is limited to 10%, which is acceptable by PIRC guidelines. However, we have concerns that the sale could result in dilution of shareholder interests without a commensurate return, since the shares may be offered at a discount. Therefore, PIRC recommends shareholders vote to oppose the resolution.

* This resolution requires an affirmative vote of 75% of shareholders present at the meeting in order to take effect.

The company's remuneration report outlines the philosophy and policy of the board in relation to the remuneration of the directors and executives of the company and details the remuneration of key management personnel. Combined remuneration is clearly disclosed and based on salary and short and long term incentives. No quantified performance targets are disclosed under the annual bonus scheme. Bonuses were paid to various executives, with the exception of the CEO and the Executive Vice Chairman. The long term incentive scheme, under which share options may be granted, does not satisfy PIRC Guidelines. The LTIP has no performance hurdles attached to the grants. The company considers its shares' price to be the performance target to which long-term incentives are linked. We do not deem share price to be an appropriate measure as it is linked to several factors which are beyond the control of executives and it does not permit the evaluation of individual performances. The two top executives have open agreements with no fixed terms however no further details are given including termination provisions.

Based on the lack of performance conditions attached to the LTIP and the lack of disclosure for what concerns both the annual bonuses and the executives' contracts, we recommend opposition.

The company proposes to increase the number of shares available under the Plan by 5,000,000 to 17,300,000. Up till the date of the EGM circular, 6,714,281 shares have been issued under the Plan. Therefore if the proposal is approved the amount of shares available for issue will increase from 5,7555,016 to 10,755,016. The stated purpose of the proposal is to ensure that enough shares are available to issue to new hires and key employees during the next two years.

We are concerned that the maximum amount of shares that may be issued under the Plan, if the proposal is approved, would amount to 14.2% of the company’s Class A common stock, which exceeds the recommended dilution limit of 10%. In addition, although the company states that vesting of awards of restricted stock is subject to achievement of performance goals, it is not clear whether any targets are applied to option, SAR, deferred stock unit or phantom share awards. In view of these concerns, we recommend an oppose vote.

PIRC supports the principle of performance-related pay and considers the rationale of 162(m) is to enable shareholders to implement this principle for all awards above $1 million. We welcome that the Board has amended the Omnibus Incentive Plan to add the following additional performance criterion: employee engagement, environmental, health, safety and security performance and other operating metrics. These criteria may be used in the future in formulating compensation performance goals for participants, however the Company do not disclose how these metrics are applied. Additionally, we welcome that the committee has disclosed maximum levels of awards but we consider that it allows the committee too much discretion to determine the size, type and term of awards. Performance targets, for awards granted under the plan that are performance based, are not disclosed which prevents shareholder assessment whether future payouts will be commensurate with performance. As the Company does not disclose the number of employees that are eligible this Plan is not considered to be an all employee Plan and we therefore view it as an executive compensation vehicle. Therefore, we recommend an oppose vote on the proposal.

The Human Resources Committee, with key responsibilities regarding the remuneration of both executive employees and non-executives directors, is exclusively comprised of independent members, which we consider to be best practice.

Disclosure. Disclosure of cash remuneration is adequate. We welcome the company’s disclosure of the past 5 years’ records of its earning per share performances, although we would like to see historic TSR performance disclosed too, given that, like EPS, it is a performance measure under a company share incentive scheme. In addition we welcome the disclosure of the ratio of fixed and performance-related remuneration paid during the year to individual top executives of the company, although we would like to see disclosure of the intended balance going forward too.

Non-executive directors' remuneration. NEDs are remunerated with board and committee fees (disclosed separately) and, in line with best practice, are not entitled to performance-based remuneration or to participate in the company's equity incentive plans. However under the Non-Executive Directors' Share Plan NEDs are required to take at least 20% of their director's fees in the form of shares of the company.

Balance performance and reward. Short-term incentives consist of cash awards granted on the basis of various performance objectives including financial, corporate and individual objectives. We welcome the adoption of non-financial targets as well as financial ones. However, maximum awards available under this scheme and specific targets are not disclosed.

Long-term incentives. LTIs come in three types, the first of which is cash incentives subject to deferred settlement, the value of which is ultimately determined with reference to the company’s share price. The award of such incentives is triggered by an entitlement to a cash-settled STI and is currently only available to the MD of the company.

LTIs are also available in the form of performance rights and performance options which, during the year, were awarded under the CSL Performance Rights Plan only. A maximum level of award is not disclosed. Each long-term incentive grant generally consists of 50% performance rights and 50% performance options. Quantitative performance measures attached to performance rights are different from those adopted for performance options which we welcome, however these measures are not applied in a linked fashion, which we would consider best practice. In addition, the vesting of these two types of long-term incentive awards is also contingent on a qualitative hurdle which is based on the rating under the internal performance management system. These awards start vesting after two years from the date of grant and may vest fully after four years; whilst PIRC considers that 3 years is the minimum acceptable performance period for long-term incentive awards (However, the company has stated that vesting will begin on the third anniversary of the date of grant from 2010.) Awards of both types are divided into three tranches with different vesting periods. We have concerns about the availability of re-testing where performance targets have not been attained with the relevant period.

The performance hurdle attached to performance rights is Total Shareholder Return (TSR) relative to a peer group. If the company’s TSR is at the 50th percentile of the peer group over the relevant period, 50% of performance share rights within a given tranche vest; the maximum award will vest at the 75th percentile. Vesting increases on a straight line basis between these points. Although no upper award limit is disclosed for these awards, we consider that the upper performance target is sufficiently challenging in view of the level of award made during the year.

Performance options have an earning per share (EPS) performance hurdle. The target is 10% compound EPS growth per annum. This performance hurdle is subject to three years vesting period. No vesting scale is disclosed, which indicates that there is a single vesting point. According to the data provided by company regarding the previous years’ performances, this target does not seem to be particularly challenging as the company has significantly exceeded it in the past three years.

Contracts. Executive directors are entitled to six months notice of termination. They may receive compensation on termination of 12 months salary, which is in line with best practice. The company does not disclose its policy regarding unvested incentive awards in case of a change in control.

Due to the concerns expressed above in relation to performance-related pay schemes, such as the lack of disclosure of quantitative targets under the STI scheme and, in relation to the Performance Rights Plan, the absence of a disclosed award limit and the availability of retesting, we recommend an abstain vote.

The structure of the Performance Rights Plan, under which awards will be made, is outlined in our analysis of resolution 3 above. We have a number of specific concerns over this plan, including the shortness of the period before awards start to vest. Although this will be lengthened in 2010, the shorter period will still apply to awards made in 2009 after the end of the 08-09 financial year. Also, executive directors may submit their performance to re-testing the following year if it does not satisfy the relevant performance target during the relevant period. We consider that this serves to dilute the incentive to fulfil the performance conditions. In addition, we do not consider the EPS performance condition applicable to performance options to be sufficiently challenging in view of historic EPS performance. In view of these concerns we recommend abstention.

The proposed authority is limited to 10%, which is acceptable by PIRC guidelines. However, we have concerns that the sale could result in dilution of shareholder interests without a commensurate return, since the shares may be offered at a discount. Therefore, PIRC recommends shareholders vote to oppose the resolution.

* Although this resolution is considered ordinary business by the Company it requires an affirmative vote of 75% of shareholders present at the meeting in order to take effect.

Disclosure is acceptable however, we have concerns that the transactions have not been subject to sufficient independent scrutiny as there are not enough independent directors on the board in our view. Therefore, we recommend an abstain vote.

Disclosure is acceptable however, we have concerns that the transactions have not been subject to sufficient independent scrutiny as there are not enough independent directors on the board in our view. Therefore, we recommend an abstain vote.

Disclosure is acceptable however, we have concerns that the transactions have not been subject to sufficient independent scrutiny as there are not enough independent directors on the board in our view. Therefore, we recommend an abstain vote.

The board seeks shareholder approval to amend Article 18 of the company's Articles of Association to adapt its drafting to the legislation in force, eliminating the maximum limit suppresed by Article 111bis of the Securities Market Act. The new Article 18 allows the company to issue bonds, notes, warrants preferential shares or other tradable securities, with a fixed or variable ratio. Further, the AGM may delegate to the board: 1) the power to issue simple and convertible and/or exchangeable bonds; and 2) the power to exclude pre-emptive rights.

PIRC is aware that the company intends to align its Articles of Association with the Spanish Securities Market Act. However, we are concerned that such Act does not establish a limit for the issuance of convertible bonds and other securities. In addition, we are also concerned about the lack of independent scrutiny on the board, as only six directors (out of 15) are considered independent in our view. Therefore, we recommend an abstain vote. In addition, PIRC will monitor that the board requests shareholder authority for future issuances.

The board seeks shareholder approval to issue fixed income securities or debt instruments, as well as fixed interest securities (including warrants) convertible into shares of the company and/or exchangeable into shares of the companies or of other companies of the group, up to a maximum amount of €5,000m. The authority allows the board: to 1) carry out issuances on one or more occassions within a period of five years; 2) establish the criteria for determining the bases and modalities of the conversion and/or exchange; 3) exclude pre-emptive subscription rights for shareholders.

PIRC is concerned about the excessive upper limit set: €5,000m, for which no justification or explanation has been provided by the board of directors. At the current (7 October 2009) share price of the company, €19.82 per share, an implementation of the sought authority would imply a potential maximum of 25,227,043 new shares, which represents a potential maximum dilution of 27.8%. We consider this figure potentially excessive, especially, when pre-emption rights are specifically being excluded from the authority. We recommend an oppose vote based on the lack of a justification for the issuance by the board and the lack of independent scrutiny on the board.

We note that at the company's AGM in April 2009, the company sought authority to issue convertible and non-convertible bonds up to a maximum amount equal to the company's issued capital (as provided for by the law). The authority (Resolution 7) was approved by shareholders, and subsequently, the company held an EGM in July 2009 to approve the conversion of convertible bonds into shares of the company. PIRC opposed on both ocassions the sought authorities based on the excessive potential dilution.

The Chief Executive Officer is the only executive on the board of Cochlear. His remuneration includes base salary, a bonus scheme (the Cochlear Management Short-Term Incentive Plan) and the Cochlear Executive Long-Term Incentive Plan, which offers awards of both shares and options.

The company clearly discloses the CEO’s total remuneration, but there is no indication that pay elsewhere in the company is taken into account in setting his salary. Although the company discloses in general terms the performance targets in use under the bonus scheme, the specific targets linked to awards made during the year are not disclosed. The company makes clear the performance conditions applying under the LTIP, which comprise an absolute EPS criterion and TSR relative to a stated comparator group. Diagrammatic data on absolute EPS and relative TSR performance over the last four or five years is also provided.

Total remuneration for each non-executive is clearly disclosed, although the company does not set out the composition of fees in terms of Board and Committee responsibilities. The Chairman’s fee is set at three times the fee for the other non-executive directors. Those non-executive directors who joined the company before 2003 accumulate benefits under the directors’ retirement scheme but from this date no new non-executive directors may join the scheme.

The maximum award available under the bonus scheme is 50% of total fixed remuneration, with up to 100% available in years of ‘exceptional performance'. The level of vesting is dependent on achievement of financial and personal performance goals.

The Chief Executive receives conditional awards under the LTIP with a value of 50% of fixed remuneration. Vesting of 50% of the award is based on EPS growth over the 3-year performance period, while vesting of the other 50% depends on relative TSR growth. We support the use of one absolute and one relative performance criterion under this scheme, but would like to see them applied concurrently rather than separately to mitigate the risk the Chief Executive might focus excessively on one performance measure. None of the TSR-based portion of the award vests for sub-median performance relative to the S&P/ASX 100 comparator group over a three-year performance period; 50% vests for median performance, rising on a pro-rata basis to 100% for upper quartile performance. Although the performance period is of sufficient duration in our view, we do not consider the twenty-five percentile vesting scale to be sufficiently wide in terms of incentivising improved performance beyond the vesting threshold. However, we regard the targets as sufficiently challenging in view of the level of award available. When it comes to the EPS-based portion of the award, 50% vests for EPS growth of 10% over the performance period; 100% for 20% growth; vesting increases on a straight-line basis between these points. We do not regard these performance targets as stretching enough in view of EPS performance over the last three years. In addition, it is also not clear whether any dilution limits are in place in line with ACSI guidelines.

The CEO has a six months’ rolling contract but in the event of termination ‘without cause’ may receive compensation equivalent to 12 months’ fixed remuneration and bonus pro-rated to the date of termination. The company does not make any statement on the application of the principle of mitigation.

The level of disclosure, the balance of incentives and awards and the Chief Executive’s contract are satisfactory for the most part. However, we have certain specific concerns over disclosure, including the lack of information on the targets linked to the CEO’s vested bonus award during the year and the lack of information on the composition of non-executive remuneration, as well as over the structure of the CELTIP, as outlined above. For these reasons, we recommend an abstain vote.

Non-executive remuneration:

NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs also receive additional fees for committe membership. NEDs are not paid any additional fees for attendance at board meetings. Non-executive remuneration is decided by the Human Resources Committee which takes into account advice from independent remuneration consultants. We note that no increase has been decided for 2010 due to the current economic situation and the interest of cost containment. Non-executive directors do not participate in incentive plans. Some directors elect to receive part of their remuneration by way of equivalent value of Stockland securities under the Non-Executive Director Security Acquisition Plan.

Executive remuneration:

Disclosure:

The total remuneration amount paid to executives is disclosed. Disclosure of short term (STI) and long term incentive payments (LTI) is adequate. The company has not disclosed performance targets for the STI or the LTI due to reasons of commercial sensitivity.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

The STI is a cash bonus scheme, paid annually. The STI operates to a maximum of 100% of annual fixed pay for the Managing Director and between 60-80% for other senior executives. The company states that the STI is linked to group, business unit and individual performance measures basen on a Balanced Scorecard approach. The Balance Scorecard includes 50-70% business and financial measures, 10-20% stakeholder measures, 10-20% people and leadership and 10-20% of CR&S and HSE measures depending on employee seniority, role type, area of business and short-term priorities of the business unit. However, the company does not disclose the specific targets used to allocate any of the payouts awarded for the year under review. Shareholders are therefore unable to judge whether the targets are challenging. In addition, in July 2009 the company paid Mr K Lindsay a retention bonus of A$467,650. We do not consider the use of retention bonuses to be acceptable since they are not linked to performance hurdles.

