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September 25, 2003

Cochlear changes incentives

From: The Age, Australia - Sep 25, 2003

By Sue Cant

Hearing-implant maker Cochlear has changed its executive options plan to reflect the company's growth and to respond to market concerns about the impact of such plans on future profits.

The company has not changed its incentives scheme since it listed eight years ago.

Chief financial officer Neville Wright said the main reason for the change was to reflect the company's growth.

"Of course we have taken notice of the expensing of options and the current debate," he said. "But we are at a different stage in our development now."

Under the long-term incentive plan, which must be approved by shareholders at the general meeting on October 21, employees and executives will receive half their incentive package as options and half as ordinary shares.

But incentives will be paid only if the company stays in the top 25 per cent of listed companies based on shareholder return. Cochlear's growth based on earnings per share must also increase more than a compound average of 20 per cent.

The company's chief executive and president, Jack O'Mahony, received a package last year worth $1.8 million, including a $416,845 performance-based bonus. He has 100,000 in options, which remain unaffected by the new plan.

Cochlear delivered record unit sales of 9328, up 19 per cent for the year to June 30. Net profit rose 45 per cent to $58.2 million. The company is aiming for long-term average annual growth in sales units of 20 per cent.

In July, Cochlear took a majority stake in European-based hearing technology provider Phonak AG to develop an implantable hearing prosthesis.

Cochlear's annual report, released yesterday, noted a $12 million increase in sales and marketing expenditure, including significant market research in Japan, which is one of the lowest penetrated markets in the world.

The company's shares closed 29¢ higher yesterday at $32.33.Copyright

© 2003. The Age Company Ltd