2016 REMUNERATION REPORT Introduction from the Chairman of the People and Remuneration Committee Dear Shareholder, I am pleased to present our Remuneration Report for 2016, which is designed to provide a clear summary of the remuneration strategy, arrangements and outcomes for the Chief Executive Officer (CEO), direct reports to the CEO (Senior Executives) and Non-Executive Directors. 2016 was another exceptional year of sales and profit growth across all areas of the business. These outstanding results are directly attributable to the dedication and quality of our people. Throughout the year, management: • Continued to deliver on the Group strategy to grow the business – sales up 52% and NPAT up 115%. • Continued to deliver on the Group strategy to grow the Australian business – Australian revenue up 56.5% and EBIT up 100.9%. • Continued to grow Blackmores’ business in Asia – total Asia sales up 54% and Asian consumers now influence 50% of Group revenue. • Continued to invest in world class innovation and new product development – launched 117 new products, announced a partnership with Bega to produce nutritional foods, and acquired Global Therapeutics, a leader in Chinese herbal medicine. • Delivered responsible financial management resulting in strong net operating cash flows of $83.7 million, net debt of $17.8 million, and return on shareholders’ equity of 56.1%. These successes have been recognised in our share price which increased by 75% per cent during the year. We were one of the highest performing stock of the S&P/ASX 100 companies during 2016. Blackmores delivered total shareholders’ return (TSR) of 180% for FY16 and EPS accretion of 114.5% and dividend growth of 102%. ALIGNING REMUNERATION WITH BUSINESS PERFORMANCE AND STRATEGY Following last year’s record growth across all areas of the business we reviewed our remuneration framework to ensure that it retains our key executives, rewards and recognises the individual contributions of our people and further inspires them to achieve results aligned to business strategy and shareholder interests. As part of this review, and with particular note to the growing size and resulting market capitalisation of the Company, the Committee conducted a thorough external benchmarking review of Senior Executive and Non-Executive Director Remuneration. KEY OUTCOMES FOR FY16 REMUNERATION 1. Following the external benchmarking review, the Board undertook to increase the Fixed Annual Remuneration (FAR) of some senior executives. The increases ranged between 3% and 22%. Full details are on page 53. 2. The Board is very pleased with the ongoing performance of the CEO in continuing to deliver against the business strategy and leading the organisation through a period of unprecedented change and extraordinary growth. With regard to performance, relevant benchmarks and previous modest increases in FAR, the Board increased the CEO’s FAR by 29%. It is the intention of the Board to conduct another review of the CEO’s FAR for FY17. 3. In a year in which Blackmores delivered TSR of 180% and NPAT growth of 115%, it was appropriate to see NPAT financial targets for the Group and for most of Blackmores businesses achieved or exceeded. This triggered the payment of $3,563,981 of short-term incentives (STI) to Key Management Personnel (KMP) for FY16 which was higher than FY15 STI payments. Additionally, for the first time the FY16 STI maximum potential incentive was set at 100% FAR and it is very pleasing to see that many senior executives have achieved this outcome. The CEO received $890,098 in STI for FY16 which represented 100% FAR. The STI was based on statutory NPAT and the Board did not exercise discretion in changing the calculation for purposes of determining the financial achievement of targets. Full details of the STI payments are on page 55. 4. The Board was also very pleased that under the long-standing Profit Share scheme, whereby of 10% of NPAT is paid to employees of Blackmores, delivered 44 days incremental salary for each employee as a result of the record profit. 5. No executive long-term incentive (LTI) awards were eligible to vest in FY16 as the first three year LTI plan came into effect at the beginning of FY15. The FY16 LTI plan remains a three year plan. The total remuneration for the financial year, the details of which are shown on page 53, includes an accounting expense for all unvested performance rights and has been calculated using the value of the maximum number of rights that could vest over the three year performance period of each LTI plan. BLACKMORES ANNUAL REPORT 2016 44 6. In line with market capitalisation growth and following a review of relevant external benchmarks, Non-Executive Director fees were increased by 13.5%. Shareholders approved an increase of $300,000 to the total Directors Fee pool at the FY15 AGM. The total pool is now $1,000,000. FUTURE CHANGES TO REMUNERATION BEING CONSIDERED The FY17 LTI achievement hurdles have been increased following a review of market benchmarks and further consultation. The LTI plan will have an increased threshold hurdle of 5% three year compound annual growth rate (CAGR) in EPS. In order to receive the maximum award under the plan an achievement of 25% CAGR will be required. These new hurdles will ensure that executive reward is aligned with increasing shareholder value, a continuous focus on the successful achievement of long-term strategic goals and long-term retention of key executive management. On behalf of the Board and People and Remuneration Committee, I invite you to read the 2016 Remuneration Report and welcome your feedback on our approach to and disclosure of Blackmores’ remuneration arrangements. Helen Nash Chairman, People and Remuneration Committee CONTENTS 2016 REMUNERATION REPORT 1. Introduction 2. Senior Executive Remuneration