| ||Pool Management Services Remuneration Model for AWB Ltd & AWB (International)Ltd|| ||
As foreshadowed in the AWB Limited (AWB) prospectus dated 6 July 2001, a Performance Based Remuneration Model has been approved by the Board of AWB (International) Limited (AWBI). This payment structure for pool management services has been agreed by the Boards of AWB and AWBI and will come into effect from October 2001 and will operate for the 2001/2002 season.
AWBI operates the National Pool and is the sole bulk exporter of Australian wheat.
AWB, the parent company, of AWBI provides pool management services to AWBI. These services include:
- international sales and marketing (including international supply and demand analysis, market analysis, pricing strategy, marketing, international sales, and the provision of technical training to international customers);
- risk management services (including foreign exchange management and commodity hedging);
- grower services (including grain acquisition, grower payments, communication, and regional office services).
- managing the wheat supply chain (from farm gate to international customer); and
- research and development (to ensure Australia’s wheat growers stay abreast of seed variety and technology developments and ensure AWB delivers value added products to international customers).
The constitutions of both AWB and AWBI require that the business of AWBI is managed with the objective of maximising net returns to growers who sell wheat into the pools run by AWBI by securing, developing and maintaining markets for wheat.
Under the original Services Agreement between AWB and AWBI the payment for pool management services was on a “cost plus” basis. This approach provides little incentive for AWB to maximise net returns for AWBI nor to minimise its costs.
The payment structure was independently reviewed by reference to industry best practice in relation to asset and fixed income management as well as international grain industry models. The result is a new remuneration model which provides an incentive based payment system that encourages AWB to invest its capital in the provision of pool management services and provides incentive for AWB to add value to the National Pool return.
The model balances the risks and rewards to each party. While AWB’s investment in infrastructure and people necessary to provide the pool management services is covered by a minimum payment, AWBI is protected by the requirement for AWB to exceed certain benchmarks and a hurdle before any out performance incentive is payable.
For further information please click on the attachment
Pool Management Services Remuneration Model