The company’s main long-term incentive plan is the Performance Rights Plan (PRP). Due to proposed changes in the Federal Budget to the way equity plans are taxed, the 2009 grantes are delayed until full details of the new legislation are known.

The PRP operates to a maximum of 90% (FY 2008: 75%) of annual fixed pay for the Managing Director and of 70% (FY 2008: 60%) for other senior executives. Most awards have a vesting period of three years in some cases they vest after a two-year vesting period, which we don't consider sufficient. Grants will occur when certain performance targets are met. Each grant will comprise of two tranches, each of which will vest on separate performance hurdles, namely EPS and TSR. The EPS target is the sum of annual EPS growth targets over the three year financial measurement period. The company states that due to commercial sensitivity reasons, annual EPS targets and the extent to which the targets have been achieved are disclosed retrospectively. Shareholders are therefore unable to judge whether the targets are challenging. We also consider that companies should disclose targets for the whole three-year performance period. If the company’s EPS growth is equal to target, 50% of EPS performance related rights vest. Five percentage points or more greater than the target, 100% of EPS performance related rights vest, with a straight-line vesting in between these two points. The company’s TSR is compared to that of the ASX 200 REIT Index (excluding Stockland). The target is calculated by an independent third party. If TSR growth is greater than the target, 50% of the proportion of TSR related performance rights vest. If TSR growth is 10 percentage points or more greater than the target, 100% of the rights vest, which a straight line-vesting between these two points.

Contracts:

Executive directors’ contracts do not include termination provisions. Their notice periods are six months for the Managing Director, three months for the Finance Director and 12 months for the Managing Director of Stockland UK. Total severance payments are 150% of the annual fixed pay for the Managing Director and 100% for the Finance Director and Executive Committee and the Managing Director of Stockland UK. We do not support the provision of severance payments in excess of 100% of the fixed salary.

Due to concerns mentioned above, in particular, the lack of disclosure of key performance targets, the retention bonus paid to Mr. Lindsay and the Managing Director's severance payments, we recommend an oppose vote.

Shareholder approval is being sought for the grant of 1,260,000 performance rights to Mr Quinn, Managing Director of the company. Such performance rights are to be issued pursuant to the company's Performance Right Plan subject to the achievement of the performance hurdles that have been described in the analysis of the previous resolution.

PIRC considers that the absence of disclosed performance targets makes it impossible for shareholders to judge whether the targets are challenging. We therefore recommend an oppose vote.

The board considers that the terms of the Zhongyou Zhongtai Acquisition are on normal commercial terms and are fair and reasonable and in the interests of the company. Furthermore, the board considers that the Acquisition is coherent with the strategies of the company in exploring new business growth opportunities in city gas, vehicle fuel gas and related businesses, enhance its economy of scale, improve the efficient allocation of resources, and bring new development opportunities.

PIRC assesses this type of corporate transactions based on the level of disclosure provided and the independent representation on the board. While we are satisfied that the company has provided sufficient information in justification for the proposal, we are concerned that the proposal has not been subject to sufficient independent scrutiny, as only one directors out of six is independent in our view. In view of our concerns, we would normally recommend an abstain vote, however, as shareholders are not allowed to abstain in this meeting, we recommend an oppose vote.

Disclosures: Total remuneration paid to individual board members and performance targets/hurdles, as well as the peer group for each share scheme is disclosed. In particular we welcome disclosure of the maximum level of award available under the annual bonus and LTIP, which we consider to be best practice. We are also satisfied that the company outlines the key features of its remuneration framework and changes introduced during the year under review.

Non-executive fees: Chairman and the other Non-executive directors receive a base fee of A$ 478,500 and A$159,500 respectively. The Chairman of the Board does not receive committee fees. Non-executive directors do not receive performance based remuneration beside fixed fees, and must purchase shares in the company with 20% of annual fees. The plan has been momentarily suspended pending finalisation of new laws governing taxation of share plans.

At the 2008 AGM shareholders approved an increased pool limit of $2,000,000, and base board fees subsequently increased 10% on 1 January 2009. The company explained that the increase was necessary to accommodate for the temporary expanded Board. PIRC did not consider the increase to be necessary or justified, and we are also concerned that the company does not provide information in justification for the increase of the base fees.

Executive Remuneration:

Salaries: Executive remuneration comprises a mix of fixed remuneration, short-term incentives, and long-term incentives. For the CEO each of the fixed annual remuneration, annual bonus and long-term incentive plan accounted for 53%, 36% and 11%, respectively of the total remuneration for the year under review. For other key executives, annual bonus and long-term incentive plan percentage ranges from 21% to 10% and 35% to 30%, respectively. Executives’ fixed remuneration is on a total remuneration basis for executives domiciled in Australia or, for those executives whose home country is not Australia, a base salary basis, where additional benefits are provided. Newly-appointed Managing Director of Carlton & United Breweries, Alex Stevens, received a sign-on payment of $200,000, equal to 70% of his base salary, and an allocation of shares worth $300,000. The shares will remain restricted and subject to forfeiture for 3 years. PIRC does not approve such “golden hellos” as all bonuses to directors should be linked to performance.

Balance performance/Reward:

Short-Term Incentives: Actual payments under the Short-Term Incentive Plan ("STIP") for year ended 30 June 2009 were determined by: business financial performance, based on key business measures; and individual performance. Payments under the STIP were approximately 83% and 25% of the fixed remuneration for CEO and on average for other key executives, respectively. We are concerned that the company does not disclose targets and actual company’s and individual performances for the year under review. One third of the payments will be deferred an received in the form of shares subject to forfeiture in case of resignation within a period of two years from the date of the grant, which PIRC welcomes as, in our view, enhances the link between executive and shareholders interest. Going forward, payments under the STIP will be calculated in accordance with pre-determined scorecard, comprising company, business unit, and personal performance criteria, and underpinned by a EBITS based hurdle. PIRC welcomes the changes introduced, however, we would like to see further disclosure of the targets applied to performance criteria.

Long-Term Incentives: For the Long-Term Incentive Plan (“LTIP”), awards will vest upon achievement of TSR targets, with performance period of three years and split into three tranches measured over one, two and three years, weighted at 20%, 20% and 60% respectively. For each tranche, 50% of the award will vest for median performance, and full vesting for upper 85th percentile performance. Two peer groups are equally weighted in determining the number of shares to be allocated. Half of the awards are measured against a peer group of Australian companies of a similar size, and the other half against a peer group of international alcohol beverage companies. PIRC considers that each of the targets is sufficiently challenging given the level of award, and welcomes the use of the two performance measures concurrently. However, awards granted in 2009 to the CEO will be equivalent to 75% of his fixed remuneration for TSR performance ranking at the median. We consider the target not to be challenging enough in view of the level of award expected. PIRC welcomes the company’s decision not to re-test performance for all awards granted after 2005. However, we would welcome further disclosure as to whether an appropriate dilution limit is in place.

Contracts: CEO contract provides for 13 weeks notice, while other key executive have 3 months notice. PIRC is concerned that CEO will receive a payment equivalent to 52 weeks of total remuneration in case of a change in control, not dependent on termination of employment. We are also concerned that CEO and other key executives will receive termination payments in excess of one year base salary.

Concerns: PIRC has a number of concerns with regard to Foster’s remuneration framework. Firstly we are concerned over the lack of disclosure for performance targets and the actual performance of the company, business units, and individuals, under the STIP. Secondly, going forward, we consider the target awards for the CEO under the LTIP not to be challenging enough. Thirdly, we do not consider acceptable the potential cash payment, in lieu of unvested awards to the CEO and other key executives, in case of a change in control. Fourthly, we consider the payments upon appointment for Alex Stevens, not acceptable, as PIRC does not approve such “golden hellos” as all bonuses to directors should be linked to performance. Finally, PIRC did not consider the increase in the limit for non-executive fees to be necessary or justified, and we are also concerned that the company does not provide information in justification for the increase of the base fees. In view of our concerns, we recommend an oppose vote.

Executive Remuneration:

Disclosure: Overall, there is adequate disclosure of figures paid to directors, performance criteria and targets under the STIP, LTIP, and predecessor plans. There is no disclosure of the maximum payment under the LTIP expressed as a percentage of the annual salary. However, the company does not disclose the performance targets under the LTIP for the financial year 2009/10. We would welcome further disclosure of performance criteria and targets under the Retention Plan.

Balance performance/Reward: Following a review of the remuneration framework performed by the Remuneration Committee, the new Short Term Incentive Plan was introduced (the “STIP”), replacing the Performance Cash Plan (“PCP”) and the performance Share Plan (“PSP”), which were both discontinued from June 2009. Currently, for the CEO, 35% of the remuneration will be represented by the annual salary, 45% by the STIP, and 20% by the LTIP. For the rest of the key executives, the salary represents a higher percentage (40-50%), while the STIP and LTIP represent lower percentage of the total remuneration.

STIP: Awards under the STIP will be based on financial and non-financial performance criteria, relating to the whole Group performance as well as segment performance. Financial measures will account for 65% of the awards for each of the participant to the STIP, while the remaining 35% will be based on non-financial measures. A third of awards under the STIP will be deferred into Qantas shares with a two-year vesting period. The amount payable to participants to the STIP will be determined by multiplying the annual salary, by the “target opportunity” expressed as a percentage of the salary, and then multiplied by the performance scorecard result. For the CEO, maximum awards under the STIP will represent 120% of the annual salary, which we consider excessive. However, for the other participants maximum awards under the STIP will not exceed 100% of the annual salary, which we consider acceptable. The predecessor PCP has been discontinued with the introduction of the STIP, and no awards were made under the plan as targets were not met. The other predecessor, the PSP, was the medium-term deferred plan, with 25% of awards vesting upon achievement of three non-financial and one financial target, 60% of the awards under the PSP vested under the plan.

LTIP: The LTIP (formerly PRP) involves annual grants of Performance Rights, subject to achievement of performance targets on a three-year period. From the year 2007/08 the performance targets under the LTIP are EPS growth and TSR compared to S&P/ASX100. EPS target will account for 50% of the awards, likewise the TSR target. For the year 2008/09 awards will vest on a linear scale ranging from 50% of 99% of the awards under the LTIP, with minimum target at 6% EPS growth and 100% or above for EPS growth exceeding 12.5%. With regard to the TSR target, 50% of the awards will vest in case the company ranks at the 50th percentile of the comparator index, and 10% for a rank above the 75% percentile.

Contracts: CEO and Financial Director have contracts with 12 months-notice, while of other executives notice period varied from 12 to 3 months. Contracts do not provide for end of service payments, and all unvested awards will be lapsed at termination of employment, which meets best practice guidelines.

Contracts: For executive directors Messrs. Joyce and Storrie (CEO/MD and Finance Director, respectively) contracts provide for a twelve month notice. For other senior executives, notice period varies from twelve months to three months. PIRC is satisfied that the company, since 2006, has adopted executives’ contracts with no end of contact payments. Furthermore, no unvested awards under the STI and LTIP will vest at the termination of employment, with the exception of the DSP.

Conclusions: PIRC welcomes the introduction of the deferral of a third of awards under the new STIP, as in our view, it helps to align executives’ interest with shareholders’ interest. Awards paid for the year under review were not excessive in our view. We note that total equity based compensation for the CEO were approximately 73% of his annual salary, which we do not consider excessive. However, the CEO was granted awards under the Retention Plan worth A$ 896,742 representing approximately 71% of the total equity awards he was granted for the year under review, partly based on length of service. PIRC does not support the grant of awards for executives based on length of service, and would welcome further disclosure of the performance criteria and targets operated under the Retention Plan. With regards to the LTIP, PIRC is concerned that the company does not set a maximum payable under the LTIP expressed as a percentage to the annual salary, therefore shareholders cannot determine whether the awards under the plan are adequate and the performance targets operated under the plan are challenging or not.

In view of the concerns expressed above, we recommend an abstain vote.

As there is insufficient independent representation on the board we recommend opposition.

As there is insufficient independent representation on the board we recommend opposition.

As there is insufficient independent representation on the board we recommend opposition.

The board seeks approval to issue 367,000 performance rights and 2,760,000 options to the Managing Director and Chief Executive Officer respectively, pursuant to the company's Long-Term Incentive Plan.

Due to the company's level of disclosure, we are unable to assess the extent to which the targets for Return on Average Funds Employed are challenging enough. Therefore, we recommend opposition.

The board seeks shareholder approval to grant share rights to the Chief Executive Officer and Managing Director, pursuant to the Company's Management Incentive Plan.

The actual level of potential award is contingent on performance relative to the cash element of the MIP, however the company fails to disclose information on the operation of the MIP within the remuneration report. We consider that the potential awards are excessive, as variable remuneration is over 200% of salary. We recommend opposition.

In accordance with Section 250R of the Australian Corporations Act, the directors are seeking approval of the remuneration report. The Act does not require directors to act on approval of the resolution and the vote is advisory.

Disclosure. Total remuneration paid to individual board members is disclosed along with performance targets and TSR peer group information for each share scheme. The company fails to disclose its prior year targets and level of achievement for the annual bonus scheme. The company has not provided a 5 year history for performance using the same financial metrics used for awards under the executive share schemes. There is no evidence that pay elsewhere in the group is considered in setting executive remuneration.

Non-executive remuneration. NEDs are remunerated with fees and non-monetary benefits and do not participate in any performance based remuneration. Total remuneration for individual NEDs is disclosed; however the amount of separate fees paid for committee membership and/or chairmanship are not disclosed. NEDs had previously participated in the company retirement benefit plan, however this use was discontinued in 2006 and no further accruals are made with the exception of CPI indexed adjustments.

