Page 23 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 21

Performance period

The performance period begins on the date the award is made and extends for a period of three years. The Board determined that from 2011 onwards there would be no provision for re‑testing performance conditions in any future LTI grants, to align with general market practice and institutional investor expectation.

The table below outlines the performance period for grants made from 2011 onwards.

AWARDS MADE (YEAR 0) END OF PERFORMANCE PERIOD (YEAR 3)

The performance period commences on the date of the award

The vesting date occurs.

At the end of the performance period, the TSR outcome is applied to unvested performance rights. If median TSR performance is met or exceeded, the relevant proportion of performance rights are converted to shares (according to the vesting schedule in the table above).

If median TSR performance is not met and the LTI does not vest, the performance rights are forfeited.

It should be noted that under limited circumstances, the EPSP rules allow the Board the discretion to satisfy a participant’s entitlement upon vesting through a cash payment, in lieu of an allocation of ordinary shares.

For grants made during the year ended 30 June 2010 (i.e. for awards granted in October 2009) and prior, the SLT had the option to extend the performance period for a further two years at the end of the initial three years, as outlined in the table below.

YEAR 0 AWARDS MADE

END YEAR 3 INITIAL PERIOD

END YEAR 3 TO END YEAR 5

2‑YEAR RE-TEST PERIOD END YEAR 5

The performance period commences on the date of the award.

The frst potential vesting date occurs.

If performance measures are met, the executive can elect to:

1. exercise performance rights and convert them to shares; OR

2. lock the performance rights in for an extended two year re‑test period.

If performance measures are not met and the LTI does not vest, the executive can elect to:

1. forfeit any future right to the performance right; OR 2. lock the performance rights in for an extended two year re‑test period.

Where an executive elects to extend the measurement period for two years, TSR is measured every six months between the measurement dates.

At the end of the re‑test period, the most favourable TSR outcome from either the initial period or during the re‑test period is applied to unvested performance rights. After the re‑test period, no further elections to re‑test are available, and performance rights that do not vest are forfeited.

TSR measurement

TSR performance is monitored by an independent expert at key points throughout the LTI life cycle as outlined in the table below. TSR performance may also be measured upon termination of an individual’s contract of employment where the member of the SLT holds unvested performance rights when they cease employment. Further details of how LTI are treated on termination are set out within the ‘Treatment of LTI on termination’ section below. Dividends

The EPSP trustee manages any dividends that may be received during the time that the underlying shares are held in trust. If an individual’s performance rights vest and shares are allocated to the individual, a payment equal to the dividends received by the trustee with respect to the underlying shares is paid at the same time that the shares are allocated to the individual (less applicable taxes that have been paid by the EPSP trustee with respect to the dividends). Treatment of LTI on termination

If a SLT member ceases to be an employee of the Suncorp Group for a ‘qualifying reason’ (meaning death, total and permanent disablement, retirement, redundancy as a result of a restructure within the Suncorp Group, change of control of the Company or another reason as determined by the Board), any performance rights which have not vested remain ‘on foot’ and will vest subject to the terms of the grant (including in relation to performance conditions and lapse or forfeiture conditions), except that any allocation made will be pro‑rated to refect the proportion of the performance period actually worked, unless otherwise determined by the Board.

If a SLT member ceases to be an employee of the Suncorp Group other than as a result of a ‘qualifying reason’ (as defned above), any performance rights held, which have not vested, automatically lapse. The Board has ultimate discretion over whether to allow the vesting of any performance rights. Where the Board exercises its discretion to allow unvested shares to vest at the termination date, performance is measured at the termination date. Where vesting occurs, the fnal award size is pro‑rated for the period from the grant date to the date of termination.