Fortescue Staff Incentive Plan

Transcription

1 Fortescue Staff Incentive Plan Financial Year 2014 (1 July June 2014) TABLE OF CONTENTS TABLE OF CONTENTS... 1

2 1. KEY OBJECTIVES OF THE SIP ELIGIBILITY SUMMARY OF OFFER DETAILS PERFORMANCE OBJECTIVES AND WEIGHTINGS PERFORMANCE OBJECTIVES AND TARGETS SETTING PERSONAL OBJECTIVES CASH OR SHARES HOW WILL MY PAYMENT BE CALCULATED CHANGES DURING THE FINANCIAL YEAR WHAT HAPPENS IF I LEAVE AUTHORISATION OF PAYMENTS MISCONDUCT REMUNERATION & NOMINATION COMMITTEE DISCRETION NEXT STEPS GLOSSARY OF TERMS

3 1. KEY OBJECTIVES OF THE SIP Key objectives of the SIP are to: focus employees on the delivery of the Company s annual objectives; drive a performance culture that delivers on stretch targets; provide competitive rewards if performance expectations are achieved; and enable employees to build a vested interest in Fortescue s longer term performance by providing an opportunity to acquire shares in the Company. 2. ELIGIBILITY All permanent Fortescue direct employees are eligible to participate in the SIP. You must be employed before 1 April of the performance year to participate. Employees who commence with Fortescue after 1 July but before 1 April of the performance year will have their incentive amount pro-rated based on the number of days service in the year divided by 365. If an employee receives an overall Unsatisfactory performance rating in the FY14 Annual Performance Review, then no SIP payment is made. To receive payment, you must be in our employ at the end of the performance period (ie 30 June). The SIP operates at the discretion of the Board of Fortescue. It is not a guaranteed part of your employment conditions. 3. SUMMARY OF OFFER DETAILS Performance is measured from 1 July to 30 June. Company Performance measures Safety, Production and Cost. Team Performance measures for operations employees. Individual Performance Objectives for Salary Band D and above. The incentive is calculated as a percentage of Total Fixed Remuneration (TFR). Awarded in the form of cash or shares on election by the employee. TFR includes an employee s Total Cash salary plus employer superannuation contributions plus the value of any salary sacrifice items and associated FBT. For site based employees, TFR includes the site based allowances such as continuous shift allowance, site allowance, shift change allowance, rail allowance etc. It does not include Pilbara residential allowances such as the Pilbara Residential Travel Allowance or Power Allowance. 3

4 4. PERFORMANCE OBJECTIVES AND WEIGHTINGS The distribution of objectives and weightings varies between Operational and Non- Operational employees and is subject to salary band as shown in the tables below. Operational Employees Employee Type & (Salary Band) Company weighting (Production, Safety & Cost) Team Weighting (4 objectives) Individual Weighting (4 objectives) Manager (E) 5% 10% 15% Superintendent/Technical Lead (D) 5% 10% 5% Professional, Supervisors, Operations, Business Process and Administration Support (A-C) 5% 10% - Non-Operational Employees Employee Type (Salary Band) Company weighting (Production, Safety & Cost) Individual Weighting (4 objectives) Manager (E) 15% 15% Superintendent/Technical Lead (D) 15% 5% Professional, Supervisors, Operations, Business Process and Administration Support (A-C) 15% - 5. PERFORMANCE OBJECTIVES AND TARGETS Company and Team objectives are set by Fortescue and come from the annual Business Planning and Budgeting process and are established in line with one of our values: Set stretch targets then achieve them. 5.1 Company Objectives The three company objectives are Safety, Production and Costs all of which are weighted equally. Objectives will either be met or not met. There are no Threshold or Stretch targets. 5.2 Team Objectives Team objectives will be set for each of the operations (ie Cloudbreak, Christmas Creek, Solomon, Port and Rail). The Team component is only relevant for operations employees. A sliding scale is applied to Operational Team Production and Cost Objectives as follows: Payment of 10% of opportunity at 90% of target Payment increases to 50% of opportunity at 95% of target Payment increases to 100% of opportunity when target is achieved For over performance - payment increases by 12.5% for each 5% achieved above target and is capped at 150% (120% of target) Relative proportional payment will be made between 90%, 95% and 100%+ The sliding scale does not apply to Safety Objectives which are either met or not met. 4