Table – Non-statutory 3. Remuneration Governance and Framework 4. Senior Executive Remuneration Structure 5. Performance and Remuneration Outcomes 6. Senior Executive Remuneration Tables – Statutory 7. Employment Contracts 8. Non-Executive Directors’ Remuneration 9. Non-Executive Directors and Senior Executive Transactions 1. INTRODUCTION The Directors of Blackmores Limited present the Remuneration Report (the ‘Report‘) for the Blackmores Group. The Report outlines Blackmores’ remuneration framework and the outcomes for the year ended 30 June 2016 (FY16) for Blackmores Key Management Personnel. The Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001. In this Report the following terms and phrases have the meanings indicated below: Executive Directors – Chairman and the Chief Executive Officer and Managing Director. Directors – Executive Directors and Non-Executive Directors. Key Management Personnel – Non-Executive Directors and Senior Executives Senior Executives – Executive Directors and the other company executives who have authority and responsibility for planning, directing and controlling the activities of the Blackmores Group, directly or indirectly. Exercised – Owned. Granted – Assigned to, but not yet vested. Vested – Met performance criteria and available to be exercised, but not yet owned. Key Management Personnel The following table lists all the current Key Management Personnel (KMP) referred to in this Report: Non-Executive Directors David Ansell Non-Executive Director and member of the Audit and Risk Committee and Nominations Committee John Armstrong Non-Executive Director and member of the Audit and Risk Committee and Nominations Committee Stephen Chapman Non-Executive Director, Deputy Chairman, Chairman of the Nominations Committee, member of the Audit and Risk Committee and People and Remuneration Committee Helen Nash Non-Executive Director, Chairman of the People and Remuneration Committee and member of the Nominations Committee Brent Wallace Non-Executive Director, Chairman of the Audit and Risk Committee, member of the People and Remuneration Committee and Nominations Committee Executive Directors Marcus Blackmore Chairman of the Board, member of the People and Remuneration Committee and Nominations Committee Christine Holgate Chief Executive Officer, Managing Director and member of the Nominations Committee Senior Executives Lesley Braun Director Blackmores Institute Aaron Canning Chief Financial Officer Nathan Cheong Managing Director BioCeuticals Cecile Cooper Company Secretary and Director of Corporate Affairs David Fenlon Managing Director Australia and New Zealand Richard Henfrey Chief Operating Officer Peter Osborne Managing Director Asia BLACKMORES ANNUAL REPORT 2016 45 2016 REMUNERATION REPORT 2. SENIOR EXECUTIVE REMUNERATION OUTCOMES The following table has been provided to disclose additional non-statutory information to assist shareholders in understanding the total value of the remuneration paid or payable to Senior Executives who were KMP of Blackmores in FY16. The table sets out the cash and other benefits paid or payable relating to FY16. The remuneration outcomes prepared in accordance with accounting standards as required by the Corporations Act 2001 are contained on page 53 of the Report. The totals in the statutory remuneration table on page 53 of the Report are higher than the following table. This is because of the following: 1. leave movements – annual leave and long service leave movements due to an increase in the statutory accruals rather than cash payments; and 2. share-based payments – accounting standards require the share-based payments expense to be calculated using the fair value of the shares at grant date, amortised over the relevant performance and service period. The statutory remuneration table includes the accounting value for LTI grants for the FY15 and FY16 years which have not yet vested as they require performance hurdles and service periods being met in the future. SALARY AND STI AND PROFIT NON- FEES SHARE MONETARY1 OTHER2 SUPERANNUATION TOTAL $ $ $ $ $ $ Executive Directors Marcus Blackmore 2016 364,530 368,691 37,901 4,011 19,308 794,441 2015 353,891 284,395 - 4,011 18,255 660,552 Christine Holgate 2016 872,325 1,037,454 25,596 - 19,308 1,954,683 2015 671,475 528,599 - - 18,255 1,218,329 Lesley Braun 2016 281,131 286,818 6,713 - 19,308 593,970 2015 286,775 254,220 - - 18,255 559,250 Aaron Canning 2016 446,303 512,940 42,017 1,633 27,372 1,030,265 2015 231,710 217,239 - 1,633 31,338 481,920 Nathan Cheong 2016 350,972 297,650 15,352 - 19,308 683,282 2015 268,304 147,655 - - 7,947 423,906 Cecile Cooper 2016 261,097 335,871 4,625 2,004 29,372 632,969 2015 207,245 203,170 - 2,004 29,024 441,443 David Fenlon 2016 430,848 486,882 82,201 1,748 19,308 1,020,987 2015 412,514 370,351 - 1,748 18,441 803,054 Richard Henfrey 2016 419,909 486,882 37,218 1,825 25,808 971,642 2015 362,079 346,199 15,566 1,825 24,755 750,424 Peter Osborne 2016 375,744 391,508 - - - 767,252 2015 314,364 273,349 - - - 587,713 BLACKMORES ANNUAL REPORT 2016 46 Former Senior Executive Chris Last4 2016 - - - - - 2015 237,480 13,944 - 5,836 13,691 270,951 Total 2016 3,802,859 4,204,696 251,623 11,221 179,092 8,449,491 2015 3,345,837 2,639,121 15,566 17,057 179,961 6,197,542 1. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits. 2. ‘Other’ includes insurance and superannuation membership fees. 3. The value of LTI grants that vested in FY16 was Nil. 4. Chris Last ceased as a Senior Executive 27 March 2015. 