Balance performance/reward. The company operates three different incentive based performance plans, a short term incentive plan (SIP), middle term incentive plan (MTIP) and a long term incentive plan (LTIP).

The company discloses the maximum potential awards under both the SIP and MTIP, however these are not relative to base salary but to something the company refers to as Total Fixed Remuneration (TFR). TFR appears to include various different financial benefits. Specific performance targets are not provided for either scheme. Concerning the LTIP, due to the company omitting the maximum award limit, a definitive analysis of the validity of targets is precluded. 75% of potential award is based on TSR and 25% on RoAFE, neither condition is contiguously linked. For the TSR element, we do not consider the vesting scale sufficiently broad: for median performance 50% of the shares vest, with 100% vesting for upper quartile performance, with straight-line vesting between these two points. For the RoAFE element, no relative historical performance is disclosed and no brokers forecast is available therefore we are unable to make an accurate assessment of the targets. We do however welcome the use of a 4 year performance period which is aligned to genuine long term performance. The company makes no disclosure regarding dilution limits whether in isolation for single schemes or overall for total share based awards.

Contracts. The single executive director is retained on a one year rolling contract. Severance payments also include the annual actuarial value of long-term incentives. In the event of a change of control, the Board retains its discretion to determine whether, and if appropriate, the extent to which outstanding awards will vest. There is no evidence that mitigation is applied.

Conclusion. Whilst disclosure is generally considered adequate, the company omits various crucial elements. No maximum award limit is disclosed under the LTIP, and for 25% of the potential award under the scheme, no RoAFE performance data is provided. The company also fails to disclose fully what exactly is included in TFR, apart from base salary and benefits. This is important due to all potential variable awards being relative to TFR, which are typically relative to base salary. We recommend opposition to reflect these concerns.

The board seeks shareholder authority to amend the company’s Constitution (last amended in 1999) to incorporate the changes brought by the introduction of the Australian Corporations Act, changes to the ASX Listing Rules, introduction and revision of the ASX Corporate Governance Council's Corporate Governance Principles and the widespread adoption by other listed companies of electronic forms of communication and conduct.

The proposed changes refer to conduct of shareholder meeting (codifying the authority of the chairman); proxies (48 hours as time limit for varying instructions); reduce the minimum required number of directors of seven to three; retirement of directors (to ensure that directors are able to serve a full three-year term); payment of dividends (to provide the company with greater flexibility regarding the payment); approval of proportional takeover bid (where a proportional take-over bid is made, a shareholders’ meeting must be convened to vote on a resolution to approve the bid); other changes reflect current corporate governance practices and clarification of wording.

We are concerned about the bundled nature of the proposal. In addition, we are concerned about 1) the fact that the current articles insulate the Managing Director and Chief Executive Officer from retirement every three years. This will not be changed by the amendment; and 2) the fact that the current articles provide for more frequent re-election and the proposed new articles will diminish board accountability in our view. Therefore, we recommend opposition.

The company has stated that a number of changes have been made to remuneration practices for the financial year 2009/10 in response to the challenging economic environment, the company’s market performance and the new structure of PaperlinX following the sale of Australian Paper. The disclosed changes include: A freeze on salaries, including management and executive remuneration and non-executive directors’ fees, with the exception of increases required to be paid under industrial awards or agreements; changes to performance targets and maximum payment opportunities for the short term incentive (STI) plan and the long-term incentive plan (LTIP), which be described below. In addition, no cash payment was made under the STI plan for 2008/09 even where agreed performance targets had been achieved, except with regards to terminating senior executives for achieved targets.

Disclosure

Disclosure is adequate. The company discloses policy changes, the total remuneration package and its break-down for the five top executives and non-executive directors. The formula applied to calculate total shareholders return is also disclosed, which we welcome. However, we note that targets under the STI plan are not fully disclosed. In addition, the company has not disclosed dilution limits for single schemes or in aggregate for total share based awards.

Non-executive directors

Non-executive directors do not receive any performance-based remuneration and the fees are disclosed separately. NEDs are required to build up over a period of time their shareholding in the company to a level equal to one year's fees.

Balance reward / performance:

Short term incentive plan

Short term incentives comprise both cash awards and an equity component. Executives can be awarded cash bonuses up to 70% of Total Fixed Remuneration (TFR)on achievement of exceptional performance, while the managing director can obtain up to 120% (to be reduced to 100% for 2009/10). Performance during the year was judged against a set of indicators of the company’s financial performance; non-financial targets, including safety and impact of carbon emissions, were also taken into consideration although they were not quantified. We consider that the company has provided insufficient information to allow us to assess whether targets during the year were challenging. The percentages of awards granted for the year under review have been disclosed, and most executives would have received the maximum potential award, although payments were forgone voluntarily. Following changes to remuneration policy, the stretching target for maximum payment under the STI plan will be increased from 110% to 120%, meaning that a higher level of performance is required. In addition, performance targets under the STI plan for 2009/10 will be purely financial-based rather than including a range of personal and strategic targets.

Under the Deferred Equity Component of the STI plan the maximum award is 50% of TFR for the Managing Director and 28% for other senior executives (50% for outstanding performance). The performance conditions for the Managing Director were based on undisclosed annual earnings and operating cash flow targets, which were not achieved, and therefore performance rights approved at the 2008 AGM have lapsed. Annual targets for other senior executives are the same as for the cash component of the STI. Awards are deferred for two years.

The Strategic Initiatives Share Plan was offered to the Managing Director as part of his STI for the period 2007-2010, to reward specific strategic initiatives with deferred shares in the company. Specific targets have not been disclosed. Attached to the award there is a two years deferral period condition, at the end of which Mr. Park has to still be employed by the company. In case of a take-over or redundancy this condition does not apply and shares may vest at the board’s discretion.

Long term incentive plan

Incentives under the LTIP, reserved for the most senior executives of the company, comprise performance rights and performance options as a supplement. Maximum awards have been disclosed and are not considered excessive. The company adopts a non-concurrent dual performance hurdle: total shareholder return (TSR) and earnings per share (EPS). Each hurdle applies to 50% of the award. The company discloses the formula it applies to calculate total shareholders return, which we welcome. To obtain the maximum award the company’s TSR needs to be in the top quintile of the comparator group, in line with best practice. However, half of the award vests for TSR at the 50th percentile of the comparator group, which we consider that rewards executives for median performance. The other hurdle is EPS; for executives to obtain the maximum under this criterion, EPS growth over three years must equal or exceed the aggregate growth in the Consumer Price Index (CPI) over three years plus 5%. Pro rata arrangements apply for performance between 50% and 100% of the aggregate growth in CPI plus 5%. According to the data provided by the company, no LTIP award was exercisable in relation to EPS performance during the past 5 years. The minimum testing period is 3 years and the entire long-term award will vest only after 4.5 years, which we welcome. We note that for 2009/10 the EPS performance hurdle required to achieve maximum vesting has been lifted to 15% compound growth per annum for the three year period of the plan, or a higher target as may be set by the Board.

Contracts

Severance payments are limited to one year salary for all top executives, which meets best practice, with the exception of Mr Fothergill (18 months). However, we have concerns that the board has discretion to allow some or all of the rights/options to vest in the event of a change in control. There is no evidence that mitigation is applied.

We welcome the company’s policy that any executive who hedges or attempts to hedge their performance rights or options, or their initial grant of options (whether rights and options are vested or unvested), will forfeit those rights or options. PIRC considers the incentive plans to be adequate and actual remuneration paid not excessive. However, the company has failed to disclose important information regarding the STI plan and severance payments. In addition, there is no evidence that pay elsewhere in the group is considered in setting executive remuneration. We are further concerned that half of the TSR award vests for median performance.

Based on the above concerns we recommend an abstain vote.

In accordance with section 250R of the Australian Corporations Act, the directors are seeking approval of the remuneration report. The Act does not require directors to act on approval of the resolution and the vote is advisory. We note that the company will undertake a review of its employee equity plans following the Australian Government's announcement on May 2009.

Disclosure. Disclosure of cash remuneration is adequate. However, we would like to see historic TSR performance records for the past 5 years, as it is one of the performance measures used in the company's Employee Share Option Plan. Furthermore, targets for short-term incentives are not included in the remuneration report. It is also unclear from disclosure whether general increases in fixed remuneration for executives have taken into account the rate of increases applicable to the rest of the corporation’s workforce. The weighting of fixed and variable remuneration is disclosed.

Non-executive remuneration. It is comprised of fees for services, the maximum amount of which is approved by shareholders (last approved in 2007 and set at $2,000,000 per annum). From this maximum, the board, at its discretion, allocates fees to individual directors. The Chairman and Vice Chairman do not receive additional fees for committee membership. In addition, NEDs receive shares to the value of 30% of their fees pursuant to retirement plans. NEDs do not participate in the Employee Share Option Plan.

Executive remuneration. Executive remuneration is comprised of three elements, fixed remuneration (calculated on a total remuneration package basis, which includes superannuation, motor vehicles and shares purchased through employee share plans), short and long-term incentives.

Short Term Incentives ("STI"). STI payments reward the achievement of certain predetermined targets. Maximum award is 80% of base salary for senior executives; the CEO could receive up to 131.25% of Total Employment Costs on meeting disclosed EPS targets and unqualified stratetic and operation targets. Targets are based on achieving undisclosed key financial measures, the individual’s performance and safety results. The company must first meet its global EBIT budget before executives are granted STI bonuses (other than one-off discretionary bonuses). For the 2008 financial year, the EBIT budget was not met and no STI bonuses were granted; however, “to retain executives”, a discretionary bonus (paid in two instalments) and a cash retention incentive were introduced. Amounts paid have been disclosed. This is a major concern as PIRC does not consider such payments acceptable.

Long Term Incentives ("LTI"). The company’s Employee Share Option Plan allows for awards of options. The options are exercisable subject to two performance hurdles being met: EPS and TSR. 50% of the total LTI award vests for each tranche. It is unclear from the company’s disclosure whether these two conditions operate on a concurrent basis. Options are exercisable annually in years 3,4 and 5 after the grant.

For the TSR tranche, annual TSR is compared to the S&P/ASX200 Industrial Accumulation Index; EPS growth must be at least 12% per annum compound. 25% of the LTI entitlement vests for 50% TSR percentile with 50% of the entitlement vesting for 75% TSR percentile. The EPS (measured as annual compound growth between June 2009 and March 2014) vesting scale is 25% of the entitlement for 5% EPS growth per annum up to 50% vesting for 10% per annum. We do not consider these vesting scales to be sufficiently challenging within each tranche, as 50% of the total TSR LTI entitlement vests for median performance, with 100% of the tranche vesting for upper quartile performance. In addition, the company has a Share Retention Incentive Plan in place pursuant to which, 300,000 shares were awarded to senior executives. The shares expire in December 2011 and are meanwhile held in trust. The only condition for the vesting of the shares is continuos service: ie, that the executive is employed by the Group on 11 December 2011. The board has discretion to allow pro-rata vesting of shares on termination prior to December 2011.

Contracts. The Chief Executive’s contract stipulates that the company and Mr. Leupen are able to negotiate alternative succession and long-term incentive arrangements if changes in the law and regulations applying to him materially affect the value of the proposed grants. Otherwise Mr. Leupen is entitled to 12 months’ total fixed remuneration and succession incentive. In the event of change-in-control, the LTI entitlement will vest in full at the date of the change in control.

We welcome the disclosure of a policy prohibiting hedging and marging lending. We have concerns over the TSR and EPS vesting scales, which are too narrow in our view. Furthermore, we consider that the EPS and TSR performance conditions are not challenging enough. In addition, the company has in place two discretionary bonus schemes (one a short-term incentive, the second a retention one), with no performance conditions attached to it. PIRC does not consider such payments acceptable. Finally, we are concerned about the power retained by the CEO to modify the terms of his long-term incentive arrangements and the immediate vesting of the LTI entitlements in the event of change-in-control. Based on the above concerns, we recommend an oppose vote.

Shareholder approval is sought to issue 1,365,041 options over fully paid ordinary shares pursuant to the company's Australian and USA Employee Share Option Plan.

In resolution 2 we have expressed our concerns in relation to the performance conditions of options to be issued, based on the performance hurdles and vesting scales, which we do not consider challenging enough. Therefore, we recommend opposition.

Shareholder approval is sought so that the issue of 560,000 shares is ratified and approved. The issuance will occur pursuant to the company's Australian and USA Employee Share Option Plan.

In resolution 2 we have expressed our concerns in relation to the performance conditions of options to be issued, based on the performance hurdles and vesting scales, which we do not consider challenging enough. Therefore, we recommend opposition.

With regards to the proposed amendment to the Articles of Association, PIRC is concerned that the board will amend the articles of association in order to, inter alia, delete the requirement of shareholder approval of the financial statements and auditor’s fees, to "conform the Articles of Association to the Israeli Companies law and common Israeli practice". Although we understand that shareholder approval is not required under Israel legislation and common practice, we consider positive in terms of shareholders’ rights that shareholders’ approval is necessary under the company’s Articles, and we consider the proposed amendment detrimental to shareholders’ rights. Therefore, we recommend an oppose vote.

PIRC is satisfied that the company has provided sufficient information regarding the transaction. However, we have concerns that the proposal has not been subject to sufficient independent scrutiny, as only 11% of directors are independent in our view. We therefore recommend an abstain vote.

We have concerns over his aggregate time commitments and note that he attended only 67% of board meetings held during the year without any justification provided by the company. Therefore, we recommend opposition.

Executives Remuneration:

Disclosure: Overall, there is adequate disclosure of figures paid to directors, and performance criteria and targets under the Short-Term Incentive (“STI”). Regarding the Long-Term Incentive (“LTI”), PIRC is concerned that the company does not disclose the company’s performance against the TSR group comparator and targets utilised, and does not clarify if, and how, EBIT growth targets have been met.

