REMUNERATION REPORT Dear Shareholders, On behalf of the Board, we are pleased to present Myer’s FY2018 Mr King’s remuneration is heavily weighted toward equity, with a Remuneration Report. requirement to maintain a shareholding equivalent of 75 percent The FY2018 financial results were disappointing. When it became of total fixed remuneration (TFC) for the duration of his apparent to the Board that theexecution of the strategywas not employment. The details of his remuneration are provided in going to deliver shareholder value, the Board made the decisive Section 2. move to make significant leadership changes.This included The FY2019 STI will focus on financial performance, with the appointing Mr Hounsell as Executive Chairman while the search primary measure being EBITDA and retaining NPAT as the for a new CEO was undertaken. gateway before any payment can be made. The FY2019 Long- We have made significant changes to the executive team, Term Incentive Plan (LTIP) will be granted in options making recruiting three new Key Management Personnel (KMP). In sure participants are only rewarded if there is an increase in the June 2018, we appointed John King as Chief Executive Officer Company’s share price. and Managing Director, followed by Allan Winstanley as our The changes we have made demonstrate our further Chief Merchandise Officer. With these appointments we have commitment to creating a stronger link between our bolstered our global retail expertise, with Mr King and performance and executive remuneration outcomes. Mr Winstanley bringing best in class experience in running Executive remuneration outcomes department stores and deep merchandising skills. Combined with the appointment of Nigel Chadwick, a senior finance The FY2018 remuneration outcomes reflect this period’s professional as Chief Financial Officer and the operational financial performance. experience of other KMP, we are confident we can deliver an The STI plan requires that a NPAT gateway is achieved before improved experience for customers and create shareholder any payments are made. The gateway was not achieved in value. FY2018, and accordingly no STI was paid to the Executive Importantly, and deliberately, during the period we have sought Management Group, including KMP. to re-base fixed remuneration, with the current KMP paid no Performance rights granted to KMP under the FY2015 LTIP more, and typically less, than their predecessors. This means were tested for vesting following the release of our results in over time we have reduced the average remuneration of our September 2017. The relative Total Shareholder Return (TSR) KMP, as well as implementing a reduction in non-executive and Earnings per Share (EPS) hurdles under this plan were not directors’ fees. met, and accordingly the rights subject to these hurdles did not Response to the ‘First Strike’ vest. The Business Transformation hurdle set in 2014 was As you know, at the 2017 Annual General Meeting (AGM), the determined by the Board to be partially met, and accordingly, majority of shareholder votes cast (70.59 percent) were in favour only 33 percent of the rights subject to this hurdle (being 8.3 of adopting the 2017 Remuneration Report. However, 29.41 percent of the maximum grant) vested. The measures that were percent of the total votes received were against the achieved included: Net Promoter Score; merchandise mix; remuneration report, constituting a ‘first strike’ under the basket size (online sales); and increase in page views. There Corporations Act 2001 . were only two KMP who participated in the FY2015 LTIP and therefore had rights vest under this plan. Following the AGM we made a number of immediate changes to Performance Rights under the FY2018 LTIP were granted to our remuneration structure to address the concerns raised, executives, including some members of the KMP. The FY2018 implementing a number of changes including those designed to LTIP retained the same structure as the FY2017 grant with the improve the alignment of remuneration for Directors with the shareholder measures of Return on Funds Employed (ROFE), creation of value for shareholders. These changes were: EPS and relative TSR remaining key features. 1. To decrease the Chairman and non-executive director fees; We believe that the Company’s approach to executive and remuneration, clearly outlined in the Remuneration Report, will 2. The introduction of a target to purchase a minimum support executives in delivering a strategy that will importantly shareholding for non-executive directors. put our customers first and ultimately deliver value to The Company subsequently invited shareholder feedback and shareholders. We look forward to your support at our Annual consulted with a number of key shareholders and other General Meeting in November 2018 and welcome any feedback stakeholders. This feedback has informed the remuneration for on our remuneration practices and disclosures. Mr King and changes to the FY2019 remuneration structure. Finally, we acknowledge and thank Chris Froggatt for her service New CEO remuneration and changes to FY2019 as Chairman of the Human Resources and Remuneration Following an extensive international search during FY2018, Committee during the past seven years. Myer was pleased to appoint Mr King as CEO on 4 June 2018. Yours faithfully, Mr King brings with him highly relevant retail experience, including eight years leading House of Fraser in the United Kingdom, where he transformed customer experience and created significant shareholder value. He has been given a full mandate by the Board to deliver an improvement in the financial performance. Mr King understands fashion retailing, particularly Garry Hounsell Ian Cornell department stores and will bring a new perspective to Myer with Chairman Chairman, Human his experience in revenue creation. Mr King’s contractual Resources and remuneration reflects this experience. His fixed remuneration Remuneration Committee has been set at the same level as the previous CEO, which had not been reviewed since 2015. Mr King did not participate in the FY2018 Short-Term Incentive (STI) plan and he will not participate in the FY2019 STI plan. Myer Annual Report 2018 25