2016 REMUNERATION REPORT 3. REMUNERATION GOVERNANCE AND FRAMEWORK Remuneration Governance People and Remuneration Committee The primary responsibility of the People and Remuneration Committee (the ‘Committee‘) is to make recommendations to the Board on remuneration strategy and policy for KMP and other executives of Blackmores that are in the best interests of Blackmores and its shareholders. This includes recommendations related to Non-Executive Directors Fees, executive remuneration and Short-term Incentives (STI ) and Long-term Incentive (LTI) schemes. The Committee also advises the Board on remuneration policies and practices for the Company. The responsibilities of the People and Remuneration Committee are set out in the Committee’s charter which can be viewed or downloaded from the Company’s website at blackmores.com.au (go to ‘Investor Centre’, then click on ‘Corporate Governance’). The charter is reviewed annually by the Committee and the Board. The People and Remuneration Committee comprises three independent Non-Executive Directors and the Executive Chairman who have experience in both remuneration governance and the Blackmores business. The members during FY16 were Helen Nash (Committee Chairman), Marcus Blackmore (Executive Chairman), Stephen Chapman and Brent Wallace. Marcus Blackmore will cease be a member of the Committee in FY17 in accordance with ASX Listing Rule requirements. Advisors to the Committee The People and Remuneration Committee has established protocols for engaging and dealing with external advisors and this is included in the Committee’s charter. The Committee obtains specialist external advice about remuneration structure and levels. The advice is used to support its assessment of the market to ensure that Senior Executives and Non-Executive Directors are being rewarded appropriately, given their responsibilities and experience. Executive remuneration packages are also reviewed annually against suitable benchmarks to ensure that an appropriate balance between fixed and incentive pay is achieved. The Committee did not use a remuneration consultant in the current financial year. Benchmarking of KMPs was conducted by utilising various independent published remuneration surveys. Remuneration Framework The remuneration framework links remuneration to both the Group’s performance and the individual’s performance and behaviour and provides the opportunity to share in the success and profitability of Blackmores in alignment with increased shareholder wealth. The remuneration framework is included in Blackmores’ remuneration structure and policies and the key elements of this framework are illustrated below: BLACKMORES REMUNERATION STRATEGY Rewards for the achievement of strategic goals, financial targets and operational performance Attract and retain talented Senior Executives and Directors Align Senior Executives to the enhancement of Blackmores’ earnings and shareholder wealth BLACKMORES REMUNERATION FRAMEWORK Fixed Remuneration – Not at Risk Component Short-term incentives (STI) – comprise cash payments linked to clearly specified annual group targets and individual objectives and behaviours. This element of remuneration is considered to be an effective tool in promoting the interests of Blackmores and its shareholders. The STI scheme is designed around appropriate performance benchmarks based primarily on Blackmores’ NPAT performance relative to prior year and requires the achievement of year on year growth. Profit share – Executive Directors and Senior Executives participate in the same cash based profit share plan as all permanent Blackmores staff. The scheme allocates up to 10% of the Group NPAT to eligible employees. Long-term incentives (LTI) – Participation is open to Executive Directors and Senior Executives determined to be eligible by the Board. Under this plan, rights to acquire shares in Blackmores are granted annually to eligible Senior Executives at no cost and vest provided specific performance hurdles are met. The Chairman’s incentive is a cash-based equivalent. Special long-term incentives (SLTI) – From time to time the Board may offer ‘one-off’ SLTIs to particular Executive Directors and Senior Executives in addition to the LTI. There are currently no SLTI’s in place. BLACKMORES ANNUAL REPORT 2016 Fixed Remuneration – It is targeted to be reasonable and fair, taking into account Senior Executives’ responsibilities and experience compared with competitive market benchmarking against companies with relative size and scale of Blackmores’ operations. Performance-based Remuneration – At Risk Component 47 2016 REMUNERATION REPORT 4. SENIOR EXECUTIVE REMUNERATION STRUCTURE Executive Remuneration Mix In determining the mix of Senior Executive remuneration, the Board aims to find a balance between: • fixed (not at risk) and performance (at risk) remuneration • short and long term remuneration • remuneration paid in cash and deferred equity. Blackmores’ target of fixed and at risk components of the current Senior Executives disclosed in the Report as a percentage of total target annual remuneration for FY16, is as follows: On Target Remuneration Mix CEO Senior Executives 55% 70% 18% 16% 27% 14% At maximum levels of STI and LTI the mix of remuneration elements expressed as a % of total remuneration2 is as follows: Remuneration Mix at Maximum Reward CEO Senior Executives 27% 32% 42% 41% BLACKMORES ANNUAL REPORT 2016 48 36% 22% 1. Fixed remuneration includes cash, non-monetary benefits and superannuation. 2. Total is the Aggregate Reward (Fixed Remuneration plus STI plus Profit Share plus LTI). 3. LTI value is expressed as the % of Fixed Annual remuneration as at the start of the three year performance period. Fixed Remuneration1 STI / Profit Share LTI3 Fixed Annual Remuneration (FAR) FAR includes base salary, non-monetary benefits (including fringe benefits tax and superannuation). The Committee and the Board conducts an annual review of remuneration at the end of each financial year for Senior Executives. The process incorporates a comprehensive assessment of market benchmarking, individual and company performance. The review conducted at the commencement of FY16 considered the considerable growth in market capitalisation and the size and regional expansion of operations. 