Balance performance/Reward:

Salaries: The board states salaries of senior executives “has been determined with reference to executive pay in S&P/ASX 100 companies, taking into account the individual’s performance, responsibilities, and their level of knowledge, skills and experience”. For Managing Director/CEO each of the fixed annual remuneration, annual bonus and long-term incentive plan accounted for 33% of the total remuneration for the year under review. For other key executives, annual bonus and long-term incentive plan percentage is decreasing, ranging from 30% to 20% of annual bonus and 27% to 17% for long-term incentive plan. Annual salary for the Managing Director/CEO and for the Chief Operating Officer has decreased by approximately 5% and 9% respectively; however, the overall level of salaries paid to senior executives has increased by 12.5% compared to the previous year. However, PIRC notes that several changes to the senior management team have occurred during the year.

Annual Bonuses: The choice of performance criteria for the STI focuses on “safety, cost reduction, and return on capital”. The financial performance criteria for STI will change from Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) to Earnings Before Interest & Tax (“EBIT”). In the boards’ view, EBIT is more efficient in aligning the interests of shareholders as the management "will be focused on ensuring capital expenditure spend translates into higher earnings after depreciation and amortisation". The EBIT target accounted for 50% of the overall payments under the STI. The performance criteria relating to safety, accounting for 15% of the STI, is the Lost Time Injury Frequency Rates (“LTIFR”). Payments of STI will be leveraged based upon individual performance targets. Other performance criteria utilized for the STI were: debt reduction (target: 25%); and efficiency review (target: 10% on non-specified financial efficiency measures). Those two criteria account for 25% and 15% of the STI, respectively. All the targets were achieved, either totally or partially, for the year under review, and the level of payments under the STI is not excessive, in our view. PIRC is satisfied with the level of disclosure provided, and we welcome the mix of financial and non-financial criteria for the STI.

Long Term Incentives: 75% of the awards under the LTI will vest upon achievement of EBIT targets, while the remaining 25% will vest subject to achievement of Relative TSR targets. Performance period is between three and four years, which is acceptable, in our view. Regarding EBIT target, 50% of the wards will vest if the EBIT growth will equal two times the domestic GDP growth, with pro-rated vesting for EBIT growth between 2 and 2.5 times of the domestic GDP growth, and 100% over 2.5 times or more. The lack of disclosure regarding the company’s performance against the comparator and forecasts does not allow shareholders to determine whether the EBIT are challenging. Furthermore, going forward the company does not clarify how targets will be set in case a negative domestic GDP growth is expected. Regarding the TSR, PIRC is satisfied that 100% of the maximum awards will be granted only if the company ranks at or above the top quartile, and no awards will be granted for performance below median. However, we are concerned that the vesting scale is not wide enough. PIRC notes that LTIP payments to the Managing Director/CEO has sensibly decreased by 98% for the year under review, and overall, LTIP payments to senior executives decreased by 69%.

Contracts: Managing Director/CEO contracts provides for twelve-months notice, with payment of six months Target Employment Remuneration (“TER”). For all other senior executives, contracts provide for 6 month notice. PIRC is concerned over the level of discretion for the treatment of unvested option and payment up to 18 months TER in lieu of notice in case of termination upon notice for the Managing Director/CEO.

Conclusions: Overall, the level of payments for fixed remuneration, annual bonuses and long-term incentives is not considered to be excessive. PIRC welcomes the mix of financial and non-financial KPIs under the STI, and we consider the performance targets relating to the TSR criteria under the LTI to be challenging. However, PIRC would welcome further disclosure of the company’s performance against the comparator for the LTIP. Furthermore, PIRC would welcome the introduction of claw-back arrangements, including forfeiture when past bonuses were triggered by results which are subsequently restated. Finally, we are concerned over termination payments for the Managing Director/CEO in case of termination upon notice. In view of our concerns, we recommend an oppose vote.

Shareholder approval is sought for the merger agreement dated 17 June 2009 between the company and WebMD. As a resuls of the merger: 1) HLTH will merge into WebMD, with WebMD continuing as the surviving company and HLTH will cease to exist as a separate entity; 2) each HLTH share will be converted into 0.4444 WebMD shares; 3) the WebMD Class B shares held by HLTH will be cancelled; and 4) holders of WebMD Class A Common Stock will continue to own their existing shares, which will not be affected by the merger, except that such shares will no longer be referred to as “Class A”. HLTH controls approximately 96% of the voting power of all the outstanding WebMD shares.

PIRC assesses corporate transactions based on the information disclosed by the company and the level of independent scrutiny on the board. We are satisfied with the company's disclosure. However, we have concerns over the level of independent oversight as, in our view, only one non-executive director (of six) is considered independent. Therefore, we recommend abstention.

We note that if the merger is approved, the board of directors of WEbMD and HLTH at the effective time of the merger will be the directors of the surviving corporation until their successors are duly elected and qualified.

Class II non-executive director, being elected for a three-year term. Independent by the company, not independent by PIRC as Mr. Brooke has served on the board for over nine years. There is insufficient independent representation on the board in our view.

Class II non-executive director, being elected for a three-year term. Independent by the company, not independent by PIRC as Mr. Manning is a former executive of a predecessor of the company, Medical Manager Corporation. Also, Mr. Manning has been on the board for over 14 years. There is insufficient independent representation on the board in our view.

PIRC welcomes the publication by the company of a social report in terms of the HCI Foundation activity during the year. However, the King III Code of Governance for South Africa recommends that "Sustainability reporting and disclosure should be integrated with the company's financial reporting", and the company has not published a sustainability report nor is there any environmental disclosure included in the report and accounts. We also note the absence of Black Empowerment reporting and reference to BEE transactions, which does not meet best practice. However, we note that Hosken is a "black empowerment company", as the Southern African Clothing and Textile Workers Union (SACTWU) owns approximately 40% of the company's outstanding shares.

Based on the above concerns PIRC recommends an abstain vote.

Although we recognise that 15% is the maximum allowed under JSE Listings Requirements, we consider the authority potentially overly dilutive. We also have concerns that the sale could result in dilution of shareholder interests without a commensurate return, since the shares may be offered at a discount. Therefore, opposition is recommend.

*Although this resolution is considered ordinary business by the company, under the JSE Listings Requirements it requires an affirmative vote of 75% of shareholders present or represented by proxy at the AGM.

The financial statements and reports have been made available sufficiently before the meeting. The auditors have issued an unqualified opinion. As recommended by the King III Report, the company has reported about the extent and nature of its health and safety ("Employees Occupational Health and Safety"), ethical behaviour, ("A Guide to the Code of Conduct for Shoprite Holdings Employees"), environmental management policies, ("Environmental Impact and Sustainability") and social transformation ("Corporate Social Investment"). Furthermore, the company reports on its BEE practices

However, we are concerned about the Remuneration Committee composition, as two executive directors (Chief Executive Officer and Finance Director) are members of the committee; we note that the remaining two members, non-executive directors, are not considered independent by PIRC.

PIRC welcomes the compliance of the company with the Code and its reporting; however, we consider a serious governance concern the fact that the CEO and FD sit in the Remuneration Committee. Therefore, we recommend an oppose vote.

PricewaterhouseCoopers proposed. Non-audit fees for the year under review represent 37% of audit fees. On a three-year aggregate basis, non-audit fees represent 43% of audit fees. This level of non-audit fees raises independence concerns about the auditors. Therefore, we recommend an abstain vote.

Non-executive director. Independent by the company, not independent by PIRC as he has served on the board for over nine years. There is insufficient independent representation on the board in our view. We recommend opposition.

Disclosure. Total remuneration paid to individual board members is disclosed and the performance hurdles for outstanding share schemes are disclosed. However the company fails to go beyond descriptions of the financial and non-financial KPIs used in the short term bonus scheme, and does not disclose prior year targets and levels of achievement. The company has disclosed its peer group for the TSR element of its long-term incentive plan, as well as the future plans for executive salaries (which will be cut by 15% for the CEO and 10% for the other executives) and non-executive fees (which remain unchanged from 1 July 2007). In particular we welcome the disclosure of maximum awards under the bonus plan and LTIP as a percentage of salary, which we consider to be best practice. The balance of fixed and variable remuneration is disclosed, however it is unclear whether pay elsewhere in the company is considered in setting directors’ remuneration.

NEDs are rewarded on an annual fee basis, and until the end of fiscal year 2009 25% of the fees were paid in shares on a compulsory basis under the Non-Executive Share Plan. Restrictions are in place on when these shares can be traded. There is no performance-related element attached to the plan. This plan is to be closed and replaced by a minimum shareholding requirement amounting in value to the director’s annual fee. Total remuneration for NEDs is disclosed, as well as current committee membership fees.

Balance of performance to reward. Regarding long term arrangements, executive directors are entitled to receive an award worth 50% to 85% of salary, of which 60% is determined by relative TSR performance, and 40% is determined by absolute EPS growth. Under the TSR performance measure directors receive 30% of the total award for median performance, increasing on a pro-rated basis to full-vesting (60% of total award) for upper quartile performance. The company’s TSR is compared against a defined peer group of ten competitors. For the EPS performance measure directors receive 20% of the total award for compound EPS growth of 10% per annum, increasing on a pro-rated basis to full-vesting (40% of total award) for compound EPS growth of 20% per annum. The initial performance period is three years, however there is the option to retest rights at the end of the fourth year. Even though the company states that the same vesting schedule will apply, but over a four-year performance period, PIRC considers re-resting to be inappropriate. We note that the company states that the retest facility has been in place since the company listed in 2002, but has never been applied to date. The upper TSR target is sufficiently challenging, while the lower TSR target is insufficiently challenging. The EPS target seems to be challenging in view of the forecasted decrease in EPS for 2010. Additionally, although two performance conditions are used, they are not used concurrently, which we consider to be best practice. There is no disclosure regarding dilution limits for schemes.

Contracts. Most executive directors have six-month rolling contracts, with the exeception of the chief executive John Grill who has a 12 month notice period. In addition William Hall and Larry Benke, who joined the board in 2007 following the acquisition of Colt Companies, have contracts until 5 October 2010 and 9 March 2010 respectively, with a six and three month notice period respectively after those dates.

Conclusion. We welcome the disclosure of the maximum awards available under the annual bonus and executive share plan, although the exact targets and the level of achievement under the bonus plan in the previous year are not disclosed. We regard the targets under the long-term incentive plan as sufficiently challenging, but have concerns over the re-testing clause that is built into the scheme, although we recognise that the same performance targets will be applied to the longer period. Due to our concerns we recommend an abstain vote.

Non-Executive Remuneration

The policy for determining non-executive directors’ fees is disclosed in general terms and fees paid during the year are clearly set out. However, it is not clear to what extent they have been determined with reference to board and committee responsibilities. Fees have remained unchanged since last year for all non-executive directors apart from the Chairman, but we do not consider the Chairman's pay increase to be material.

Executive Remuneration

Components of executive remuneration include base salary, a short-term incentive plan, an Executive Performance Share Plan (‘EPSP’) and an Executive Performance and Retention Plan (‘EPRP’).

Disclosure

Cash remuneration paid during the year is adequately disclosed, although it is not clear why Mr Naude has received a salary increase of 23%. Details of share incentive awards made during the year are provided, but the date of award of rights under the EPSP and the price of shares on that date is not disclosed . The company provides figures for the value of pension benefits received during the year but the nature of pension arrangements is not explained.

The Short-Term Incentive plan provides a cash reward based on performance hurdles. For the Chief Executive Officer, these are Group Net Profit After Tax, Group working capital as a percentage of sales and personal performance objectives. For the General Manager of Billabong USA, they are Group NPAT, regional EBIT, regional working capital as a percentage of sales and personal performance objectives. However, in both cases personal objectives are not disclosed and quantitative targets linked to awards made during the year are not disclosed for any of the performance hurdles.

The Executive Performance Share Plan (‘EPSP’) has been restructured recently into Tier 1 and Tier 2. Tier 1 participants comprise ‘the executives of the group who are directly responsible for driving the growth strategy of the group’, and therefore presumably includes the CEO and the General Manager of Billabong USA. Tier 2 participants comprise other senior management. The objective of the EPSP is to provide executives with an equity-based reward opportunity that vests based on the group’s three-year EPS performance. However, specific EPS performance targets are not disclosed. This makes it impossible to assess whether the performance conditions under the scheme are sufficiently demanding. In addition, any cap on awards available under this scheme is not disclosed.

The Executive Performance and Retention Plan (‘EPRP’) was approved at the 2008 AGM and provides for the grant of options to the executive team which will only vest if certain performance hurdles are met and the individual is still employed by the Group at the end of the vesting period. Any limit on the level of awards available under this scheme is not disclosed. The scheme uses two Total Shareholder Return hurdles: a ‘gateway’ relative TSR hurdle of above median performance in a comparator group comprising the S&P/ASX 100 Index over the five-year performance period; and an absolute TSR target with a 120% (equivalent to approximately 12.8% share price growth per annum over five years) to be achieved at any point over the performance period. An ‘early banking opportunity’ is available to executives whereby they can be rewarded for “early” high TSR performance. This means that if 80% TSR has been achieved at any time by year three, one third of the total options may vest; if 100% TSR by year four, two thirds may vest; and if 120% TSR by year five, all options may vest. As the company has not disclosed the maximum level of award available under the scheme or data on historic TSR performance it is difficult to assess whether either of the performance conditions are sufficiently challenging.

Both Mr O’Neil and Mr Naude have contracts providing for twelve months notice. However, on early termination other than for gross misconduct the CEO is entitled to 2 times his base salary and Mr Naude is entitled 1.5 times base salary plus ‘performance bonus for the year of termination’. We do not support the provision of termination payments exceeding twelve months salary and benefits that have not received specific shareholder approval. Furthermore, it is not clear whether Mr Naude’s bonus would be pro-rated according to the portion of year that has elapsed before termination.

