W2D-008 Annual report-0.txt
REPORT OF THE REMUNERATION COMPENSATION COMMITTEE TO THE BOARD

Throughout the year, Irish Permanent plc had procedures in place which met with the Best Practice Provisions as set out in Sections A and B of the Irish Stock Exchange's Listing Rules requirements on Directors'remuneration.

Remuneration Compensation Committee

The Remuneration and Compensation Committee comprises John Bourke (Chairman), Eileen Lemass and Patrick O'Neill, all of whom are non-Executive Directors. The Committee is responsible for the formulation of the Group's policy on senior executive remuneration. It considers and determines salaries and other terms of remuneration of the Executive Directors and senior executives. The remuneration of the Chairman is determined by the Board of Directors meeting with the Chairman in absentia. The Committee meets about four times a year, although more frequent meetings may be held if required.

Remuneration Policy

The Group's policy on senior executive remuneration is to reward its executives competitively, having regard to the comparative marketplace in Ireland and the United Kingdom, in order to ensure that they are properly motivated to perform in the best interest of the shareholders. Advice is sought by the Committee from external consultants.

Non-Executive Directors

Non-Executive Directors are remunerated by way of Directors'fees only, full details of which are disclosed in note 37 on page 47 of the financial statements.

Executive Directors'Remuneration

The elements of the remuneration package for Executive Directors are basic salary and benefits, short-term performance bonuses, pensions, participation in the Share Option Scheme, participation in the Long-term Cash Bonus Scheme and the provision of mortgage loans. Each of these elements is discussed below and full details of the Executive Directors'remuneration is set out in note 37 on page 47 of the financial statements.

Salary Benefits

The basic salary of Executive Directors is reviewed annually having regard to competitive market practice. Employment-related benefits primarily comprise a company car.

Short-term Performance Bonus

Short-term performance bonus awards in any year are determined by the Committee by reference to criteria which are set by the Committee and by reference to the overall profit performance of the Group. The awards range from 0 per cent to a maximum of 50 per cent of basic salary in any one financial year.

Pensions

Executive Directors participate in a group defined benefit pension scheme. Pension benefits are determined solely in relation to basic salary.

Share Option Scheme

Executive Directors, in common with other senior executives, participate in the Share Option Scheme which was adopted on 21 September 1994. Under the Scheme, the Committee is entitled to select executives to participate in the Scheme. The terms of the Scheme provide that options shall be exercisable at the higher of the market value per share on the day preceding the date of grant of the option or its nominal value. The aggregate exercise price of options quoted under the Scheme may not exceed four times an executive's emoluments. Shares representing not more than five per cent of the shares for the time being in issue may be issued under the Scheme. Options may only be exercised if the Group meets certain earnings per share targets based upon growth in earnings per share over a three year period following the grant of any option.

Long-term Cash Bonus Scheme

Prior to Conversion, the Group operated a Long-term Cash Bonus Scheme ('The Scheme') which was terminated on 30 June 1994 and was then replaced by the Share Option Scheme. The participants in the Scheme are eight senior members of management, including the three Executive Directors. Payment will be made in 1997 of IR £ 2.02 million (being IR £ 1,633 million plus interest accrued thereon). This is in accordance with the decision of the Board made in 1994, on the basis of expert external advice, which determined the amount which was due under the Scheme. Payment was conditional upon the Group meeting pre-determined performance criteria for the five financial years 1992 to 1996 which have now been achieved.

Mortgage Loans to Directors

Any mortgage loan to an Executive Director of Irish Permanent plc up to IR £ 50,000 is charged at 4% which is the reduced rate of interest applicable to mortgage loans to Irish Permanent staff. Where applicable, the balance of any mortgage loan in excess of IR £ 50,000 to an Executive Director is subject to Irish Permanent's normal terms and conditions for borrowers.

Directors'Service Contracts

The Executive Directors operate under service contracts which may be terminated by the provision of two years'notice by either party which is in accordance with the normal practice of companies listed on the London Stock Exchange.

