REMUNERATION REPORT  (CONTINUED) D. EXECUTIVE KMP COMPENSATION  (continued) 5. Variable Remuneration — Long Term Incentive (“LTI”)  (continued) 24 VILLAGE ROADSHOW LIMITED (a) Objective  (continued) (b) Structure (i) Executive Share Plan and Loan Facility (“ESP”) (ii) 2008 Option Plan for CEO (“2008 OP”) Mr. Graham Burke, the Company’s CEO and from 29 November 2013  Co-Executive Chairman and Co-Chief Executive Officer and an Executive  Director KMP, was granted up to 6 million options over ordinary shares  exercisable at $3.00 per share which were issued on 18 July 2008, with  vesting subject to performance hurdles relating to growth in earnings per  share and growth in dividends. Following the $1.00 reduction of share  capital approved by shareholders at the General Meeting on 29 June 2011,  the exercise price of the options was reduced to $2.00 per share, effective  from 19 July 2011. The Company has used the fair value measurement provisions of AASB 2:  Share-based Payment  for all options or equity instruments granted to  Executive KMP and senior executives after 7 November 2002 which had not  vested as at 1 January 2005. Under AASB 2:  Share-based Payment  these are  all required to be accounted for and valued as equity settled options. For the  purpose of this Report, these have been referred to as ‘in substance  options’ even where the equity instrument itself is not a share option. The ESP has limited recourse loans secured over the relevant shares  together with a buy-back option in the event of default. The Company has full  control over all loans and the repayment thereof and full control over all  shares including through holding locks. From 1 July 2011 the Company has  implemented a policy that specifically prohibits the hedging of incentive  remuneration granted to Executive KMP, whether restricted or unrestricted.  For the 2008 and 2012 options granted to Mr. Burke, the terms of the offer  specifically prohibit the hedging of unvested options by Mr. Burke.  A summary of the Company’s incentive remuneration hedging policy is set  out in the Corporate Governance Statement on pages 29 to 33. There have been no long term incentive plan allocations during the year to  any Executive Committee KMP (2013: allotment of 300,000 shares on  29 November 2012 at $3.78 to Ms. J.E. Raffe under the Company’s Executive  Share Plan). The fair value of each ESP ‘in substance option’ for Ms. Raffe  estimated at date of grant on 29 November 2012 was $1.05. The notional  adjusted equity value of the allotment and the percentage of each Executive  Committee KMP’s total remuneration under the LTI are detailed on  pages 19 and 20 of this Report. Other than as noted below, no options have been granted, exercised or  lapsed during the reporting period. Details of shares in the Company,  unissued shares under option, shares issued as a result of the exercise of  options and ‘in substance options’ held during the period in relation to  Executive KMP and Non-Executive Director KMP of the Company are set  out in section F of this Report. There are no provisions within any of the LTI plans for the automatic  removal of holding restrictions on the relevant shares in the event of  a change of control of the Company. The Company considers that the five year period over which the ESP shares  are ‘earned’ is appropriate given the shorter term performance hurdles to  which each Executive KMP and senior executive is subject. Furthermore  the long term horizon of the loans from the consolidated entity for the ESP  continues past the final restricted holding date of the shares for the  duration of the employment of the Executive KMP and senior executive with  the Group, further demonstrating the alignment of the LTI with the long  term interests of the Company’s shareholders. The shares that are the subject of the ESP are offered at market value on  the date of issue to the Executive Committee KMP and other senior  executives and the benefits, if any, under the ESP are correlated to the  performance of the Company via the share price performance of the  underlying share. The LTI plans for other Executive Committee KMP and senior executives  have no specific performance conditions for the removal of restrictions  over the relevant shares other than successful achievement of annual  personal performance criteria. Any value accruing to the Executive  Committee KMP is derived from improvement in the Company’s share price  and dividends and distributions by the Company. The LTI plan is also  regarded by the Remuneration Committee as a partial retention  mechanism and encourages a sense of ownership with those Executive  Committee KMP and senior executives to whom the LTI’s are granted,  assisting in aligning their long term interests with those of shareholders. The LTI for Mr. Burke under the 2008 OP and 2012 OP are specifically  designed as ‘at risk’ remuneration, linked to the dividend and earnings