EXPLANATORY NOTES
Further details of these performance
hurdles are provided below.
How many EPRs will be granted to
Mr Wilkins?
Subject to shareholder approval being
obtained, the number of EPRs to be
awarded to Mr Wilkins in the financial
year ending 30 June 2016 will be a
maximum of 569,700.
The number of EPRs the Board will
award has been calculated using the
following formula:
E = (1.5 x F) / S
Where:
E = the number of EPRs to be offered
rounded up to the nearest 100.
F = the dollar value of Mr Wilkins’
Fixed Pay at the time of grant.
S = the closing price of IAG shares on
the last trading day of the financial
year ended 30 June 2015, being $5.58.
If Resolution 2 is approved, the EPRs
will be granted to Mr Wilkins within
two months of the meeting. The
Board retains the discretion to adjust
any unvested EPR downwards if it
decides it is prudent to do so.
Performance hurdles
Each allocation of EPRs granted to
Mr Wilkins will vest and become
exercisable for shares in the future
subject to performance hurdles being
achieved. The total allocation of EPRs
is separated into two equal portions,
with each portion having a separate
performance hurdle.
TSR performance hurdle
(50% of total allocation)
The test date for the TSR performance
hurdle is 30 September 2019, being the
fourth anniversary of the grant date of
30 September 2015. The Board may
also determine other test dates.
The starting share price for measuring
TSR is the three month volume weighted
average price (up to and including the
grant date) of IAG shares and of the shares
of other companies within the peer group.
The peer group of companies is the
top 50 industrial companies in the
S&P/ASX 100 index at the grant date,
with such inclusions and exclusions
as the Board may determine.
If, on the test date, IAG’s TSR is at or
above the 75th percentile of the peer
group, all EPRs in the TSR allocation
vest. If IAG’s TSR is at the 50th percentile
of the peer group 50% of EPR’s in the
TSR allocation vest. A sliding scale
applies such that 50% plus an additional
2% of EPRs in the TSR allocation
vest for each percentile ranking above
the 50th percentile of the peer group.
No EPRs vest if IAG’s TSR is below the
50th percentile of the peer group.
If the TSR performance hurdle is not met
or is only partially met when measured
after four years, any of the TSR allocation
of EPRs that do not vest and become
exercisable for shares will lapse.
ROE performance hurdle
(50% of total allocation)
The ROE performance hurdle is measured
over a period of three financial years from
1 July 2015 to 30 June 2018.
The ROE performance hurdle compares
IAG’s Cash ROE performance with IAG’s
WACC. ROE is measured for each six
month period and compared to WACC
for that period.
The Board approves the method used
to measure ROE and WACC. The average
of the six half yearly measurements over
the three financial years must show that
ROE is at least 1.2 times WACC for any
of the ROE portion of the EPRs to vest
and become exercisable for shares.
The vesting scale for EPRs in the ROE
allocation is outlined below:
Cash ROE vs WACC Vesting scale
ROE >= 1.6 x WACC 100% vest
ROE = 1.5 x WACC 80% vest
ROE = 1.4 x WACC 60% vest
ROE = 1.3 x WACC 40% vest
ROE = 1.2 x WACC 20% vest
ROE < 1.2 x WACC 0% vest
If the ROE performance hurdle is not met
or is only partially met when measured
after three financial years, any of the ROE
allocation of EPRs that do not vest and
become exercisable for shares will lapse.
Cessation of Employment
Under the EPRs terms, EPRs may be
retained if Mr Wilkins ceases employment
due to retirement, redundancy, death
or total and permanent disablement or
with the approval of the Board. In these
circumstances, EPRs may vest and become
exercisable for shares if the performance
hurdles are achieved in the ordinary course.
Where Mr Wilkins resigns or his
employment is terminated by the
Company giving notice, unvested EPRs
lapse on the date employment ceases,
unless the Board exercises its discretion
and allows Mr Wilkins to retain EPRs
that have been granted to him. In these
circumstances, EPRs may vest and
become exercisable for shares only if
the performance hurdles are achieved
in the ordinary course.
Early vesting of EPRs
The early vesting (and exercise) of
Mr Wilkins’ EPRs for shares may be
permitted by the Board in circumstances
such as a takeover, scheme of
arrangement or winding up of IAG.
Reconstruction and Bonus Issues
Mr Wilkins’ entitlement to shares through
the exercise of EPRs may be adjusted to
take account of capital reconstructions and
bonus issues.
Voting Exclusion Statement
As this resolution is connected with the
remuneration of a member of the key
management personnel of the Company,
within the meaning of the Corporations
Act 2001, the Company will disregard any
votes cast on Resolution 2:
■
■
by Mr Wilkins or any of his associates;
or
■
■
as a proxy by a member of the key
management personnel or any of their
Closely Related Parties,
unless the vote is cast as a proxy for a
person entitled to vote on Resolution 2:
■
■
in accordance with the directions on
the voting form; or
■
■
by the Chairman of the meeting
following express authorisation on the
voting form to vote as he sees fit.
What do the Directors Recommend?
The Directors (other than Michael
Wilkins) recommend that you vote “For”
the Resolution. The Chairman intends to
vote available proxies given to him “For”
the Resolution.
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INFORMATION
8
IAG NOTICE OF MEETING 2015