STATEMENT OF DIRECTORS'RESPONSIBILITIES

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and Group and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 1990, and all Regulations to be construed as one with those Acts. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

REPORT BY THE AUDITORS TO IRISH PERMANENT plc ON CORPORATE GOVERNANCE MATTERS

In addition to our audit of the financial statements, we have reviewed the Directors'statements, on pages 10 and 11 on the Company's compliance with the paragraphs of the Code of Best Practice specified for our review by the Irish Stock Exchange and their adoption of the going concern basis in preparing the financial statements. The objective of our review is to draw attention to non compliance with Listing Rules 12.43 (j) and 12.43 (v).

We carried out our review in accordance with guidance issued by the Auditing Practices Board. The guidance does not require us to perform the additional work necessary to, and we do not, express any opinion on the effectiveness of either the Company's system of internal financial control or its corporate governance procedures nor on the ability of the Company to continue in operational existence.

Opinion:

With respect to the Directors'statements on internal control on pages 10 and 11, and going concern on page 11, in our opinion the Directors have provided the disclosures required by the Listing Rule referred to above and such statements are not inconsistent with the information of which we are aware from our audit work on the financial statements.

Based on enquiry of certain Directors and officers of the Company, and examination of relevant documents, in our opinion the Directors'statements on pages 10 and 11 appropriately reflect the Company's compliance with the other paragraphs of the Code specified for our review by Listing Rule 12.43 (j).

AUDITORS'REPORT

To the membership of Irish Permanent plc

We have audited the financial statements on pages 20 to 49.

Respective responsibilities of Directors and Auditors in relation to the financial statements:

As described on page 17 the Company's Directors are responsible for the preparation of financial statements. It is our responsibility to form an independent opinion, based on our audit, of those statements and to report our opinion to you.

Basis of opinion:

We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion:

In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 December 1996 and of the profit of the Group for the year then ended, and have been properly prepared in accordance with the Companies Acts, 1963 to 1990 and all Regulations to be construed as one with those Acts.

We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The balance sheet of the Company at 31 December 1996 is in agreement with the books of account.

In our opinion, the information given in the Directors'Report on pages 9 to 14 is consistent with the financial statements.

The net assets of the Company as stated in the balance sheet on page 21 are more than half of its called up share capital and, in our opinion, on that basis there did not exist at 31 December 1996 a financial situation which, under section 40(1) of the Companies (Amendment) Act 1983, would require the convening of an extraordinary general meeting of the Company.

NOTES TO THE FINANCIAL STATEMENTS

1 Statement of Accounting Policies

A Basis of preparation

The financial statements have been prepared under the historical cost convention, in accordance with the Companies Acts 1963 to 1990, the European Communities (Credit Institutions: Accounts) Regulations 1992, and with applicable Financial Reporting Standards.

B Basis of consolidation

The Group financial statements include the financial statements of the Company, and of its subsidiary undertakings made up to 31 December 1996.

The results of subsidiary undertakings acquired during the year are included in the consolidated profit and loss account from the date of acquisition. Goodwill arising on acquisition of shares in subsidiary undertakings or assets of other businesses, being the excess of the acquisition cost over the fair value of the Company's share of net tangible assets acquired, is written off against reserves in the year of acquisition.

C Long-term assurance business

In order to reflect the different nature of the Group's and policyholders'interests in the long-term assurance assets, the value of the long-term assurance assets attributable to the Group and the value of the long-term assets and liabilities attributable to policyholders are classified under separate headings in the consolidated balance sheet.

The amount shown as long-term assurance assets attributable to shareholders is determined based on a prudent assessment of the embedded value. The embedded value is the present value of statutory earnings expected to emerge in the future from policies currently in force, together with the net tangible assets of the business. In determining this value, assumptions regarding future mortality rates, lapse rates, surrender rates, investment returns, solvency margins and levels of expenses are made based on the experience of the business. This value is determined on the advice of independent qualified actuaries and is included separately in the consolidated balance sheet.

Movements in the value of the Group's long-term assurance assets attributable to shareholders, grossed up for taxation at the standard corporation tax rate, are included as other operating income in the consolidated profit and loss account.

D Tangible fixed assets

Land, freehold premises and leasehold premises with unexpired terms in excess of 50 years are stated at cost. It is the policy of the Company to maintain these properties in good repair and it is considered that residual values are such that depreciation is not significant. Insofar as depreciation has not been written off these assets, the Company has not complied with Statement of Standard Accounting Practice No.12, because, in the opinion of the Directors, the amount involved is not material.