In conclusion we have several concerns about remuneration arrangements at the company, including the lack of information on bonus targets and EPSP targets, the lack of information on maximum awards available under the EPRP and the termination provisions available to the executive directors. In view of these concerns we recommend an oppose vote.

The background to this proposal is that the company launched a 2-for-11 accelerated pro-rata non-renounceable entitlement offer at a discount to market price on 18 May 2009. The board wishes to use its power under the terms of the EPRP to adjust the exercise price to take account of corporate actions such as the entitlement offer. It notes that the purpose of this power is ‘to ensure that optionholders are not unfairly advantaged or disadvantaged by corporate actions’ and adds that the increase in the company’s share capital as a result of the entitlement offer and the ‘impact on the share price’ could affect the options granted under the EPRP during the year.

As a matter of principle, we do not support re-pricing of options under normal circumstances as in our view it shields directors from the effect that under-performance may have on the share price and serves to dilute the incentivisation effect of option awards. It is true that the fall in the share price in this case has been attributed by the board to a specific corporate action and the proposed new exercise price is based on a formula linked to the entitlement offer. However, we do not believe that the entitlement offer constitutes a valid reason to depart from our usual principle.

The reason for this is that we do not consider that executives should be compensated for a fall in the share price occurring after a corporate action such as the entitlement offer, in the same way as we would not expect the board to re-price options upwards if the share price rose following another corporate action, such as a buyback. Furthermore, the launch of the entitlement offer in the first place indicates a need for additional finance that could have arisen at least partly as the result of management strategy. In any case, it is difficult to prove that the fall in the share price was directly and solely caused by the entitlement offer. It could have resulted from negative investor sentiment in relation to the perception of a need for the company to carry out a capital raising. For these reasons, we uphold our normal opposition to the re-pricing of option awards in this case also.

We have the same reservations about departing from our normal opposition to the re-pricing of share options in this case as we do in the case of the proposed re-pricing of the options awarded to Messrs O’Neill, White and North. We therefore recommend opposition.

PIRC considers that it is in the best interests of the company and its shareholders to provide employees with an opportunity to benefit from business success and increase their share ownership through payroll deductions (as permitted under Section 423 of the Internal Revenue Code). We are satisfied that the Plan is open to a high proportion of full-time employees and is capped. However, PIRC considers any share award scheme with the potential to transfer in excess of 10% of outstanding share capital to participants in 10 or fewer years to be overly dilutive. Therefore, we recommend a vote to oppose the amended plan.

The Board has stated that the company has experienced significant declines in share price over the last year due in part to the worldwide economic downturn. Therefore, a considerable number of employees hold "underwater" stock options (49% of outstanding stock options as of September 4, 2009). It is believed that these underwater stock options are no longer effective as incentives to motivate and retain employees. The board also notes that although the granted stock options are not likely to be exercised as long as the company's share price is lower than the applicable exercise price, they will remain on the company's books with the potential to dilute stockholders’ interests for up to the full term of the options, while delivering little or no retentive or incentive value. Consequently, as the Board states, the new stock options received under the Option Exchange program will provide new incentives to motivate and retain talented employees while reducing the "overhang" of outstanding employee stock options.

The options exchange is effectively an option repricing operation, which we do not generally welcome. PIRC is satisfied that the NEOs and directors are excluded from the possibility of exchanging options, however the number of employees eligible to participate in such exchange is limited to approximately 8.1% of the workforce (or 55% of options holders). The company does not disclose which will be its effects on the reported earnings and the potential consequences for the performance targets attached to NEOs' remuneration. Given the lack of disclosure and that an insufficient proportion of the workforce would benefit from the approval of the options exchange we recommend an oppose vote.

Disclosure. Total remuneration paid to individual board members is disclosed. The company measures its performance against a peer group of the top 50 ASX-Listed companies in the S&P/ASX 100, excluding property trusts. The company has provided a five-year history of its Total Shareholder Return performance (and that of its peer group). There is no evidence that increases in executive remuneration take into account the rate of increases applicable to the rest of the employees. Bonus targets for the year are not disclosed, although we note that no bonus payments were made during the year.

Non-executive directors’ remuneration. NEDs are paid a base remuneration and superannuation benefits. Directors of the parent company who are also directors of the subsidiaries do not receive additional fees. Fees per annum are disclosed both by individual director and by role on the board. NEDs cannot participate in performance share plans but are entitled to take part into the Non-Executive Directors’ Share Plan (NEDSP), which allows the purchase of shares by directors as a percentage of their pre-tax remuneration. NED’s retirement benefits ceased to be offered after 30 June 2003. Directors in office at that date are contractually entitled to a retirement benefit, but they agreed to cap them as at 30 June 2004, and amortise their respective benefit entitlement at a rate equivalent to 20% of their annual directors’ fees. NED fees remained unchanged during the year.

Balance performance/target:
The annual bonus scheme, or Short Term Incentives Scheme, provides for a maximum award in the range of 35% to 150% of the executive’s Total Employment Cost (TEC). The percentage varies with seniority. This scheme operates a system of balanced scorecards which measure financial and non-financial KPIs.

Long-term incentives are granted in the form of Executive Performance Share Plan (EPSP). Performance shares offered to executives are granted as a percentage of their TEC, but the exact figure is not disclosed. EPSP has a performance period of three-years. Re-testing is allowed, and it takes place at the beneficiary’s discretion, every six months during an extra two-year period. Any shares not allocated at the end of the performance period are forfeited. The granting of shares will occur subject to the attainment of one performance condition, TSR. TSR is measured against the peer group described above. If the company’s performance is median, 50% of the award vests. If it is below median no shares vest. If the company’s TSR is in the top quartile of the peer group, full-vesting occurs. Straight-line vesting between these points.

Contracts. The newly appointed Chief Executive Officer contract provides for 12 months notice or payment in lieu. Notice periods or payment in lieu are up to 18 months for some former executives from the company Promina, which Suncorp Metway merged with in 2006.

PIRC believes that Long Term Incentive Plans should have two, ideally concurrent, performance conditions and that the maximum percentage of base salary subject to schemes should be disclosed. We believe that the vesting scale is not challenging enough: we would expect, at least, upper quintile for 100% of EPSP vesting. PIRC does not consider that re-testing is in line with best practice and we have concerns in relation to the waiving of the performance condition during the year under review.

Based on the above concerns we recommend an oppose vote.

Disclosure: There is adequate disclosure of actual remuneration paid to individual board members and executives, together with performance targets/hurdles. We are also satisfied that the company outlines the key features of its remuneration governance process together with changes introduced during the year under review. There is disclosure of the performance measures under the STI, but the company does not make clear which directors were evaluated against which measures or what quantitative thresholds were applied during the year.

Non-executive: Non-executive director remuneration comprises director fees (inclusive of committee fees), non-monetary benefits and superannuation. The company does not operate a retirement benefits program for Non-executive Directors. An aggregate total fee cap for non-executive directors of $1,500,000 was approved by shareholders at the 2006 Toll AGM. In line with the fixed remuneration freeze decision applying to senior management, Non-executive Directors fees are to be frozen for the year commencing 1 July 2009. Non-executive remuneration does not contain any performance-related element.

Executive Remuneration

Overall Balance Performance/Benefit: Executive fixed remuneration positioned at the median of the peer group, which we welcome. In recognition of current economic conditions, the board determined (upon management’s recommendation) that there be no fee or fixed remuneration increases for the Board of Directors and top 150 executives for the forthcoming financial year. For the forthcoming financial year, fixed remuneration will count for 30% of the total remuneration for the CEO, down 5% compared to the previous year. Similar decrease will be applied to all other key management positions (KMP). PIRC welcomes the increase of the “at risk” element of executives’ remuneration. In particular, the long-term bonus will account for 40% of CEO’s total remuneration, as opposed to 30% for the year under review.

Short-Term Incentive: Actual payments under the Short-Term Incentive Plan ("STIP") for year ended 30 June 2009 were determined by a mix of budgeted EBIT, NPAT, relevant EPS growth, cash-based returns on assets, debtor days and safety measures, as well as other non financial measures. The company is re-evaluating its planned implementation of a share-based deferred STI program given the recent announcements by the Federal Government that will impact the taxation of employee share deferral plans. For the year under review, the CEO’ target payment was 100% of has fixed remuneration, and actual payout represent approximately 67% of the fixed remuneration. For all other KMPs, targets and payout were generally below 100% of fixed remuneration, with the exception of former CFO Neil Chatfield, whose STI included a performance-tested pro-rated short-term incentive and a special incentive of $284,000 paid at the end of his retirement transition period. We are satisfied that target payments are not excessive, in our view, however, the lack of disclosure of performance targets and company’s performance does not allow shareholders to determine whether the targets sets were challenging and payouts reasonable with regard to performance achieved.

Long-Term Incentive: For the year under review, LTI target for the CEO and other KMPs, were below 100% of the fixed remuneration. We are concerned that the scheme only utilises one absolute performance criterion (EPS compound growth), whereas we consider it best practice concurrently to apply one absolute and one relative performance criterion. However, going forward, grants of options under the LTI for the CEO will include a TSR performance criterion, which we welcome. We are also concerned that there are two additional re-testing years beyond the initial three-year performance period. PIRC does not support re-testing provisions as we believe that they dilute the incentive effect of the performance criterion. Furthermore, the company does not disclose the dilution limits in place for the LTI scheme.

Contracts: CEO’s contract provides for 12 months notice and payment up to 6 months of total employment remuneration (“TER”), with payment of the balance of the required notice period in case he will not work the full notice period. For all other KMPs, notice period of 18 months for termination by company, with payments in line with CEO’s provisions.

Conclusion: PIRC welcomes the freeze in executive and non-executive overall remuneration going forward, and we have no concerns over the level of actual remuneration for the year under review. PIRC welcomes the planned increase of the “at risk” element of executives’ remuneration going forward (in particular, with reference to the long-term bonus), as in our view it as it enhances the alignment of for executives’ and shareholders’ interest. However, we are concerned that termination payments for CEO and other key executives could potentially exceed one year basic salaries, as executives who will not work the entire notice period, may also receive a termination payment equal to the balance of the notice period. We are also concerned over the special bonus awarded to resigning CFO Mr. Chatfiled. In our view, directors should not receive additional incentive payments just for doing his job properly until his retirement. In addition, we are concerned that Mr. Chatfiled will be able to receive payments under the LTI following his retirement. With regard to lack of disclosure, we have a number of concerns over the lack of disclosure of performance targets operated under the STI, and we do not consider the use of one only non-comparative performance criterion under the LTIP to be adequate. Furthermore PIRC does not support re-testing provisions under the LTI as we believe that it dilutes the incentive effect of the performance criterion. In view of our concerns, we recommend an oppose vote.

The company’s medium-term incentive (MTI) and salary at-risk (SaR) cash incentives were discontinued in 2008/09. A new bonus deferral scheme was introduced to replace these incentives and a new LTI scheme was also adopted.

Disclosure

The level of disclosure is generally good. Newcrest is one of few listed Australian companies that retrospectively disclose the corporate performance targets against which bonuses are assessed. For example, in each of the 2007, 2008 and 2009 years Newcrest achieved 125 percent of its earnings target; albeit this may indicate that Newcrest has historically not set sufficiently challenging earnings targets. The company discloses the total remuneration package and disclosure concerning the new LTI is sufficient.

Non-executive directors' remuneration

Non-executive directors do not receive any performance-based remuneration and are required to build up a shareholding of 3,000 shares. Individual fees are outlined and fees attached to the various committees are disclosed. With effect from 2003, the practice of providing retirement benefits was discontinued.

Balance between performance and reward

During the year the company introduced a new long term incentive scheme replacing the former scheme which assessed TSR against a gold mining comparative.

The new scheme grants conditional shares subject to performance over three years measured in three equally weighted areas:

Reserves growth: Zero vesting if ore reserves net of mining depletion grow by less than 10%. 50% vests at 10% growth, with straight-line vesting up to full vesting for 30% growth in reserves.

Comparative cost position: This is measured using the GFMS Precious Metals Cost Service against 200 operating mines across 90 companies. No vesting occurs above the 50th percentile, then vesting on a linear basis up to 50% for performance at the 25th percentile; full vesting occurs for cost performance at the 10th percentile.

Return on capital employed (ROCE): threshold vesting for ROCE of 7%, with 10% vesting for each percentage point improvement in ROCE up to full vesting for ROCE at 17%.

In view of the company’s historical performance we have concerns over each of the three performance conditions. Concerning ROCE, over the previous three years the company has only fallen below the upper target of 17% once in 2007 and the ROCE for 2008 in the 2009 annual report was 21%. Concerning the cost comparative performance condition we have concerns over the target range. According to the company’s results announcement on 17th August 2009, on GFMS figures the company is already a “first cost quartile” producer meaning half of this proportion of award will vest simply for maintaining the comparative cost position. Concerning the growth in ore reserves performance condition, during the fiscal period, the company’s total ore reserves after mining depletion increased by 7 percent (gold) and 12.5 percent (copper).

Contracts

The CEO on termination is entitled to 12 months notice but his payment in lieu of notice, as is the case with all senior executives, is based on his total annual remuneration. As at 30th June 2009, at target levels, he would be entitled to A$5.72 million. These entitlements are excessive by the ACSI Guidelines which call for termination payments to be capped at 12 months fixed pay. PIRC considers all termination provisions should be limited one year’s base salary and benefits.

Additional considerations

Newcrest acquires shares for equity incentives on market using company funds. This means it does not require shareholder approval to grant shares to executive directors following the amendment to ASX Listing Rule 10.14. The amendment removed the requirement for companies to seek shareholder approval for the issue of equity incentives to directors if the shares granted were acquired on market. It should be noted that Newcrest sought shareholder approval for grants to its executive directors up until 2007.

