CSL Ltd Annual Report 2019

2.5 Leading and Managing Modifier The Board, based on recommendations from the CEO for Executive KMP, and the HRRC for the CEO, has the discretion to apply a ‘Leading and Managing’ modifier to both the STI and LTI opportunity – allowing for recognition of extraordinary contribution in exceptional circumstances or significant leadership failure. Applied to the overall STI outcome or LTI target opportunity, there can be an increase of up to 20% or a decrease of up to 50% applied. In 2019, the Leading and Managing Modifier was not used as the CEO and the Board determined that all Executive KMP had met expectations in the leadership of their respective business units and outcomes delivered, and consistently modelled the CSL Values. Below sets out an illustrative example of how the Modifier is used on STI outcomes. KPI outcomes assessed by the Board Proposed STI outcome determined Modifier applied in exceptional circumstances Final STI outcome determined 2.6 Malus and Clawback Policy CSL operates a Malus and Clawback Policy. “Malus” means adjusting or cancelling all or part of an individual’s variable remuneration as a consequence of a materially adverse development occurring prior to payment (in the case of cash incentives) and/or prior to vesting (in the case of equity incentives). “Clawback” means seeking recovery of a benefit paid to take into account a materially adverse development that only comes to light after payment, including shares delivered post vesting. The Board, in its discretion, may apply the policy to any incentive provided to a senior executive, including a former senior executive, in the event of a material misstatement or omission in the financial statements of a Group company or the CSL Group, or other material error, or in the event of fraud, dishonesty or other serious and wilful misconduct involving a senior executive, leading to a senior executive receiving a benefit greater than the amount which would have been due based on the corrected financial statements or had the error or misconduct not occurred. In 2019, following a joint review of reward outcomes by both the HRRC and the ARMC, there was no application of the policy. The HRRC and ARMC also review all remuneration outcomes to ensure that any material risk issues and behaviour and/or compliance issues are addressed and have been appropriately reflected in outcomes. 3. CSL Performance and Shareholder Returns 3.1 Financial Performance from 2013 to 2019 The following graphs 5 summarise key financial performance over the past seven financial years. We have disclosed over a seven year period to align with our ROIC LTI performance measurement period. 5 The 2016 Annual Return on Invested Capital figure includes the gain on acquisition of Novartis’ global influenza vaccine business of US$176.1m. The opening share price on 1 July 2014 was A$66.55. The Total Dividends per Share is the actual total dividends paid within the financial year. Net Profit After Tax (millions) – USD Earnings Per Share (cents) – USD Cash Inflow From Operating Activities (millions USD) Annual Return on Invested Capital Closing Share Price (dollars) – AUD Total Shareholder Return (12month %) – AUD Total Dividends Per Share (cents) – USD 0 500 1000 1500 2000 2019 2018 2017 2016 2015 2014 2013 0% 5% 10% 15% 20% 25% 30% 35% 2019 2018 2017 2016 2015 2014 2013 Net Profit After Tax/ Earnings Per Share (USD) Closing Share Price (at 30 June AUD)/ Total Shareholder Return 0 500 1000 1500 2000 2500 2019 2018 2017 2016 2015 2014 2013 0 100 200 300 400 500 0 50 100 150 200 250 2019 2018 2017 2016 2015 2014 2013 0 20% 40% 60% 80% 0 50 100 150 200 2019 2018 2017 2016 2015 2014 2013 CSL Limited Annual Report 2019 66 Directors' Report