5 5.3 Personal Objectives Personal Objectives are only applicable for employees occupying roles in Salary Bands D and E. Personal Objectives are set at stretch levels of performance by the employee in conjunction with their manager. The objectives under this category are of equal weighting and must be endorsed by the relevant one-up Manager for all participants. 6. SETTING PERSONAL OBJECTIVES SIP Personal Objectives are distinctly different from the performance objectives you set as part of the performance review process. SIP Personal Objectives represent achievements above and beyond normal activities and are set at stretch levels of performance. SIP Personal objectives should: Drive value linked to business objectives Build capability / make the business more effective Achieve a step change not incremental improvement Generate ideas / encourage innovation Be challenging but not impossible Above and beyond the day to day requirements of your role Setting Personal Objectives Objectives should be set in line with the S.M.A.R.T. model and be of equal weighting. Band D FOUR 1.25 per cent each = Total 5 per cent of TFR Band E FOUR 3.75 per cent each = Total 15 per cent of TFR Specific Measurable Achievable Result Oriented Time Bound Spells out in concrete terms what is to be achieved and to what degree Contains quantitative or qualitative terms or conditions that are easily identifiable Sets a target that is ambitious yet attainable, given the conditions, resources available and time frame Instead of describing an activity, identifies a specific end-product, result or outcome that is something of value Set at a specific date by which to achieve the result Personal Objectives must be signed by the employee, the employee s Manager and authorised by the one-up Manager. All Personal Objectives must be submitted electronically to the Remuneration & Benefits team for collation in the SIP Management System. Variation to any personal objectives during the course of the financial year must be authorised by the one-up Manager. 5

6 7. CASH OR SHARES Your SIP payment can be made in one of the following ways: Cash payment; or Shares with a twelve month non-disposal period; or Shares with a three year non-disposal period. You must make the election to receive your payment in cash or shares at the time you accept the offer. You may change your election at any time up until 28 February You will not be able to change you election after this date. 7.1 Cash Payment If you elect to receive your payment in cash it will be inclusive of superannuation. Your cash payment will be paid less company superannuation (where relevant) and income tax calculated at your marginal tax rate. The balance will be transferred to your nominated bank account. 7.2 Shares If you elect to receive your payment as shares, the value of your payment will be increased by an additional 50 per cent. The shares will be awarded to you in two tranches as follows: Tranche 1 shares to the value of your original payment; and Tranche 2 shares to the value of the 50 per cent additional payment. Tranche 1 Your shares will be subject to a twelve month or three year non-disposal period (depending on your election) from the date of award. This means that you cannot trade or sell these shares during this time. If you leave the company prior to the end of the non-disposal period your Tranche 1 shares will be released to you shortly after your employment end date. Tranche 2 Your shares will be subject to a twelve month or three year non-disposal period (depending on your election) from the date of award. In addition, a forfeiture condition will apply to Tranche 2 shares for a period of twelve months from the date of award. This means that you cannot trade or sell these shares during the non-disposal period and if you leave the company prior to the end of the 12 month forfeiture period you will forfeit your Tranche 2 shares and they will be returned to the company. How the number of shares are calculated The amount of shares issued or transferred will be the value of your SIP payment divided by the average of the daily Volume Weighted Average Price (VWAP) of Fortescue shares traded on the Australian Securities Exchange (ASX) over the 15 days prior to issue. 6

7 Tax Treatment of Shares Your shares are subject to a twelve month or three year non-disposal period. You will not be subject to income tax when you are awarded your shares. Income tax can be deferred on your shares until the end of the non-disposal period provided you remain employed by Fortescue. When your shares are no longer subject to disposal restrictions, you will be subject to income tax on the shares. The end of the non-disposal period is known as the Release Date. The taxable value will be reported to you on an Employee Share Scheme (ESS) Statement at the end of the financial year in which the Release Date occurs. The taxable value will generally be the market value of the shares on the Release Date. If the shares are sold within 30 days of the Release Date, the deferred taxing point becomes the date you sell your shares. The tax information provided above is general in nature and you should always seek your own independent financial advice. Trading Restrictions on Shares Payments If receiving your payment in shares the following restrictions will apply: all shares will have a minimum 12 month non-disposal condition; shares cannot be traded whilst non-disposal conditions apply; and any sale of Fortescue shares must be in line with Fortescue s Securities Trading Policy which has been provided as part of your SIP information pack and is available on the Company s intranet. Shareholder Entitlements Your SIP shares will be entitled to earn any dividends that the company pays during the nondisposal period. 7.3 Superannuation Salary Sacrifice You may, by prior arrangement, have some or all of your cash incentive payment paid into your superannuation fund via a salary sacrifice deduction. Elections to salary sacrifice all or a percentage of your incentive must be made prior to 1 June You should also be mindful of the superannuation contribution limits which include the per cent Company contribution AND your salary sacrifice contribution (see below) that are in effect for the 2013/14 financial year. Age Under 60 Limit $25,000 per annum 60 and Over $35,000 per annum 7

8 8. HOW WILL MY PAYMENT BE CALCULATED Your SIP Participating Percentage is based on your Salary Band. Objectives Potential Payment Salary Band Company Team Personal Cash Shares Operations A-C 5% 10% - 15% 22.5% D 5% 10% 5% 20% 30% E 5% 10% 15% 30% 45% Non-Operations A-C 15% % 22.5% D 15% - 5% 20% 30% E 15% - 15% 30% 45% Your TFR for the calculation of the SIP will be the average of TFR over the course of the financial year (Participating TFR). For example you had a TFR of $100,000 on 1 July 2013, you were promoted and your TFR changed to $130,000 from 15 November The table below shows how your Participating TFR would be calculated: TFR From Date To Date Days in year % of Year Participating TFR $100,000 1/07/ /11/ % $37,534 $130,000 15/11/ /06/ % $81,205 Totals: % $118,739 If you have any periods of unpaid leave (including unpaid parental leave) during the year, these days will be taken off your service days and will reduce your Participating TFR. The table below shows how this situation would be calculated: TFR From Date To Date Unpaid Leave Days in year % of Year Participating TFR $100,000 1/07/ /11/ % $37,534 $130,000 15/11/ /06/ % $77,644 Totals: % $115,178 8