2016 REMUNERATION REPORT Short-term Incentives (STI) – Performance Conditions Specific information relating to the actual annual performance awards is set out in the table on page 54. What is the annual incentive and who is eligible to participate? What is the amount the eligible employee can earn? The STI plan provides eligible employees with a reward for annual performance against measured targets set at the beginning of the performance period. Eligible employees include the Executive Directors, Senior Executives and other nominated employees. Chairman Chief Executive Officer Senior Executives % of FAR Less than 4% 0% 0% 0% Sliding Scale Sliding Scale Sliding Scale >60% What were the performance conditions for FY16? Year on year EBIT / NPAT Growth 100% 80% 80% Measures Chairman Chief Executive Officer Senior Executives Group Divisional Roles Heads Financial measures: Group NPAT achievement of growth over prior year 100% 100% 100% 30% Divisional EBIT achievement of growth over prior year - - - 70% NA Personal multiplier of 0 – 1.25 applied to the outcome of financial measures Personal multiplier of 0 – 1.25 applied to the outcome of financial measures Individual objectives: Financial (i.e. revenue, new product launches and other specific objectives) Non-financial measures (i.e. safety, employee engagement and other agreed objectives) Why were these performance measures chosen? NPAT performance over prior year is a well-recognised measure of financial performance and a key driver of shareholder returns. It is the primary measure considered by Directors in determining the level of dividend payments to shareholders. Using NPAT as an incentive performance measure ensures that incentive payments are aligned with Blackmores’ business strategy and objectives. The incentive targets are set by the Board at levels designed to reward superior performance. Achievement of NPAT growth over prior year aligns remuneration outcomes with shareholder’s expectations. Similarly EBIT as an incentive measure rewards dividend heads for the performance of business under their direct management. Individual performance was selected as a secondary performance condition to ensure that Senior Executives have clear objectives and performance indicators that are linked to Blackmores’ performance. When are performance conditions tested? NPAT and Divisional EBIT is calculated by Blackmores at the end of the financial year, verified by Blackmores’ auditors and published in the Group’s Financial Statements before any payment is made. This method was chosen to ensure transparency and consistency with disclosed information. The person to whom a Senior Executive reports assesses that individual’s performance by reviewing his or her individual objectives, key tasks and performance indicators and the extent to which they have been achieved. Individual objectives are set at the start of each financial year and are formally reviewed every six months. The Board reviews performance assessments for KMP. BLACKMORES ANNUAL REPORT 2016 Blackmores’ policy is that STIs will only be awarded when Blackmores meets agreed performance hurdles. In addition, Senior Executives are not awarded any STI in the instance of the lowest personal performance assessment. 49 2016 REMUNERATION REPORT Profit Share – Performance Conditions and Operation Specific information relating to the actual annual performance awards is set out in the table on page 54. What is the annual incentive and who is eligible to participate? Senior Executives participate in a profit share plan, whereby up to 10% of the Group NPAT is allocated to all eligible permanent Group staff on a pro-rata basis by reference to their fixed annual remuneration. The profit share plan is in addition to the STI award. What is the amount the executive can earn? The amount distributed is a percentage of Group NPAT. As the amount is distributed on a pro-rata basis, the amount earned in any year depends on both the Group NPAT achievement and the total number of employees and salaries in the calculation. The approximate maximum amount of fixed annual remuneration that can be earned is 17%. What were the performance conditions for FY16? Under the Company’s Collective Agreement, 7.5% of Group NPAT is allocated and an additional 2.5% of Group NPAT is allocated conditional on the achievement of Group NPAT growth on the prior financial year. Why were these performance measures chosen? NPAT is a well-recognised measure of financial performance and a key driver of shareholder returns. Using NPAT as an incentive performance measure ensures that incentive payments are aligned with Blackmores’ business strategy and objectives. When are performance conditions tested? Profit share is paid twice a year based on Blackmores’ NPAT calculation. All employees, including Senior Executives, may purchase up to $1,000 of Blackmores shares each year under the Staff Share Acquisition Plan with money that would have otherwise been received under the profit share plan. Long-term Incentives (LTI) – Performance Conditions Specific information relating to the actual annual performance awards is set out in the table on page 54. What is the annual incentive and who is eligible to participate? Eligible employees are invited annually by the Board to participate in the Executive Performance Share Plan (EPSP). Under this plan, eligible employees are granted rights to acquire shares in Blackmores. What is the amount the eligible employee can earn? Chief Executive Officer % of target performance % of FAR Less than 3.9% 3.9% 3.9% to 7.8% 7.8% 7.8% to 17.9% 17.9% 0% 25% Sliding scale 50% Sliding scale 150% Eligible employees include