IOOF  | Annual Report 2012 6.2 Total Fixed Remuneration and Short Term Incentive Following shareholder approval, 150,000 performance rights  and 300,000 share options were granted to Mr Kelaher on  23 November 2010 in relation to the 2010/11 financial year.  An additional 150,000 performance rights and 300,000 share  options were granted to Mr Kelaher on 1 July 2011. The performance rights and share options will be subject to  a three year performance period commencing on the date  of grant. They will vest after the performance period and be  exercisable in the following manner: The remuneration of Mr Kelaher is set by the Board and  is based on a market review of the level of remuneration  required to attract and retain a high calibre individual suitable  for the role. During the financial year ended 30 June 2012,  Mr Kelaher received a remuneration package comprising  fixed remuneration of $1,090,000. This amount included  $65,000 annual Director’s fee paid directly by DKN Financial  Group Limited prior to acquisition by the Group which has  been incorporated into Mr Kelaher’s remuneration from the  Group. Mr Kelaher was entitled to a total STI opportunity  of up to a maximum of $870,000 based on achievement of  superior performance against set targets determined by the  Remuneration Committee. In July 2012 the Remuneration  Committee assessed Mr Kelaher’s performance against those  targets and determined an STI amount of $626,400. In terms of his remuneration arrangements, the STI  opportunity was settled two thirds by cash and a third in  the form of deferred shares. The number of deferred shares  granted to Mr Kelaher was determined on the basis of the STI  deferral amount divided by the five day Volume Weighted  Average Price up to and including 29 June 2012, which  was $5.8038. The number of deferred shares to be issued  accordingly is 35,977 (capped at 75,000 annually) and there is  no consideration payable for the grant of the deferred shares. The Board has determined that the portion of STI that will be  deferred will be subject to Board ‘look back’ arrangements.  This means the Board will conduct a review of Group  performance in June 2013 and assess whether any significant  unexpected or unintended consequences have occurred  that were not foreseen by the Remuneration Committee  when it made its decision in July 2012, and whether it is still  appropriate to award the deferred shares. During June 2012, the Remuneration Committee performed  a ‘look back’ review in regards to the 31,694 deferred shares  issued in July 2011. The Remuneration Committee determined  that all of the deferred shares were to vest in accordance with  the terms of the arrangement. The 31,694 shares have since  been transferred to Mr Kelaher. As approved at the Annual General Meeting (AGM) of  shareholders on 23 November 2010, Mr Kelaher is entitled  to participate in an LTI program offering a maximum reward  opportunity of 150,000 performance rights and 300,000  options in respect of the 2010/11 and 2011/12 financial years. The exercise period will lapse 12 months after the fifth  anniversary of the relevant grant date. The Board has the  discretion to either purchase shares on market or to issue new  shares. The Board has determined that this element of the plan will  not activate unless a minimum average Return on Equity (ROE)  of 5.5% per annum over the performance period has been  achieved. The performance hurdle of the performance rights  will be based on the Company’s Total Shareholder Return (TSR)  relative to a comparator group comprising the S&P ASX200  index companies over the performance period.  Following a review of the Company’s LTI program during  the 2009 financial year, with advice being obtained from  independent remuneration consultants, the Board determined  that the comparator group for the 2010 and future grants  should be the S&P ASX200. This comparator group provides an  objective measure of performance across a range of industries  and company types which compete with the Group for capital.  The Board reserves the right to make changes to the peer  group to allow for changing circumstances (e.g. takeover) for  peer group companies.  TSR measures the return to the shareholder over the  performance period in terms of changes in the market value of  the shares plus the value of the dividends paid on the shares. Performance rights that do not vest will lapse and will not  be retested. Consistent with the Company’s hedging policy,  Mr Kelaher will be prohibited from entering into hedging  arrangements in respect of unvested performance rights. Upon exercise of the performance rights, shares will be  allocated to Mr Kelaher. Shares allocated to Mr Kelaher will rank  equally with all other ordinary shares on issue. Any dealing  in shares resulting from performance rights that have been  exercised will be subject to IOOF’s Securities and Insider  Trading Policy. page 41 6.3 Performance Rights and Share Options 6.4 Performance rights – performance hurdles •  25% on the fifth anniversary of the grant date. •  25% on the fourth anniversary of the grant date; and •  50% on the third anniversary of the grant date;