In Summary

Whilst we are supportive of the new sector relevant performance conditions operated under the new LTI, we have strong concerns over the disclosed performance targets. As Newcrest avoids the need for shareholder approval of equity grants by buying shares in the market, shareholders have no other way of indicating their dissatisfaction with the performance conditions. The company’s executives are entitled to excessive payments on termination. We recommend opposition.

The maximum number of shares for which options and SARs may be granted, or which may be issued as restricted stock or made subject to awards of restricted stock units, to any one person during any continuous five-year period is 3,000,000 shares in the aggregate. The maximum number of shares that may be subject to all options and SARs granted to any one person during any one calendar year is 3,000,000 shares in the aggregate, which is equivalent to $15,000,000.

The company states that the awards 'may contain' performance conditions based on a list of numerous conditions provided. However, the specific conditions and targets have not been disclosed and the maximum potential limit has not been expressed. As these have not been clearly disclosed, we recommend shareholders oppose the resolution.

Non-executive remuneration:

NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs also receive additional fees for committee membership. NEDs are not paid any additional fees for attendance at board meetings.

Executive remuneration:

Disclosure:

The total remuneration amount paid to executives is disclosed. Disclosure of short term (STI) and long term incentive payments (LTI) is adequate. The company has disclosed the performance targets for the STI and the LTIP however the targets under the STI have not been quantified. The maximum award limits under the STI and the LTIP has not been disclosed.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

The STI is a cash bonus scheme, paid annually. As mentioned earlier, the potential maximum limit has not been disclosed. The performance conditions are based on financial (40%), strategy/customer (40%), and people management (20%). During the year, the company awarded Mr. Fraser 88% of his base salary.

The company’s main long-term incentive plan is the Share Performance Rights (SPR) plan which is based on TSR as the performance measure. As the company has not disclosed the maximum potential awards payable, we are unable to assess the TSR conditions. During the year, the company granted Mr. Fraser shares worth 105% of his basic salary.

Contracts:

Mr. Fraser's contract is 12 months rolling. His contract has certain retention provisions. For example, he was awarded shares with a face value of $1,023,639. On 1 September 2009, he was allocated shares with a face value of $400,000 and as he was employed until 31 August 2009, he was allocated shares with a face value of $400,000.

Due to concerns such as the disclosure of maximum potential award and the retention provisions in Mr. Fraser's contractual details, we recommend opposing the remuneration report.

Shareholder approval is sought for the acquisition of Ibi Participações S.A. (Ibi Participações) by the company, via the merger of the totality of Ibi Participações's shares into Banco Bradesco's shares. Ibi Participações will become a wholly-owned subsidiary of the company. Pursuant to Articles 224 and 225 of Law 6,404/76, this corporate action, contains three further authorisations: 1) ratification of the appointment of companies to appraise the companies' equities (Pricewaterhourse Coopers Auditores Independentes and Ernst & Young Auditores Independentes); 2) examination and approval of the "Protocol and Justification Instrument"; and 3) issuance of 45,662,775 new shares in the issued share capital of the company, of which 22,831,386 are preference shares and 22,831,389 are ordinary shares. The ratio is 0.049 of the company's shares for each share issued by Ibi Participações. The new shares will be distributed to Ibi Participações's shareholders on a pro-rata basis.

PIRC assesses corporate transacions based on the information disclosed by the company and the level of independent scrutiny on the board. We are satisfied with the information provided by the company; however, none of the non-executive directors are considered independent according to PIRC’s guidelines as they are linked to either the controlling shareholder (Cidade de Deus, holding 24.51% of the company’s issued share capital) or the minority shareholder (Banco Espíritu Santo, holding 3.58% of issued share capital). We note that the company is listed on Bovespa’s Level 1, which requires a 20% element of independent representation on the board., which in our view, has not been met. We also note our concerns to the issuance of dual-class shares, which perpetuates an unequal share structure that grants different voting and dividend rights to preference and ordinary shares.

Based on the concerns expressed above, we recommend abstention.

Non-executive remuneration:

NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs also receive additional fees for committee membership. NEDs are not paid any additional fees for attendance at board meetings.

Executive remuneration:

Disclosure:

The total remuneration amount paid to executives is disclosed. Disclosure of short term (STI) and long term incentive payments (LTI) is adequate. The company has disclosed the performance targets for the STI and the LTIP however the targets under the STI have not been quantified. The maximum award limits under the STI and the LTIP has not been disclosed.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

The STI is a cash bonus scheme, paid annually. As mentioned earlier, the potential maximum limit has not been disclosed. During the year, the company awarded the Managing Director Mr. King 135% of his basic salary and Ms. Moses 92% of her basic salary.

The company’s main long-term incentive plan is based on TSR as the performance measure. As the company has not disclosed the maximum potential awards payable, we are unable to assess the TSR conditions. During the year, the company granted Mr. King 175% of his basic salary in options and 77% to Ms Moses.

Contracts:

The company states that it can provide a payment in lieu of notice however, this has not been clearly specified.

Due to the concerns mentioned above, we recommend opposing the remuneration report.

Shareholder approval is being sought for the grant of Options and PSRs worth $2,520,000 for 2008/09 and $2,940,000 for 2009/10 to Mr. King, Managing Director of the company. The awards are to be issued pursuant to the Senior Executive Option Plan and the Performance Share Rights Plan subject to the achievement of the performance conditions based on TSR. PIRC does not consider that the disclosed performance targets are challenging. We therefore recommend an oppose vote.

Shareholder approval is being sought for the grant of Options and PSRs worth $978,000 for 2008/09 and $1,150,000 for 2009/10 to Ms. Moses, Executive Director of the company. The awards are to be issued pursuant to the Senior Executive Option Plan and the Performance Share Rights Plan subject to the achievement of the performance conditions based on TSR. PIRC does not consider that the disclosed performance targets are challenging. We therefore recommend an oppose vote.

In accordance with Section 250R of the Australian Corporations Act, the directors are seeking approval of the remuneration report. The Act does not require directors to act on approval of the resolution and the vote is advisory.

Disclosure. The company fails to disclose the reason why it has changed the performance hurdle attached to long term incentive awards three times in the past three years. Also the company does not disclose which performance targets are attached to short term incentives, and shareholders are therefore unable to judge whether the targets are challenging. The peer group used to compare the company’s performance to award long term incentives is not fully disclosed in the annual report.

Non-executive directors' remuneration. NEDs receive base and committee fees (for chairman of the board and board committees) paid from an aggregate limit of $1.5m (as approved by shareholders on 24 October 2007). NEDs do not participate in any performance related incentive scheme and do not receive retirement benefits (except statutory superannuation), in line with best practice.

Executive remuneration. Executive remuneration is comprised of fixed remuneration, short and long-term incentives. Fixed remuneration is calculated on a total cost basis, including the costs of benefits packaged as salary and employer contributions to superannuation.

Short Term Incentives (“STI”). STI awards are made in cash and are based on performance against Key Performance Indicators that include financial and non-financial measures. The Remuneration Committee states that full details of the KPIs and targets have not been disclosed as they are commercially sensitive. We note that STI bonus paid to the Managing Director for the year under review has increased by 41%.

Balance performance / reward. Long term incentives are delivered under the Executive Performance Rights Plan (“EPRR”). Awards made in 2006 and 2007 are vested in full. EPRR has a vesting period of 3 years, in line with best practice, and for grants made after 30 June 2009, re-testing will not be allowed. We welcome that the performance rights are subject to cancellation when the executive’s service terminates prior to the vesting period and that executives are subject to a policy that prohibits hedging of performance rights or unvested options. The company has adopted a Total Shareholder Return (TSR) performance hurdle for performance rights with 1 July 2007 grant date; the company’s TSR is compared to TSR for a peer group comprising a selection of companies included in the S&P/ASX 200 (excluding resources and financial companies). If the company’s TSR is at the 50th percentile of the peer group, 50% of performance share rights vest; the maximum award will vest at the 75th percentile. We consider this performance hurdle to be insufficiently challenging, as for maximum vesting the upper quintile is considered best practice.

Contracts. The Managing Director, Mr Dixon, is employed under a contract which ends in December 2010. In case of a change in control the Managing Director, as well the CFO and COO, are entitled to a termination payment equivalent to 12 months salary and their unvested outstanding LTI awards are forfeited, in line with best practice.

Due to our concerns mentioned above, particularly the lack of disclosure of some key aspects of both the short term and the long term incentive plans, we recommend an oppose vote.

Non-executive director. Independent by the company not independent by PIRC as he serves as a non-executive director of Suncorp-Metway Ltd., a major shareholder of the company, owning 8.97% of the company's issued share capital. There is insufficient independent representation on the board in our view.

Australian Stock exchange (ASX) listing rule 10.14 requires the board to seek approval for grants of conditional rights and options over ordinary shares to the directors.

Shareholder approval is being sought for the grant of 196,409 Performance Rights to the Managing Director of the company, Mr Bruce Dixon. Such performance rights are to be issued pursuant to the Healthscope Executive Performance Rights Plan subject to the achievement of the performance hurdles that have been described in the analysis of resolution 2. As noticed above, PIRC considers the performance hurdle for performance rights not to be sufficiently challenging. We therefore recommend an oppose vote.

We note that voting exclusions apply to this resolution, as the company will disregard any votes cast by Mr. Dixon and/or his associates.

Disclosure

Over-arching remuneration policy is set out using generic principles but there is no indication that remuneration elsewhere in the company is taken into account in determining executive pay. Executive remuneration includes cash and awards under the employee share option plan, but no bonus is available to executive directors. Cash remuneration, pensions payments and share incentive awards are adequately disclosed for the year under review. The company states that with effect from 1 February 2009 the company’s executive directors entered into an agreement to voluntarily reduce their working hours effecting a corresponding reduction of 20% in paid remuneration.

Non-executive directors’ fees are individually disclosed and the company states that an additional fee is paid for each board committee on which a director sits. However, the breakdown of fees in terms of board and committee responsibilities is not provided. Due to ‘the impact of the global financial crisis’ and the need for the company to conserve cash, the non-executive directors voluntarily reduced their fees by 20% with effect from 1 February 2009.

Balance of Incentive and Reward

There is no cap on the award of options under the Employee Share Option Plan as the level of award is entirely at the discretion of the board. Although awards made during the year have amounted to no more than 20% of any one executive director’s salary (based on the company’s assessment of the fair value of the option awards), we consider that a clear limit ought to be in place. No performance conditions apart from continuing employment during the four-year vesting period are applied to option awards. Although awards made during the year are at a relatively modest level, we consider that they are substantial enough to warrant the use of targets so as to link the payment of supplementary remuneration of this kind to a challenging level of performance. The lack of a disclosed limit on awards makes such targets all the more appropriate. We are also concerned that no dilution limits are disclosed for this scheme.

Contracts

Executive directors have six month rolling contracts. On termination of their contract ‘without cause’ they are entitled to eighteen months’ ‘remuneration’. However, we do not consider that termination payments ought to exceed twelve months salary and benefits unless they have first been specifically approved by shareholders. No statement is made on the application of the principle of mitigation.

In conclusion we have several concerns over remuneration arrangements at the company, particularly the absence of performance conditions applying to option awards and the termination payments to which executive directors are entitled. In view of these concerns we recommend an oppose vote.

Non-executive chairman. Independent by the company, not independent by PIRC as he previously served as Managing Director and Chief Executive Officer of AGL (now Jemena). In June 2000 the company acquired the majority of AGL's Australian gas transmission assets. AGL is one of the company's major customers. There is insufficient independent representation on the board in our view. We recommend opposition.

APA Group (“APA”) comprises two registered investment schemes, Australian Pipeline Trust (“APT”) and APT Investment Trust (“APTIT”), the securities of which are “stapled” together, and their controlled entities. Australian Pipeline Limited (“Responsible Entity”) is the responsible entity of those trusts. Shareholder approval is sought for the proposed amendments to the Constitutions of both trusts.

The changes proposed to the APT Constitution relate to accounting standards and also aim to align the APT Constitution with that of APTIT. Some of the changes proposed to both the APT and APTIT Constitutions update them to reflect current market practices and implement policy changes in Australia; they aim to facilitate fundraising in the current adverse economic circumstances by removing the 10% discount limit on issue price for placement without shareholder approval. We are concerned about proposed amendments such as: 1) removal of the 10% discount; 2) foreign shareholders may not be offered shares under rights issues, distribution reinvestment plans and purchase plans; and 3) ancillary powers are granted to the Trustee: such granting removes the need to seek shareholder approval for certain corporate transactions.

We comment on the bundled nature of the proposed changes and based on the concerns expressed above, we recommend an abstain vote.

Non-executive remuneration:

NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs also receive additional fees for committee membership. NEDs are not paid any additional fees for attendance at board meetings.

Executive remuneration:

Disclosure:

The total remuneration amount paid to the Chief Executive is disclosed. Disclosure of short term (STI) and long term incentive payments (LTI) is adequate. The company has disclosed the performance targets for the STI and the LTIP however the targets under the STI have not been quantified. The maximum award limits under the STI and the LTIP has not been disclosed.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

The STI is a cash bonus scheme, paid annually. As mentioned earlier, the potential maximum limit has not been disclosed. During the year, the company awarded the Chief Executive Mr. McIlwain 54% of his basic salary as bonus.

The company’s main long-term incentive plan is based on TSR and EPS as the performance measures. As the company has not disclosed the maximum potential awards payable, we are unable to assess the conditions.

Contracts:

The company states that it can provide a payment in lieu of notice and the payment would be purely based on fixed remuneration for the 12 months. The company has not disclosed the specific details with regards to outstanding options in the case of a change in control.

Although we note that awards made during the year are not excessive, we have concerns over the level of disclosure of maximum awards, which can potentially be excessive and with regards to the lack of information on change of control provisions. We therefore, recommend opposing the remuneration report.

