Lendlease Annual Report 2022

Financial Statements 167 35.b. Short Term Award (STA) The STA plan is an annual incentive plan which replaced the STI for a limited number of senior executives from 2019. It is designed to focus senior executives on priority areas for delivery in the current financial year, including key Group and regional financial targets, safety and other non financial targets aligned to the Group’s areas of focus. Whilst performance is assessed against a set of Group metrics when determining awards, the Board will assess the overall performance and contribution of individual senior executives, with a particular focus on safety. The total value of the potential benefit varies by individual and is set with reference to both internal peers and external market levels. For FY20 and FY21, the STA plan has been awarded as cash in September following year end. From FY22 onwards, 50 per cent of awarded STA will be a deferred grant of Lendlease securities. The deferred portion will be released in two equal tranches after one and two years. 35.c. Long Term Incentive (LTI) The LTI plan is designed to: • Motivate executives to achieve the Group’s long term strategic goals and provide reward where the Group delivers better value to securityholders than its peers • Align the interests of executives and securityholders, given that the reward received is linked to the Group’s security price and average Return on Equity performance. Arrangements for LTI Awards LTI Design How the LTI Works Performance Securities • An annual grant of ‘performance securities’ is made to a limited number of executives • The Board intends that the awards be settled in Lendlease securities, although the award may be settled in cash or other means at the Board’s discretion • On vesting, each performance security entitles executives to one Lendlease stapled security, or at the Board’s discretion, cash or other instruments of equivalent value • In the event of a change in control of the Group, the Board has the discretion to determine whether the vesting of some or all performance securities should be accelerated. Performance Period (applicable to FY20, FY21 and FY22 Grants) • 100 per cent of the performance securities are assessed over a three year period. If the performance hurdle is not fully achieved at this time, those performance securities that have not vested will lapse • If the performance hurdle is not met, the awards are forfeited • There is no retesting on any portion of the LTI grant. Termination of Employment • If the executive resigns or is terminated for cause, the unvested LTI is forfeited • If the executive is terminated and if the Board considers vesting would provide a benefit that was unwarranted or inappropriate, the Board can adjust unvested LTI prior to the vesting date • For ‘good leavers’, the LTI grant may remain on foot, subject to the original terms • In exceptional circumstances (such as death or total and permanent disability), the Board may exercise discretion and settle the award at the time of termination of employment. Performance Hurdles Financial Year 2020 • 50 per cent subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX 100 Index. The S&P/ASX 100 companies are determined at the start of the performance period • 50 per cent subject to Average Return on Equity (ROE) hurdle. Financial Year 2021 onwards • One third subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX 100 index. The S&P/ASX 100 companies are determined at the start of the performance period • One third subject to Average Operating Return on Equity (Operating ROE) hurdle • One third subject to compound annual growth rate (CAGR) % in funds under management. Vesting Schedule – Relative TSR (FY20 to FY21) Measure Percentage of performance securities that vest as a proportion of maximum opportunity Below the 50th percentile No vesting At the 50th percentile 50 per cent vesting Between the 50th percentile and 75th percentile Pro rata vesting on a straight line basis between 52 per cent and 98 per cent At or above the 75th percentile 100 per cent vesting Vesting Schedule – Relative TSR (FY22) Below the 50th percentile No vesting At the 50th percentile 40 per cent vesting Between the 50th percentile and 75th percentile Pro rata vesting on a straight line basis between 40 per cent and 100 per cent At or above the 75th percentile 100 per cent vesting