Lendlease Annual Report 2022

92 Lendlease Annual Report 2022 Long Term Award (LTA) This section presents the key features of the 2022 LTA (granted in September 2021). From FY22, LTA awards are granted at maximum opportunity (rather than target). Accordingly, the vesting schedules have been recalibrated to reflect this change and a straight line vesting approach has been adopted for added simplicity. • Maximum LTA quantum has been reduced in line with broader changes to the Executive remuneration mix. LTA Design How the LTA Works Eligibility • Global CEO and Executives Quantum • The maximum face value of the 2022 LTA award granted in September 2021 is as follows: – Global CEO: 178% of Fixed Remuneration – Executives (excluding Group Chief Risk Officer): 180% of Fixed Remuneration – Group Chief Risk Officer: 144% of Fixed Remuneration Delivery • Rights to acquire securities, subject to specific performance conditions and continued tenure • The number of performance rights is adjusted up or down at vesting based on performance over the assessment period • The award may be settled in cash or other means at the Board’s discretion Determining the Number of Performance Rights • Face value - VWAP of stapled securities traded on the ASX over the 20 trading days prior to the release of the full year results preceding the grant date Performance Period • Three years Deferral • Released in four equal tranches at the end of Y3, Y4, Y5 and Y6 • The timeframe reflects a balance between reward that motivates Executives while reflecting the ‘long tail’ of profitability and risk associated with ‘today’s decisions’ Performance Hurdles • The Board believes that these measures provide a suitable link to long term securityholder value creation. • While the Board appreciates that there are, at times, differing views held by stakeholders, we believe that these measures provide the appropriate balance between market and non-market measures. Market Measure Non Market Measures Relative Total Securityholder (RTSR) – 1/3 Average Operating Return on Equity (ROE) – 1/3 CAGR % in FUM – 1/3 Rationale • TSR incentivises Executives to deliver returns that outperform what a securityholder could achieve in the market and promotes management to maintain a strong focus on securityholder outcomes • Operating ROE reflects the capital intensive nature of Lendlease’s activities and is an important long term measure of how well the management team generates acceptable earnings from capital invested and rewards decisions in respect of developing, managing, acquiring and disposing of assets • CAGR % in FUM recognises the importance of growth in FUM to achieving our key strategic objective of increasing our Investments platform globally which will be achieved through our internal development pipeline, creating new products, using value-add strategies and through external market acquisitions Definition • TSR is measured by the growth in security price and any dividends/distributions paid during the performance period • Operating ROE is calculated as the Group’s Operating Profit After Tax divided by the arithmetic average of beginning, half and year end securityholders’ equity • Performance is based on the average Operating ROE results over the three year performance period • CAGR % in FUM is calculated as the compounded annual growth rate of Lendlease’s funds under management over the three year performance period Target Setting • TSR is measured against companies that comprise the Standard & Poor’s (S&P)/ Australian Securities Exchange (ASX) 100 index • Target is reviewed annually and is set with reference to the Group’s Portfolio Management Framework • Operating ROE target aims to drive outperformance without incentivising excessive risk taking • The Board believes that the vesting range provides a realistic goal at the lower end (in the context of risk free rates of return, cost of capital and market consensus) and a stretch at the upper end • The Board is conscious of the impact that debt can have on the Operating ROE result and has governance protocols in place to monitor this • Target is reviewed annually and is set with reference to the Group’s operating plan