Shareholder approval is being sought for the grant of 750,000 performance rights under the LTIP to Mr. McIIwain, Chief Executive of the company. The awards are to be issued subject to the achievement of the performance conditions based on TSR and EPS. We welcome the use of two performance conditions, however we consider it best practice for the conditions to be used concurrently. While the TSR targets are clearly disclosed, the EPS targets are not. With regards to the TSR conditions, we do not consider the lower target for median vesting to be challenging in light of the total award. Due to the concerns mentioned above, we recommend an oppose vote.

The board seeks shareholder authority, so that, in accordance with Article 9 of the company's news Articles of Association, pre-emption rights be disapplied until the conclusion of the 2010 AGM in respect of any allotment representing not more than 10% of the issued share capital of the company.

PIRC is concerned that this proposal effectively deprives current shareholders of their right of preferential allotment pro-rata to their shareholding, and thus, precludes them from keeping the same shareholding in the company after the share split. We consider the authority potentially overly dilutive and recommend opposition.

Despite the fact that we do not consider Mr Hillery to be independent and there is insufficient independent representation on the board in our view, we consider that the requisitionist has not made sufficiently clear the reasons for why his proposals would be in the best interest of all shareholders, and what alternative would be put in place. In addition, the board has offered sufficiently clear reasoning in argument against this proposal. Therefore we recommend opposition.

We consider that the requisitionist has not made sufficiently clear the reasons for why his proposals would be in the best interest of all shareholders, and what alternative would be put in place. In addition, the board has offered sufficiently clear reasoning in argument against this proposal, and in our view Baroness Jay is independent. Therefore we recommend opposition.

The board believes that the intention of the parties to the JV Agreement is to fund the first instalment (i.e. 10%) of the acquisition price of the Land by shareholders’ loan. The total financial commitment of the Group to the JV Company is estimated to be in the amount of approximately RMB 5,150 million (approximately HK$5,852 million), representing half of the estimated total investment amount for the development of the Land. The Group intends to fund its financial commitment from its internal resources and/or bank borrowings. The joint venture is for a term of 10 years from the issue of a new business licence following formation of the joint venture and will dissolve after the development of the Land is completed, if earlier.

We consider that sufficient information has been provided about the joint venture to allow shareholders to make a reasonable choice. However, we note that none of the thirteen members of the board are independent according to PIRC guidelines and we are therefore concerned that the proposals have not been subject to proper scrutiny at board level. We would normally recommend an abstain vote in view of this but as the proxy card does not provide the option of abstaining we recommend an oppose vote.

Backrground:
On September 8th, 2009, Vivendi S.A. indicated that it had the intention to launch a tender offer for the acquisition of at least 51% of the company's fully diluted share capital at a price of R$42,00 per share, subject among other conditions to the waiver of the Dilution Provisions. On October 7th, 2009, Telecomunicações de São Paulo S.A. ("Telesp") issued a Notice of Voluntary Tender Offer for the acquisition of at least 51% of the company's fully diluted share capital at a price of R$48,00 per share, subject to, among other conditions, the waiver of the Dilution Provisions.

In order to allow for an acquisition of the company's shares to take place shareholder approval is sought to waive the application of articles 43 and 44 of the company's By-laws (which deals with the protection of dilution of the ownership interest), with respect to an acquisition of shares that shall be: (i) for a price equal or above R$48,00 per share; (ii) by a Qualified Bidder; (iii) settled prior to February 28th 2010; and (iv) settled in cash.

PIRC considers that the company has provided sufficient disclosure. However, we have concerns that the proposal was not subject to sufficient independent scrutiny, as there is an insufficient number of independent directors on the board in our view. Therefore, we recommend an abstain vote.

Non-executive directors’ remuneration:

The NEDs are remunerated with set fees with additional fees for committees membership. NEDs total remuneration is divided between cash, shares and superannuation. A minimum of 30% is paid in cash. We note that the fees will remain frozen at the 1 July 2008 level until at least 1 July 2010. From 1 July 2009 directors can voluntary participate in “The Directshare Plan”. Shares are purchased for on-market price and have no performance hurdles. The company states that it does not provide retirement benefits for directors other than superannuation contributions.

Executive remuneration:

Disclosure:

The total remuneration amount paid to executives is disclosed. Disclosure of short term (STI) and long term incentive payments (LTI) is adequate. The company has not disclosed performance targets for the STI but targets for the LTI are disclosed.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

Each senior executive have the opportunity to receive an annual bonus under the STI Plan between 120% to 160% of fixed pay depending on the role they perform. The fiscal 2009 the performance measures under the STI Plan relates to Free Cashflow, EBITDA Margin, Total Income, Mobile Services Retail Revenue, PSTN (Public Switched Telephone Network) Revenue and Individual Accountabilities. However, the company does not disclose the specific targets used to allocate any of the payouts awarded for the year under review. Shareholders are therefore unable to judge whether the targets are challenging. In addition, in January 2009 the company paid Mr. Rocca a retention bonus of A$1,000,000 and Mr. Winn a “transformation payment” of A$2,224,146. We do not consider the use of retention bonuses to be acceptable since they are not linked to performance hurdles and there is insufficient disclosure what a ““transformation payment” refers to.

Under the Long-Term Incentive Plan (LTI) executives are also awarded options and restricted stock. 50% of the LTI grant is provided through options that are subject to a relative total shareholder return (RTSR) measure and vest following a three year vesting period. This performance hurdle is based on comparing the company’s TSR growth against other companies in the peer group over the relevant period. 25% of vesting occurs when TSR is at the 50th percentile of the comparator group which increases in a straight line to 100% vesting at the 75th percentile of the comparator group. The remaining 50% of the LTI grant is provided through restricted stock that is subject to an ROI measure, which vests following a four year performance period. Performance targets are disclosed for ROI.

Contracts:

Executive directors’ contracts do not include termination provisions. Notice periods are six months and termination payment is 12 months for all NEDs.

We welcome the use of two performance measures and disclosure of the targets for the LTI plan. However, we have concerns on the lack of disclosure of key performance targets for the STI plan, the retention bonus paid to Mr. Rocca and the “transformation payment” of A$2,224,146 paid to Mr. Winn. We therefore recommend abstention.

The company does not disclose sufficient disclosure regarding the redeemable preferred shares and so we are unable to assess the potential impact on shareholders' interest in the company. Therefore, we recommend an abstain vote.

The company's auditors were PricewaterhouseCoopers and they have stated that they will continue in office till the appointment of KPMG. The company has not stated the reason for appointing KPMG instead of PricewaterhouseCoopers.

Non-executive remuneration:

NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs also receive additional fees for committee membership and are not paid any additional fees for attendance at board meetings.

Executive remuneration:

Disclosure:

We have concerns over the level of disclosure as the company has not stated the specific performance conditions under the Short Term plans. Also, the maximum potential award limits under the various schemes in operation has not been disclosed. PIRC considers that in order for shareholders to assess remuneration packages, companies should clearly state the maximum award limits as a percentage of base salary. We welcome the company's policy to clearly reveal the classifications between fixed and variable remuneration.

Balance Performance/Targets:

Executives receive base pay, short-term and long term incentives. The fixed part includes salary, superannuation and other benefits.

The STI is a cash bonus scheme, paid annually. As mentioned earlier, the potential maximum limit has not been disclosed. The performance conditions are based on unspecified company, business unit and personal objectives. During the year, the company awarded Mr. Watson a bonus worth 49% of his base salary for the period he served as Chief Executive. Dr. Goode did not receive any bonus payments during the period he worked as Chief Executive.

The company’s main long-term incentive plan is the TransShare Executive Performance Awards Plan (TEPAP) which is based on EPS and TSR as the performance conditions, which we welcome. The specific targets are clearly disclosed however the maximum potential awards payable has not been disclosed. As a result, we are unable to assess the targets.

Contracts:

Dr. Goode's contract is 6 months rolling. Termination provisions include one years salary, which is in line with best practice however we note that Mr. Watson's remuneration included cash settlement of his unvested ST-DRI payment which we do not support.

Due to concerns raised above, we recommend opposing the remuneration report.

Non-executive remuneration.
Non-executive directors received board membership fees and additional fees for Chairmanship and committee membership. The aggregate maximum annual amount for non-executive remuneration is currently AUS$ 3,500,000. NEDs do not receive shares, options or performance incentives and directors who also act as directors of a subsidiary of the company receive additional fees. Fees paid are disclosed both by individual director and by category. The NEDs retirement plan was removed on 5 November 2003 and was closed on 1 July 2008. At that date, four directors remained in the plan and they will receive a maximum benefit on retirement as if they had retired on 1 July 2008. To compensate for the loss of retirement benefits, board fees were increased.

Disclosure.
Total remuneration paid to executive directors is disclosed individually. The company has disclosed the peer group against which it measures its performance, the ASX 100. Last year’s annual bonus target is not disclosed and neither is a five year history for performance (although the past level of achievement of undisclosed performance targets is disclosed). It is unclear from the company’s disclosure whether general increases in fixed remuneration for executives take into account the rate of increases applicable to the rest of the workforce.

Executive remuneration.
Executive remuneration is comprised of five components: base salary, short-term performance, medium-term performance, long-term performance incentives and retention/retirement benefits

The short-term performance incentives reward performance above profit targets on an annual basis. KPIs are based on the group, individual business and personal objectives. The KPIs to be met are the greater of a specified return on revenue and/or a specified return on funds employed by each business unit. We note that the Chief Executive Officer has received 154% of base salary as annual bonus during the year under review.

The medium-term deferred incentive plan rewards the creation of value for shareholders on a year-on-year basis. In order to do so, the group’s profit performance is assessed against increasing profit targets, set by the board, and not disclosed. The incentive is paid three years after the award. The level of award is at the discretion of the Remuneration and Nominations Committee. The Chief Executive Officer has a discrete deferred incentive plan. The scheme operates on a threshold approach: 50% of the threshold must be achieved before any deferred incentive is paid. If the profit increase is fully achieved the maximum deferred incentive paid is 150% of the Chief Executive base salary.

Long-term incentive plan.
The Leighton Senior Executive Option Plan provides participants with the opportunity to acquire shares in the company provided that two non-concurrent performance hurdles are met, namely Total Shareholder Return (TSR) and Earnings Per Share (EPS). Half of the grant relates to TSR performance and the remaining 50% to EPS performance. The plan allows for retesting (four times) at 3, 3.5, 4 and 4.5 years after the date of options are issued. The company’s TSR performance is measured against the TSR of the peer group mentioned above. At median performance, 50% of this parcel is exercisable with 75% percentile or greater TSR performance vesting 100% of the parcel. Between these two points straight-line vesting applies. For the EPS hurdle, if the company’s EPS growth per annum is 8%, 20% of the parcel is exercisable; while achieving 12% or greater growth will vest 100% of the parcel, with straight-line vesting between these two points. Options lapse five years after the grant. The board retains its discretion to reducing or waiving the exercise conditions and the lapsing of options.

Contracts.
The company has established different arrangements for each of the service contracts of its executive employees. Currently, the Chief Executive Officer is the only executive director who sits on the board. His service contract has a notice period of 12 months (by the company) and six months (by the employee). The remaining executive employees have notice periods ranging from three to six months, retention benefits ranging from 40 to 103% of their respective Total Fixed Remuneration (TFR), and payments for early termination ranging from 70 to 100% of their respective TFR. The CEO's contract, contrary to best practice, provides for payment on termination of a fixed retirement benefit of AUS$ 12.6m, with an additional AUS$ 4.9m for a three-year restraint period following termination, and a transition bonus of up to AUS$ 5m on achieving a satisfactory transition to a new CEO and leadership team.

PIRC believes that Long Term Incentive Plans should have two concurrent performance conditions and that the maximum payments under the LTIP (in terms of base salary) should be disclosed. PIRC does not consider that re-testing is in line with best practice and we have concerns in relation to the discretion retained by the board to waive performance conditions under unspecified circumstances. Furthermore, PIRC believes that the retention incentives devised are excessive. Due to these concerns we recommend an oppose vote.

Non-executive director. Independent by company, not independent by PIRC as he has been on the board for over nine years.. There is insufficient independent representation on the board in our view.

Non-executive director. Independent by company, not independent by PIRC as he has been on the board for over nine years. There is insufficient independent representation on the board in our view.

Non-executive director. Independent by company, not independent by PIRC as he has been on the board for over nine years. There is insufficient independent representation on the board in our view.

PIRC notes that the Remuneration Committee is composed of only two non-independent directors according to our guidelines.

Disclosure
Disclosure is limited and PIRC deems this level of disclosure to not correspond to best practice. The company indicates the total remuneration and its break down for the key management personnel and directors. The company does not disclose either maximum levels or performance criteria regarding annual bonuses, however no such bonuses were paid out during the year under review. Individual remuneration for non-executive director is not disclosed, and is only given as a possible aggregate according the company’s constitution.

Non-executive directors' fees
NEDs do not receive any performance based award and do not hold any options, in line with best practice. However, contrary to best practice, the remuneration committee has discretion to award both options and performance-based remuneration to the directors. The aggregate pool available for NEDs fees is AUS$ 1.5 million per annum. Retirement benefits may be awarded to NEDs who have served the board for more than 5 years. The maximum award corresponds to 3 times the average of the director’s emolument over the previous three years, which exceeds local market best practice and PIRC considers it excessive.

Incentive schemes
The company grants options and executive directors may participate in the company's incentive plans. For the option grants one performance criterion applies: TSR measured against S&P/ASX 200 Accumulation Index. The company appears to apply cliff-vesting which we do not consider to be appropriate since it fails to incentivise improved performance beyond the threshold. Potential maximum awards are not disclosed for either the option awards or the incentive schemes.

Contracts
Executives have 3 to 4 year-long contracts, contrary to best practice. Change in control policy and severance agreements are not disclosed.

Due to the insufficient level of disclosure and our concerns regarding the company’s option plan, we recommend an oppose vote.

As cliff-vesting is applied, which we do not consider to be appropriate since it fails to incentivise improved performance beyond the threshold, and no expected value calculation is disclosed we recommend shareholders oppose the proposal.