the Executive Directors, Senior Executives and other nominated employees. Chairman and Senior Executives 0% 10% Sliding Scale 20% Sliding scale 60% What was the performance condition for FY16? Why were these performance measures chosen? BLACKMORES ANNUAL REPORT 2016 50 The performance condition is the three-year compound annual growth rate in EPS. The performance period for measuring EPS growth is three years (FY16 to FY18). In determining the performance conditions for Blackmores’ LTI plan, the Board has recognised EPS growth to be the key driver of shareholder value, influencing both share price and the capacity to pay increased dividends. Growth in EPS is simple to calculate and basing the vesting of rights on EPS growth encourages Senior Executives to improve Blackmores’ financial performance. As Senior Executives increase their shareholding in Blackmores through awards received under the EPSP, their interests become more directly aligned with those of Blackmores’ other shareholders. 2016 REMUNERATION REPORT Long-term Incentives (LTI) – Performance Conditions How does the EPSP operate? The value of rights granted to eligible employees is equivalent to a percentage of their base remuneration at the time of grant. The number of rights granted equals the value of rights divided by: • the weighted average price of Blackmores shares for the five day trading period commencing seven days after Blackmores’ results in respect of the prior financial year (year ended 30 June 2015) are announced to the ASX, less • the amount of any final dividend per share declared as payable in respect of the prior financial year (year ended 30 June 2015). Rights are automatically exercised following vesting, audit clearance of the 2018 Financial Statements, Board approval and the first trading window. These Blackmores shares are issued to participants at zero cost. The number of shares issued is identical to the number of rights exercised. In the case of the Chairman, a cash equivalent is paid in lieu of shares. Where regulations prohibit an equity based plan, a cash equivalent is awarded. When are performance conditions tested? Compounded annual growth in EPS is calculated at the end of the three year performance period and verified with reference to Blackmores’ audited Financial Statements prior to determining the number of rights that will vest. This method was chosen as it is an objective test that is easy to calculate and ensures transparency and consistency with public disclosures. What happens if the eligible employee ceases employment during the performance period? If an executive ceases employment during the three year performance period the rights lapse. In certain circumstances the board has discretion to allow a portion of rights to vest for a ‘good leaver‘. 5. PERFORMANCE AND REMUNERATION OUTCOMES Performance Incentives – Actual Performance 2016 Financial Year A continued focus on delivering against the strategic priorities and unprecedented growth over the past two years is reflected in improved returns that are illustrated in the charts below: 500 60 DIVIDEND PER SHARE (CENTS) 400 410 RETURN ON EQUITY (%) 56% 50 300 40 200 30 100 0 2012 2013 2014 2015 2016 20 2012 2013 2015 SHARE PRICE ($) 131.4 120 Investors who bought a Blackmores share five years ago would have multiplied their investment five times. 2016 90 60 30 0 2012 2013 2014 2015 2016 BLACKMORES ANNUAL REPORT 2016 150 2014 51 2016 REMUNERATION REPORT 100 Short-term Incentives (STI) Similar to previous years, NPAT achievement was selected as the Group performance measure for the STI awards in respect of FY16. 100.0 80 Blackmores’ FY16 NPAT of $100 million represented a 115% increase. NPAT ($M) 60 The amount awarded to the Senior Executives for the FY16 STI was $3,563,981 (2015: $2,245,759). This award is included under the ‘STI and Profit Share’ column in the remuneration disclosures table on page 53. Blackmores NPAT over the past five years is shown in the following graph. Long-term Incentives (LTI) Similar to previous years, EPS achievement was selected as the Group performance measure for the LTI awards in respect of FY15. No long term incentive (LTI) awards were eligible to vest in FY16. A new LTI Plan first came into effect in FY15 LTI plan which included a three-year performance period. 40 20 0 600 2012 2013 2014 2015 EPS (CENTS) 2016 580.6 500 400 The total remuneration for the financial year, the details of which are shown on page 53, includes an accounting expense of $2,026,265 (2015: $736,784) for these unvested performance rights. This amount has been calculated assuming the achievement of the maximum performance hurdle over the threeyear performance period and represents one third of the total value of the unvested rights Blackmores EPS over the past five years is shown in this graph. 300 200 100 0 2012 2013 2014 2015 2016 CEO Remuneration Outcomes – Five Year History The Group’s remuneration framework is designed to reward Senior Executives based on the achievement of the Group’s performance goals and to share in the success and profitability of Blackmores in alignment with increased shareholder wealth. The history of the CEO performance related remuneration over the past five years illustrates this linkage to business performance. STI earned as a % of maximum AUS$m LTI awarded as a % of maximum Cents 600 120 52 100 500 100 80 BLACKMORES ANNUAL REPORT 2016 100 80 400 80 60 60 300 60 40 40 200 40 20 20 100 20 0 0 2012 2013 2014 2015 2016 0 0 2012 2013 2014 Net Earnings After Tax (NPAT) Earnings Per Share (EPS) STI LTI 2015 2016 2016 REMUNERATION REPORT 6. SENIOR EXECUTIVE REMUNERATION TABLES Statutory Remuneration Table The following table discloses the remuneration outcomes of the Senior Executives of Blackmores for the financial year ended 30 June 2016. The table has been prepared