per  share performance. The performance hurdles relevant to the 2008 and  2012 grant of options to Mr. Burke are described below. The 2008 OP  ceased in March 2013. All LTI plans have been approved by shareholders at the time of their  introduction. Grants are made from time to time as appropriate and all  proposed grants to Directors of the Company are put to shareholders for  approval. The quantum of LTI grants are reflective of the seniority of the  position of the relevant executive and their ability to contribute to the overall  performance of the Group. Participation in the LTI plans listed above for the Group’s Executive KMP  is set out in Note 25 to the Financial Statements. In addition the Group has a loan arrangement over a 1993 legacy equity- linked performance plan in which Mr. P.M. Harvie is the sole remaining  participant, where dividends are used to repay the interest accrued with  any surplus dividend payment used to repay the capital amount of the loan.  All grants to Mr. Harvie under this legacy plan were in his capacity as an  executive of the consolidated entity and were prior to him becoming part of  KMP of the Company. Loans over 64,350 shares were repaid from dividends  during 2014 (2013: Nil shares). The fair value of such ‘in substance option’ grants are disclosed as part of  Executive KMP compensation and are amortised on a straight-line basis  over five years. The Company does not consider it is appropriate to ascribe  a ‘value’ to the LTI of Executive KMP for remuneration purposes other than  the amortised fair value measurement in accordance with the provisions of  AASB 2:  Share-based Payment . From 1 January 2005, options or ‘in substance options’ granted as part of  Executive KMP and other senior executives’ compensation have been  valued using the Black Scholes or binomial option-pricing model or the  Monte Carlo simulation technique, which takes account of factors including  the option exercise price, the current level and volatility of the underlying  share price, the risk-free interest rate, expected dividends on the  underlying share, current market price of the underlying share and the  expected life of the option. A detailed summary of these various LTI plans is set out below. The Company’s ESP was approved by shareholders on 19 November 1996  and allowed for the issue of up to 5% of the Company’s issued A Class  preference shares to executives and employees of the consolidated entity  and significant associated entities. Directors of the Company are not  eligible to participate in the ESP. The conversion of the Company’s  preference shares on 16 November 2010 into ordinary shares also applied  to ESP preference shares and the ESP now only relates to ordinary shares. All grants to Mr. P.M. Harvie under the ESP were in his capacity as an  executive of the consolidated entity and were prior to him becoming  a Director of the Company. Offers are at the discretion of the Company’s Remuneration Committee and  shares are issued at the 5-day weighted average price on the market prior  to allotment, rounded up to the next whole cent. The shares are held directly  by the Executive Committee KMP who pays for the allotment by obtaining  a loan from the consolidated entity which holds the ESP shares as security. The ESP was amended in 2012. Shares issued prior to 2012 are earned  (become unrestricted) at the rate of 20% per year over five years from date  of issue. The loan bears interest at ten cents per share per annum and the  first ten cents of dividends per share each year is used to repay the interest  accrued and 50% of the remaining dividend per share is used to repay the  capital amount of the loan. For shares issued in 2012 and thereafter, one  third are earned and become exercisable at the end of years 3, 4 and 5 from  the date of issue and the loan bears interest at twenty cents per share per  annum and the first twenty cents of dividends per share per year is used to  repay the interest charged and 50% of the remaining dividend per share is  used to repay the capital amount of the loan. For shares issued in 2012 or  thereafter, where the loan balance owing falls below $2.00 per share, the  interest rate becomes 10% of the balance owing on the loan. If the Executive Committee KMP or other senior executive resigns or is  dismissed, the restricted shares are forfeited and the loan on the remaining  unrestricted shares must be repaid within six months or such other time as  approved by the Company’s Remuneration Committee. In circumstances  where the market value of the remaining ESP shares at the end of the  six month period is less than the amount owing on the loan, then the  Company will buy-back the shares and cancel them in repayment of the  loan without further recourse to the former Executive Committee KMP or  other senior executive. This is the basis on which they have been described  as ‘in substance options’. CLOSE FILE X