As cliff-vesting is applied, which we do not consider to be appropriate since it fails to incentivise improved performance beyond the threshold, and no expected value calculation is disclosed we recommend shareholders oppose the proposal.

PIRC would not consider Mr Harris to be independent if appointed due to his senior editorial role at a Fairfax company however we consider the board to have adequate independent oversight and we consider that his editorial experience adds value to his candidacy. We are concerned that Mr Harris appears to have no listed company board experience.

PIRC would not consider Mr Mayne to be independent if appointed due to his role at a Fairfax company however we consider the board to have adequate independent oversight. Although biographical details are provided in support of his candidacy these details do not include mention that Mr Mayne has frequently put himself forward for election to the boards of large Australian companies. Mr Mayne has sought election at Telstra, Alumina and West Australian Newspapers without success and to date has no listed company board experience.

PIRC would not consider Mr Noonan to be independent if appointed due to his senior editorial role at a Fairfax company however we consider the board to have adequate independent oversight. We consider Mr Noonan's role at ACSI to add value to his candidacy. ACSI best practice guidelines for investors advocate behaviours which are reflected in PIRC's own published guidelines. No statement is made regarding his continuance in the ACSI role if elected however we consider that his fiduciary duty to all shareholders on election has a parallel with the inherent duty to serve the interests of all institutional investor members of ACSI.

Non-executive remuneration:
NEDs are paid a fee and superannuation benefits, neither of which are performance-related payments. The company discontinued its retirement benefits for NEDs in 2004. However, NEDs who had served at least five years on the board at the time and who were qualified under the previous scheme, on retirement will be entitled to a retirement benefit.

Executive remuneration:
- Disclosure
Individual fees for non-executive directors are disclosed as is executives' remuneration. We note that the Chief Executive's salary increased by 15% on 1 October 2009, which we deem excessive. Disclosure of short-term and long-term incentive payments are adequate. The company has disclosed performance conditions and targets for its equity-based incentive schemes but no targets have been disclosed for the annual bonus.

- Performance criteria
The maximum award under the annual bonus is 100% of base salary. The performance criteria are the following: 20% is based on Group EBITDA and earnings per share, 60% is based on business unit financial performance and 20% is based on other key performance indicators (KPIs). However, the company does not disclose the specific targets.
The maximum award under the long-term scheme is 100% of base salary and two performance conditions are employed. 50% of the award relates to TSR and 50% to the EPS. TSR is measured against S&P/ASX 300 Consumer Discretionary Index. If TSR measures at 50th percentile 50% of the TSR related part of the award will vest, above 75th percentile 100% of the award will vest. Straight line vesting in between. EPS is measured by the compound annual growth rate (CAGR), at 7% CAGR a quarter of the EPS related part of the award will vest, 100% of the awards will vest at 10% CAGR or more, straight-line vesting applied in between. Contrary to best practice the company allows for re-testing. No options were however granted during the year under review.

- Total amount of remuneration paid during the year is not deemed excessive.

- Contracts
Notice period ranges from 6 to 18 months. Severance payments excludes bonuses and non-cash incentives.

Remuneration practices:
We note that former CEO, Mr Kirk, received a termination payment amounting to AUS$ 4,122,808 upon his resignation, which amounts to 540% of his base salary. PIRC deems termination payments exceeding 12-months salary and benefit unacceptable and contrary to best practice. No explanation is provided by the company in the annual report for this payment or what it comprises.

Due to the excessive amount of severance payment paid to Mr Kirk we recommend shareholders oppose the remuneration report.

Disclosure. We welcome that following shareholders' opposition to the 2008 Remuneration Report at last year's AGM, the company has conducted a review of its compensation schemes and has increased transparency in the 2009 Report. The total remuneration for key management personnel, directors and executives is sufficiently disclosed. Fees and superannuation benefits have been individually disclosed. Following the proposed changes to Australian tax laws announced in 2009, the voluntary sacrifice of incentive into shares is suspended for 2009.

Non-executive remuneration. NEDs received fees for their services, which are reviewed yearly, paid from an aggregate amount of $3,000,000 (approved by shareholders in 2007). For the 2010 financial year, the Remuneration Committee has decided to freeze the fees. There is no performance-related element in their compensation. However, NEDs may decide to forego a portion of their fees in return for shares at market value. NEDs receive superannuation contributions (equal to 9% their fees), and they may also sacrifice part of their fee for a further superannuation contribution.

Executive remuneration. Executive remuneration is comprised of Fixed Annual Remuneration (“FAR”) (including salary, superannuation and packaged benefits) short and long-term incentives. The company is implementing a freeze on fixed remuneration increases for senior executives for the 2010 financial year.

Short Term Incentives (“STI”). Maximum awards range between 100% of FAR (Group Managing Director) and 120% of FAR (Finance Director and senior executives). Awards are based on performance against disclosed Key Performance Indicators that include financial and non-financial measures. The measures have been chosen because of their impact on ROE, which the company considers to be a key measure of satisfactory return for shareholders. The intended balance amongst the measures is not disclosed. Performance targets are specified, which we welcome. For the 2009/10 financial year, any payment above 60% of FAR will be mandatorily deferred into shares, which will be subject to a three-year trading restriction while the executive remains an employee and subject to forfeiture if the employee resigns.

Balance performance / reward. The long-term incentive plan for the Group Managing Director represents 100% of FAR at target and has a single financial measure, ROE and does not specify performance targets. ROE for the Group must exceed 12.5% p.a. over a two-year period for the initial grant to vest. Cliff vesting is in place. The performance period is between three and six years (Managing Director/ Finance Director). The Wesfarmers Senior Executive Incentive Plan ("WSEIP") operates a maximum award of 160% of FAR; maximum targets are not disclosed; it also implements a multi-year grant for certain executives.

Contracts. The Chief Executive, Mr. Goyder has a 12-month rolling contract). In the event of change in control or cessation of employment, the Remuneration Committee retains its discretion to decide on the accelerated vesting.

PIRC welcomes the review carried out by the company in order to align sustainable shareholder value with executive remuneration. We also welcome the introduction of a deferred tranche of the annual bonus into shares to be held for at least three years. However, we are concerned about the potential accelerated vesting in the event of change-in-control and also that the company uses the main financial measure, namely ROE to measure both short and long-term incentives plan and that in the latter only a single condition applies. PIRC considers it best practice to apply two concurrent performance conditions. Based on the above, we recommend opposition.

Shareholder authority is sought to approve the acquisition by the company (“KMG EP”) through its Dutch subsidiary, Coöperatieve KMG EP UA (“KMG EP UA”), of 100% of the issued share capital of KazMunaiGaz PKI Finance B.V. (“KMG PKI”) which holds 33% of the issued share capital of PetroKazakhstan Inc. (“PKI”) from JSC National Company KazMunayGas (“NC KMG”), the parent company of KMG EP.

PIRC assesses corporate transactions based on the information disclosed by the company and on the level of independent scrutiny on the board. We are satisfied with the company’s disclosure, which issued a Circular to shareholders on September 24th, 2009. We are further satisfied that the interested parties, ie, those directors who are also affiliates of NC KMG will abstain from voting, and that GCA, an energy consultancy has issued a report assessing the hydrocarbon resources as at 31 March 2009 attributed to the Kazmunaigas EP interest acquired in Petrokazakhstan Inc. However, we are concerned about the level of independence on the board, as in our view, it is below 50%. Based on the above, we recommend abstention.

Overview. The employees’ remuneration is composed by: fixed remuneration, short-term incentives (STI), and long-term incentives (LTI). For the CEO, 28% of his remuneration is fixed, 55% is based on STI awards (of which a third is deferred) and 17% on LTI awards.

Non executive remuneration: The board provides an adequate disclosure of non-executive fees, superannuation and board attendance. Remuneration for Non-Executive Directors consists of base and committee fees within a maximum of A$3,000,000 per annum as approved by shareholders 2004 AGM. No component of Non- Executive Director remuneration is contingent upon performance. Non-Executive Directors’ fees and payments are reviewed annually.

Executive Remuneration

Disclosure: Adequate disclosure of salaries, superannuations, STI and LTI awards granted, and contract terms. With regards to the STI, there is sufficient disclosure of the performance criteria operated by the scheme and KPIs. With regards to LTIP, there is adequate disclosure of performance criteria, aggregate maximum awards available under the plans and the company’s performance over the last five years. However, there is no disclosure of individual limit for the awards granted under the LTIPs.

Balance Performance/Awards: Under the STI, individual performance targets are set at the beginning of the financial year and take into account factors such as Customer Service, Business Banking, Technology and Operational Excellence, Trust and Team Spirit and Profitable Growth. Maximum Awards under the STI were decreased from 200% of fixed remuneration to a target of 100%, with a maximum of 125%. Awards paid during the year represent 84% of the CEO’s annual salary. Two-thirds of the awards will be paid in cash immediately and one-third will be paid in shares which will be held in trust for three years. Going forward this will move to a 50:50 basis between shares and cash.

The company runs two LTI schemes. The Group Leader Share Plan (GLSP) and the Equity Reward Plan. The GLSP is open to the CEO and other Executive Committee members only. Participants will share a pool representing 2.2% of the company’ profit after taxation, up to a maximum of A$34,000,000. The plan operates two concurrent performance criteria; net Profit After Tax (NPAT) and the company’s Customer Satisfaction ranking within the peer group (comprised of a total of five companies). Performance is measured over a three years period. The NPAT has a cliff vesting, at the median of the peer group. PIRC welcomes the use of the Customer Satisfaction as a non-financial performance criterion. However, we have concerns over the use of cliff vesting for the financial performance criteria operated under the GLSP.

100% of the shares will vest if the company ranks first in its peer group, and 30% if the company ranks 4th out of five. No award will be granted if the company ranks last. PIRC has concerns over the board’s discretion in determining the level of awards granted under the scheme. Going forward the performance conditions will be operated parallel to one another, rather than concurrently. In addition the NPAT profit pool will be replaced by a TSR performance condition similar to that used in the ERP and will be measured over four years.

The ERP operates one only performance criterion (TSR) with maximum award granted if the company ranks at or above the 75th percentile. PIRC considers that LTIPs should operate two concurrent performance criteria. However, we note that grants under the ERP have now ceased, the last grant from July 2006 is not due to be tested until July 2009 and will apply only to selected executives.

Other LTI awards include a specific cash-settled LTI arrangement applicable to certain executives of Colonial First State Global Asset Management (CFS GAM). This LTI scheme operates one performance criterion (Profit growth rate) over a three year period. PIRC has concerns over lack of disclosure of performance targets and the fact that in 2008 the board removed the performance hurdles under the scheme in return for an increase in the vesting period.

Given the level of awards made during the year, equal to 183% of salary, we do not consider the total remuneration package to be excessive.

Contracts: The CEO’s contract provides for six months notice and termination payment for six months. STI and LTI will be vested at discretion of the board. This is considered to be contrary to best practice by PIRC. For other senior executives, notice periods vary from four weeks to six months and severance payments vary from 6 to 12 months. For Mr. Chapman and Mr. McEwan the severance payment will be linked to their length of service.

We recommend shareholders to abstain on the Remuneration Report.

Non-executive directors’ remuneration. NEDs are paid a base remuneration and superannuation benefits, neither of which are performance-related payments. NEDs do not receive additional fees for committee membership. However, they are paid additional fees for special duties or exertions, which are not included in the aggregate remuneration cap. No such fees were paid during the year under review.

Executive remuneration

Disclosure.

The total remuneration amount paid to executives is disclosed. Executives receive a fixed and a performance based component as well as options under the company’s long-term incentive program. The fixed part includes salary, superannuation and other benefits. The performance based award includes bonus payments, which is determined and paid out by the board on an annual basis. The company’s long-term incentive plan, “the Executive Share Option Plan” (ESOP) was approved in 1993 and awards options to senior executives. No options were issued in 2008 and there are no outstanding options as of 30 June 2008.

alance performance/targets: No bonuses were paid during the year under review. The company has not disclosed any specific targets or thresholds for this measure and no non-financial performance measures were used. The company does not measure its performance against any peer group or index. Also, there is no evidence that increases in executive remuneration take into account the rate of increases applicable to the rest of the employees. No options have been granted for the year under review. However, we note that there are no targets attached to options granted under the company’s ESOP plan other than share price appreciation. However, the company states that future issues under the plan will be subject to specific performance hurdles and exercise constraints, but none of them have been disclosed. This policy prohibits the entry by executives into transactions, which is designed to limit risk on unvested options and requires the disclosure of hedging transactions undertaken to limit risk on vested options. Finally, it is unclear from the company’s disclosure if it prohibits re-pricing. We note that the Chairman received a total remuneration of $1,376,051 for both his role as the chairman of the board and as a managing director.

Contracts.

In the event of termination without cause, the company is required to pay one month salary in lieu of notice. No further disclosure has been made in relation to payments in lieu of performance-related remuneration. Non-executive director, Mr van den Kley received a payment of $177,500. The termination benefits are not explained. We note that the directors’ retirement scheme was frozen in 2006. PIRC believes that the company’s disclosure should be much more specific and comprehensive. The lack of information with regards to contracts and the poor disclosure of performance conditions related to the company’s annual bonus and incentive scheme are not in line with best practice. Due to these concerns we recommend an abstain vote.

Disclosure:
Overall, the company provides a satisfactory disclosure of remuneration paid to directors and senior executives, together with share grants, company’s performance and contracts provisions. However, there is no disclosure of the intended balance between fixed remuneration, short-term, and long-term incentives. Also, the company does not disclose performance targets under the STI, together with the maximum awards under the LTIP.

Non-executive Remuneration:
Non-Executive Directors’ (NEDs) remuneration comprises base fees, superannuation benefits, and travel fees. For the year under review, the board decided not to increase the aggregate limit for NEDs fees, however, board and committees individual fees were increased effective from January 2009. Increases vary from 28% for board chairman, to approximately 14% for board membership, and 25% for Nomination