in accordance with Section 300A of the Corporations Act 2001 and has been audited. The amounts in statutory table are higher than from the remuneration table on page 46 because of the following: 1. Leave movements – annual leave and long service leave movements due to an increase in the statutory accruals are included rather than cash payments 2. Share-based payments - accounting standards requires share-based payments expense to be calculated using the grant date fair value of the shares amortised over the relevant performance and service period. The statutory remuneration table includes the accounting value for LTI grants for the FY15 and FY16 years which have not yet vested. OTHER POST- LONG-TERM SHARE EMPLOYMENT EMPLOYMENT BASED SHORT-TERM EMPLOYMENT BENEFITS BENEFITS BENEFITS PAYMENT SALARY STI AND NON- SUPER- PERFORMANCE AND FEES PROFIT SHARE1 MONETARY2 OTHER3 ANNUATION OTHER4 RIGHTS5 TOTAL $ $ $ $ $ $ $ $ Executive Directors Marcus Blackmore 2016 357,770 368,691 37,901 33,418 19,308 7,088 166,433 990,609 2015 353,891 284,395 - 33,890 18,255 6,502 63,754 760,687 Christine Holgate 2016 775,198 1,037,454 25,596 68,229 19,308 33,161 885,696 2,844,642 2015 637,909 528,599 - 52,622 18,255 12,410 289,492 1,539,287 Lesley Braun 2016 267,401 286,818 6,713 11,612 19,308 1,401 137,188 730,441 2015 270,170 254,220 - 22,084 18,255 468 51,447 616,644 Aaron Canning6 2016 421,343 512,940 42,017 36,168 27,372 961 172,832 1,213,633 2015 200,198 217,239 - 19,812 31,338 - 49,580 518,167 Nathan Cheong 2016 334,143 297,650 15,352 28,145 19,308 2,800 134,276 831,674 2015 254,076 147,655 - 22,635 7,947 712 48,535 481,560 Cecile Cooper 2016 240,275 335,871 4,625 33,221 29,372 25,902 117,394 786,660 2015 194,364 203,170 - 19,880 29,024 7,440 39,716 493,594 David Fenlon 2016 407,735 486,882 82,201 35,621 19,308 2,264 72,026 1,106,037 2015 387,255 370,351 - 32,539 18,441 859 72,026 881,471 Richard Henfrey 2016 366,955 486,882 37,218 40,615 25,808 12,970 187,905 1,158,353 2015 328,407 346,199 15,566 32,052 24,755 6,795 67,357 821,131 Peter Osborne 2016 317,937 391,508 - 28,661 - - 152,515 890,621 2015 291,723 273,349 - 26,323 - - 54,877 646,272 Former Senior Executive 1. ‘STI and Profit Share’ includes amounts paid by way of profit share on 17 Dec 2015 and 24 Jun 2016. 2. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits. 3. ‘Other’ shown in short-term employment benefits relate to provisions for annual leave. 4. ‘Other’ shown in long-term employment benefits relate to provisions for long service leave. 5. The FY16 share-based payments relate to the LTI plan and represent the FY16 portion of the fair value of rights granted in FY16 and FY15. Vesting of the rights remains subject to performance and service conditions as outlined page 50. 6. Aaron Canning joined 4 Dec 2014. 7. Chris Last ceased as a Senior Executive 27 Mar 2015. Directors’ and Officers’ liability insurance has not been included in the figures above since the amounts involved are not material and it is not possible to determine an appropriate allocation basis. BLACKMORES ANNUAL REPORT 2016 Chris Last7 2016 - - - - - - - 2015 234,742 13,944 - 7,346 13,691 1,068 - 270,791 Total 2016 3,488,757 4,204,696 251,623 315,690 179,092 86,547 2,026,265 10,552,670 2015 3,152,735 2,639,121 15,566 269,183 179,961 36,254 736,784 7,029,604 53 2016 REMUNERATION REPORT Performance Related Remuneration Statutory Performance Related Remuneration Table The following table shows an analysis of the non-performance and performance related (STI, Profit Share and LTI) components of the FY16 remuneration mix detailed in the Statutory Remuneration table. NON-PERFORMANCE STI AND PERFORMANCE TOTAL PERFORMANCE RELATED REMUNERATION1 PROFIT SHARE RIGHTS2 RELATED REMUNERATION % % % % Executive Directors Marcus Blackmore 2016 46.0% 37.2% 16.8% 54.0% 2015 54.2% 37.4% 8.4% 45.8% Christine Holgate 2016 32.4% 36.5% 31.1% 67.6% 2015 46.9% 34.3% 18.8% 53.1% Senior Executives Lesley Braun 2016 42.0% 39.2% 18.8% 58.0% 2015 50.4% 41.2% 8.4% 49.6% Aaron Canning3 2016 43.5% 42.3% 14.2% 56.5% 2015 48.5% 41.9% 9.6% 51.5% Nathan Cheong 2016 48.1% 35.8% 16.1% 51.9% 2015 59.3% 30.7% 10.0% 40.7% Cecile Cooper 2016 42.4% 42.7% 14.9% 57.6% 2015 50.8% 41.2% 8.0% 49.2% David Fenlon 2016 49.5% 44.0% 6.5% 50.5% 2015 49.8% 42.0% 8.2% 50.2% Richard Henfrey 2016 41.7% 42.1% 16.2% 58.3% 2015 49.6% 42.2% 8.2% 50.4% Peter Osborne 2016 38.9% 44.0% 17.1% 61.1% 2015 49.2% 42.3% 8.5% 50.8% Former Senior Executive Chris Last4 2016 - - - 2015 94.8% 5.2% - 5.2% Total 2016 41.0% 39.8% 19.2% 59.0% 2015 52.0% 37.6% 10.5% 48.0% BLACKMORES ANNUAL REPORT 2016 54 1. Non-performance related remuneration includes the accounting expense from all of the columns in the ‘Statutory Remuneration Table’ other than ‘STI and Profit Share’ and the LTI ‘Performance Rights’. 2. LTI is the ‘Performance Rights’ which includes the FY16 accounting expense of the FY16 portion of the rights granted in FY16 and FY15. 3. Aaron Canning joined 4 December 2014. 4. Chris Last ceased as a Senior Executive 27 March 2015. 2016 REMUNERATION REPORT Short Term Incentives The following table shows the details of the STI cash bonuses awarded as remuneration to Executive Directors and Senior Executives that was paid for the financial year ended 30 June 2016. STI Included in Personal STI earned as a % % of maximum STI remuneration1 Multiplier of maximum STI award forfeited2 $ % % 3 Executive Directors Marcus Blackmore Christine Holgate 307,016 890,098 - 1.25 100 100 0 0 Lesley Braun Aaron Canning Nathan Cheong4 Cecile Cooper David Fenlon Richard Henfrey Peter Osborne 239,262 434,917 246,767 290,000 414,000 414,000 327,921 1.00 1.15 1.25 1.25 1.15 1.15 1.15 80 92 77 100 92 92 92 20 8 23 0 8 8 8 Senior Executives 1. Amounts included in remuneration for the financial year represent the amount related to the financial year based on achievement of personal goals and satisfaction of performance criteria. The Committee approved these amounts on 12 August 2016. 2. Amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year. 3. The maximum potential award was achieved in respect of Group financial measure being Group NPAT achievement over prior year. Senior Executives have the ability to earn a personal multiplier on the achievement of individual objectives. The maximum multiplier is 1.25. 4. Nathan Cheong’s STI financial measure includes divisional EBIT achievement over prior year. The maximum potential was not achieved in FY16. Share based payments The table below outlines the rights over ordinary shares in the Company that were granted as compensation to Executive Directors and Senior Executives during FY16 and FY15. The fair value of awards is calculated in accordance with AASB 2 Share-based Payments. END OF HOLDING NAME GRANT VESTING EXERCISE LOCK NUMBER NUMBER OF DATE NOTE RIGHTS FAIR VALUE PER RIGHT TOTAL FAIR VALUE SHARE PRICE % OF VALUE OF MAXIMUM OF NUMBER RIGHTS NOT VALUE1 DATE RIGHTS2, 5 GRANTED VALUE3 DATE VESTED Executive Director Christine Holgate 7/11/2014 34,436 24/11/2015 12,127 $868,476 $32.22 $1,109,528 30/06/2017 - - - 09/2017 $1,109,527 $147.49 $1,788,611 $25.22 $179.50 $2,176,797 30/06/2018 - - - 09/2018 $2,176,796 $197,186 Senior Executives Lesley Braun 7/11/2014 6,120 $25.22 $154,346 $32.22 $197,186 30/06/2017 - - - 09/2017 24/11/2015 1,744 $147.49 $257,223 $179.50 $313,048 30/06/2018 - - - 09/2018 $313,048 Aaron Canning 10/12/2014 5,143 $28.92 $148,736 $32.65 $167,919 30/06/2017 - - - 09/2017 $167,918 24/11/2015 2,507 $147.49 $369,757 $179.50 $450,007 30/06/2018 - - - 09/2018 $450,006 5,773 $25.22 $145,595 $32.22 $186,006 30/06/2017 - - - 09/2017 $186,006 24/11/2015 1,744 Nathan Cheong 7/11/2014 $257,223 $179.50 $313,048 30/06/2018 - - - 09/2018 $313,048 $25.22 $119,139 $32.22 $152,207 30/06/2017 - - - 09/2017 $152,207 24/11/2015 1,580 $147.49 $233,034 $179.50 $283,610 30/06/2018 - - - 09/2018 $283,610 $25.22 $216,085 $32.22 $276,061 30/06/2017 - - - 09/2017 $276,060 $258,146 David Fenlon 7/11/2014 8,568 Richard Henfrey 7/11/2014 8,012 $25.22 $202,063 $32.22 $258,147 30/06/2017 - - - 09/2017 24/11/2015 2,452 $147.49 $361,645 $179.50 $440,134 30/06/2018 - - - 09/2018 $440,134 6,528 $25.22 $164,636 $32.22 $210,332 30/06/2017 - - - 09/2017 $210,332 24/11/2015 1,986 $147.49 $292,915 $179.50 $356,487 30/06/2018 - - - 09/2018 $356,487 Peter Osborne 7/11/2014 1. Disclosure of maximum value is required under s300A of the Corporations Act 2001. The value disclosed represents the underlying value of shares at the time of grant multiplied by the number of rights granted to each individual. The minimum value of rights awarded is zero if performance conditions are not achieved. 2. The total value of rights granted in the year is the fair value of the rights calculated at the time of grant. This amount is allocated to remuneration over the vesting period (i.e. FY16 grant over 1 July 2015 to 30 June 2018). 3. The number of rights vested is equal to the number of rights exercised and the number of shares issued; vesting occurs on 30 June and shares are issued in September following audit clearance of the Group’s results and Board approval. 4. Value of rights at exercise is equal to the number of rights exercised multiplied by the share price at exercise date. 5. There were nil shares that vested in the FY16 and FY15 years. BLACKMORES ANNUAL REPORT 2016 $147.49 4,724 Cecile Cooper 7/11/2014 55 2016 REMUNERATION REPORT 7. EMPLOYMENT CONTRACTS The remuneration and other terms of employment are covered in employment contracts. No contract is for a fixed term. TERMINATION Executive Directors’ and Senior Executives’ contracts can be terminated by Blackmores or the Senior Executive providing notice periods as shown in the following table. Name Notice periods / Termination Payment Christine Holgate 1 Six months’ notice (or payment in lieu) including redundancy. May be terminated immediately for serious misconduct. Senior Executives2 Three months’ notice (or payment in lieu). May be terminated immediately for serious misconduct. Redundancy Payments Years of continuous service Notice periods / Termination Payments. Up to one year Two weeks’ pay. Between one and 10 years Two weeks’ pay plus an additional three weeks of pay for each completed year of service. 10 years or more 29 weeks’ pay plus an additional three weeks of pay for each completed year of service following 10 years capped at a maximum of 52 weeks of pay. 1. For the purposes of calculating Christine Holgate’s payment, a month of pay is based on her total remuneration package at the time, being base salary, superannuation contributions and other benefits as agreed from time to time. 2. For the purposes of calculating the amount payable for all other Senior Executives, one week of pay is the average amount received by the individual as wages or salary over the four weeks of employment immediately preceding termination of employment. 