Annual Report

Washington H. Soul Pattinson and Company Limited

Annual Report 2016

Directors' Report

– Remuneration Report

Remuneration Report

Letter from the Chair of the Remuneration Committee

Dear Shareholders,

On behalf of the Remuneration Committee I am pleased to present to you WHSP’s Remuneration Report for the

financial year ended 31 July 2016. WHSP’s remuneration policy is designed to attract and retain high calibre talent

whilst providing incentives for senior management to deliver sustainable value for our shareholders. For the year,

a new variable pay framework was introduced for the Parent Company that is aimed at better aligning executive

performance with the short and long-term strategic objectives approved by the Board and ensuring that senior

executive variable pay outcomes remain consistent with shareholder returns.

The long-term incentive plan was voted on at the 2015 Annual General Meeting and approval was given for the

issue of performance rights to Executive Directors.

For the year, WHSP recorded improved results in telecommunications, building products and pharmacy, which

has offset lower results in mining resources. It is on this basis that regular earnings per share increased 9.1% to

74 cents and group profit after tax increased by 79.3% to $149.4 million. Moreover, total shareholder return was

31.4% and pre-tax net asset value increased 9.6% to $6 billion for the year.

During the year, a short-term incentive (STI) plan was introduced for the Parent Company which applies a cash

inflow hurdle that is designed to enable increasing dividends and a net asset value performance hurdle that is

designed to grow the value of the investment portfolio in support of shareholder wealth creation. For the year, cash

inflow performance resulted in 80% of the target STI pool being awarded under this condition, whilst 150% of the

target STI pool was awarded for outperformance related to net asset value per share. The new STI plan came into

effect from 1 January 2016 and therefore awards have been pro-rated for the seven months to 31 July 2016.

The Remuneration Committee is keen to ensure that shareholders continue to benefit from strong performance

by the company. By incentivising our Executive Directors and senior management through the alignment of their

performance with outcomes that benefit shareholders we are seeking to achieve a mutually beneficial outcome

for all stakeholders.

The following Remuneration Report considers the key management personnel of the Parent Company and the

Consolidated Entity. New Hope Corporation Limited (New Hope) forms part of the Consolidated Entity and the

remuneration of certain key management personnel of New Hope is included in this Report. New Hope is publicly

listed and, accordingly, has its own Remuneration Committee and produces its own Remuneration Report in

accordance with the

Corporations Act 2001

to be voted on by its shareholders.

We will continue to develop our remuneration policies in future years to ensure that WHSP’s practices and

outcomes remain relevant by reflecting evolving strategic objectives and the expectations of Company

shareholders.

Yours sincerely,

David Wills

Non-Executive Director

Chair of the Remuneration Committee