FINANCIAL YEAR 2020 LTI PLAN
The aim of the LTI Plan is to provide an incentive for Senior Executives to help achieve the Company’s strategic objectives by
delivering performance that will lead to sustainable and superior returns for shareholders. Another purpose of the LTI Plan is to
act as a retention mechanism in order to maintain a stable team of performance-focussed Senior Executives. The current LTI
Plan is the NEXTDC Limited Equity Incentive Plan (EIP).
Opportunity/Allocation Maximum LTI value was set at 100% of Base Salary Packages.
The LTI grant of Performance Rights is calculated by applying the following formula:
Number of Performance Rights = Base Package x Maximum LTI% ÷ Right Value
NB: The Right Value is the volume weighted average share price of Shares over the 10 trading
days following the release of the Company’s FY19 results. The “Maximum LTI %” recognises that
the stretch level of Rights will be granted when stretch performance is achieved.
Measurement period The Performance Rights measurement period for FY20 is a three (3) year period beginning from
the end of trade on the day of release of the FY19 Results and ending upon the end of the day of
release of the annual results for FY22.
The measurement period for assessing Total Shareholder Return (TSR) performance is aligned
with the release of results to ensure that the share price upon which TSR is determined at the start
and end of the performance period reflects an informed market.
Performance hurdle The performance condition is market adjusted TSR which compares the TSR of the Company
to the TSR of the ASX 200 Accumulation Index (Index) with the vesting percentages to be
determined by the following scale:
NEXTDC’s TSR over the Measurement
Percentage of Rights that vest
Less than TSR of Index Nil
At TSR of Index 25%
Between TSR of Index and TSR of Index + 5% Pro rata vesting from 25% to 100% on a
TSR of Index + 5% or greater 100%
A positive TSR gateway applies to all offers such that no vesting will occur if shareholder value
has not increased over the Measurement Period (i.e. TSR must be positive).
The Remuneration and Nomination Committee has again reviewed whether the introduction of a
second LTI performance measure is appropriate. It remains the Board’s view that an additional
measure is not appropriate at NEXTDC’s current stage of development. The Remuneration and
Nomination Committee regards the continued application of a relative TSR performance measure
to be the most effective method for aligning long-term executive performance with shareholder
wealth outcomes and will review the appropriateness of the single measure LTI program on an
Reason for selection TSR was selected as it recognises the total returns (share price movement and dividends
assuming they are reinvested into Company shares) that accrue to shareholders over the
Measurement Period. This measure creates the most direct alignment between shareholder return
and rewards realised by Senior Executives. The measurement period for assessing TSR
performance is aligned with the release of results to ensure that the share price upon which TSR
is determined at the start and end of the performance period reflects an informed market.
Market adjusted TSR was selected to ensure that participants do not receive windfall gains from
broad market movements unrelated to the performance of the Senior Executives.
The positive TSR gate ensures that Senior Executives cannot benefit from the LTI Plan when
shareholders have lost value over the Measurement Period. Vesting commences upon NEXTDC’s
TSR matching the Index TSR, with full vesting occurring once NEXTDC’s TSR exceeds the Index
TSR by 5% compound annual growth over the performance period. This hurdle has been
determined with regard for the historic performance of the ASX 200 Accumulation Index whereby
5% compound annual growth or greater represents upper q
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