8. NON-EXECUTIVE DIRECTOR REMUNERATION Non-Executive Directors receive fixed annual fees comprising a Board fee, Committee fee and Committee Chair fee as applicable. No incentive based payments are awarded to Non-Executive Directors. Blackmores makes superannuation contributions on behalf of Non-Executive Directors in accordance with statutory obligations and each Non-Executive Director may sacrifice their fees in return for additional superannuation contributions paid by Blackmores. Retirement allowances were accrued until 1 October 2003 for Non-Executive Directors appointed prior to this date. For Directors appointed prior to 1 October 2003, a retirement allowance applies of $15,333 per annum, which accrues each year but is capped after nine years of service at $138,000. No further retirement allowances have accrued to these individuals. Non-Executive Directors appointed after 1 October 2003 do not receive a retirement allowance. Shareholders at a meeting held on 29 October 2015 determined the maximum total Non-Executive Directors’ fees payable, including committee fees, to be $1,000,000 per year, to be distributed as the Board determines. Compensation arrangements for Non-Executive Directors are determined by Blackmores after reviewing published remuneration surveys and market information. In line with market capitalisation and following a review of relevant external benchmarks, base and committee fees for Non-Executive Directors were increased in FY16 by 13.5% effective 1 July 2015. Non-Executive Directors’ fees levels for FY16 include: BLACKMORES ANNUAL REPORT 2016 56 2016 2015 DEPUTY DEPUTY CHAIRMAN CHAIRMAN MEMBER CHAIRMAN CHAIRMAN MEMBER FEES $ $ $ $ $ $ Board1 Audit and Risk People and Remuneration Nomination 1. Chairman of the Board is an Executive Director - 47,894 95,787 - 42,196 84,394 16,356 - 9,813 14,410 - 8,646 16,356 - 9,813 14,410 - 8,646 - - - - - - 2016 REMUNERATION REPORT The total annual Non-Executive Director remuneration for the Board of five Non-Executive Directors for FY16 was $561,761. The following table discloses the remuneration of the Non-Executive Directors for the financial year ended 30 June 2016. SHORT-TERM POST EMPLOYMENT EMPLOYMENT BENEFITS BENEFITS FEES AND ALLOWANCES NON-MONETARY1 SUPERANNUATION TOTAL $ $ $ $ Non-Executive Directors David Ansell 2016 2015 John Armstrong2 2016 2015 Stephen Chapman3 2016 2015 Helen Nash 2016 2015 Brent Wallace 2016 2015 Former Non-Executive Director 96,438 84,968 4,235 - 9,170 109,843 8,074 93,042 96,438 14,052 - - 9,170 105,608 1,335 15,387 86,623 10,352 8,337 105,312 106,737 - 10,140 116,877 102,413 88,654 111,375 93,859 6,882 - 9,738 119,033 8,422 97,076 - 10,590 121,965 - 8,917 102,776 Verilyn Fitzgerald4 2016 - - - 2015 30,217 - 2,871 33,088 Total 2016 493,287 21,469 47,005 561,761 2015 418,487 - 39,759 458,246 1. ‘Non-monetary’ includes benefits and any applicable fringe benefits tax. 2. John Armstrong joined as a Non-Executive Director 5 May 2015. 3. Stephen Chapman was on an unpaid leave of absence from 14 April 2015 to 30 November 2015 4. Verilyn Fitzgerald retired as a Non-Executive Director 23 October 2015. Shareholders approved a retirement scheme by resolution in 1993 and V Fitzgerald was paid a retirement amount of $138,000 in accordance with this approved scheme. The amount was fully provided and disclosed in prior year’s financial statements. Directors’ and Officers’ liability insurance has not been included in the figures above since the amounts involved are not material and it is not possible to determine an appropriate allocation basis. BLACKMORES ANNUAL REPORT 2016 57 2016 REMUNERATION REPORT 9. NON-EXECUTIVE DIRECTORS AND SENIOR EXECUTIVE TRANSACTIONS EQUITY HOLDINGS During FY16 and FY15 there were no share options in existence. There have been no share options issued since the end of the financial year. SHARES The table below outlines the fully paid ordinary shares of Blackmores Limited held by KMP. FULLY PAID ORDINARY SHARES OF BLACKMORES LIMITED RECEIVED ON BALANCE AT SETTLEMENT NET CHANGE BALANCE AT 2016 1/7/15 OF RIGHTS OTHER1 30/6/16 NUMBER NUMBER NUMBER NUMBER Non-Executive Directors David Ansell John Armstrong Stephen Chapman Helen Nash Brent Wallace 1,000 - 27,528 1,000 13,701 Executive Directors - 1,000 20,028 1,000 12,302 - - (7,500) - (1,399) Marcus Blackmore Christine Holgate 4,268,815 68,102 - - (48,980) (23,100) 4,219,835 45,002 Aaron Canning Leslie Braun Cecile Cooper Richard Henfrey Peter Osborne Total 15,500 10,855 41,792 7,797 356 4,456,446 - 12 (3,000) (988) (250) (166) (85,371) 15,512 7,855 40,804 7,547 190 4,371,075 Senior Executives 1. Includes shares issued under the Company’s Staff Share Acquisition Plan. RIGHTS TO SHARES The table below outlines the rights to fully paid ordinary shares of Blackmores Limited held by KMP. GRANTED AS BALANCE VESTED VESTED RIGHTS BALANCE COMPEN- NET OTHER BALANCE AS VESTED AT BUT NOT AND VESTED 2016 AS AT 1/7/15 SATION EXERCISED CHANGE AT 30/6/16 30/6/16 EXERCISABLE EXERCISABLE DURING YEAR NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER Executive Director C Holgate 34,436 12,127 - - Lesley Braun Aaron Canning1 Nathan Cheong Cecile Cooper David Fenlon Richard Henfrey Peter Osborne Total 6,120 5,143 5,773 4,724 8,568 8,012 6,528 79,304 1,744 2,507 1,744 1,580 - 2,452 1,986 24,140 - - 46,563 - - Senior Executives BLACKMORES ANNUAL REPORT 2016 58 (for Key Management Personnel) 7,864 7,650 7,517 6,304 8,568 10,464 8,514 103,444 1. The opening balance for Aaron Canning includes rights for the period as a KMP (4 December 2014 to 30 June 2015). - - - - - - - - - - - - 2016 REMUNERATION REPORT LOAN DISCLOSURES There were no loan balances exceeding $100,000 due from KMP during or at the end of the financial year (2015: $nil). OTHER TRANSACTIONS WITH KEY MANAGEMENT Transactions entered into during the year with KMP of Blackmores Limited and the Group are on the same basis as normal employee, supplier or customer relationship on the same terms and conditions and those dealings on an arm’s length basis which include: • the receipt of dividends on their shareholdings, whether held privately or through related entities or through the employee share plans in the same manner as all ordinary shareholders • terms and conditions of employment • purchases of goods and services • expense reimbursement. No interest was paid to or received from KMP. Signed in accordance with a Resolution of the Directors made pursuant to s298(2) of the Corporations Act 2001. On behalf of the Directors Marcus C Blackmore AM Director Dated in Sydney, 24 August 2016 BLACKMORES ANNUAL REPORT 2016 59