9 Example 1: An operations employee (Salary Band B) on a SIP Participating Percentage of 15 per cent. The employee has been employed for the full 12 months of the financial year and results assume all objectives have been met. Operations Employee (Band B) Example TFR: $117,416 Start Date: 15/06/2011 Service Days Worked: 365 Service % Worked: % Pro-rata TFR based on Service: $117,416 Company Objectives Potential % Value Potential $ Value % Achieved $ Achieved Safety 1.67% $1, % $1,957 Production 1.67% $1, % $1,957 Cost 1.67% $1, % $1,957 Team Objectives: Safety 3.33% $3, % $3,914 Production 3.33% $3, % $3,914 Cost 3.33% $3, % $3,914 Total Cash: 15% $17, % $17,612 Total Shares: 22.5% $26, % $26,419 9

10 Example 2: A non-operations employee (Band B) on a SIP Participating Percentage of 15% who has been employed since 28 September Results assume one company objective has not been met (shown in red). Non-Operations Employee (Band B) Example TFR: $117,416 Start Date: 28/09/2013 Service Days Worked: 276 Service % Worked: 75.62% Pro-rata TFR based on Service: $88,786 Company Objectives Potential % Value Potential $ Value % Achieved $ Achieved Safety 5% $4,439 5% $4,439 Production 5% $4,439 5% $4,439 Cost 5% $4, % $0 Total Cash: 15% $13, % $8,878 Total Shares: 22.5% $19, % $13, CHANGES DURING THE FINANCIAL YEAR Payments are calculated based on the TFR established at the Annual Salary Review at the commencement of the relevant financial year subject to the following changes: Any changes in TFR during the course of the financial year are calculated on a pro-rata basis on the days the varying TFR amounts applied. If an employee acts in a role that qualifies for higher duties the higher duties allowance will be included in the TFR on a pro-rata basis. However, no change will be made to the employee s SIP percentage. If an employee is formally seconded into a higher level position for a period of six months or more and that role has a higher level SIP percentage, both the higher TFR and higher SIP percentage will be applied on a pro-rata basis. If an employee is promoted or moves between salary bands A-C, D or E or changes Teams, your payment will be pro-rated based on the effective date of the change and the applicable TFR amounts. 10

11 If you have any periods of parental leave or any other unpaid leave during the year, these days are excluded from the number of days service in the year as a percentage of 365 days. If a person has an outstanding debt with Fortescue, the debt will be offset against any potential SIP payment. 10. WHAT HAPPENS IF I LEAVE Incentive award Redundancy / Retirement Resignation Misconduct (eg Fraud or Breach of Code of Conduct) SIP Cash Board Discretion for a pro-rata payment if a minimum of half the performance period is served Must be employed at the end of the Performance Period (ie 30 June) No payment SIP Shares Tranche 1 Shares will be released to the employee at termination All shares forfeited SIP Shares Tranche 2 Board Discretion to lift restrictions and forfeiture conditions Shares subject to forfeiture conditions will be transferred back to the Company All shares forfeited Nothing is payable until the Fortescue Board confirms that the objectives which trigger any payment have been achieved. Specifically, employees that may receive a pro-rata payment on redundancy / retirement will receive their payment at the same time as employees continuing in the Company s employ. Employees who terminate their employment after 30 June will receive their payment at the same time as employees continuing in the Company s employ. This arrangement is subject to the employee completing their notice period and meeting satisfactory performance conditions. If either of these conditions are not met, or where there is an incident of misconduct, Fortescue retains the right to forfeit all entitlements to the SIP payment at its discretion. 11

12 11. AUTHORISATION OF PAYMENTS The timing for the authorisation of payments is at the Board s discretion, but would not normally precede Board approval of the Company s full year results for the year of operation of the SIP. Payment will normally be after the main pay run in September. 12. MISCONDUCT Any shares that you acquire through the SIP that remain subject to forfeiture or non-disposal conditions will be liable to forfeiture if you commit any unlawful, fraudulent or dishonest act, or any other act constituting serious misconduct (Misconduct). By accepting this offer you agree these forfeiture provisions apply. 13. REMUNERATION & NOMINATION COMMITTEE DISCRETION The SIP operates entirely at the discretion of the Fortescue Board and may be terminated, suspended or amended at any time, or from time to time, in its entirety or in part, in relation to any or all employees. Notwithstanding the operation of the SIP, the Fortescue Board may make such other awards to any or all employees as the Board, at its sole discretion, may determine. Participation in the SIP and any potential payments flowing from such participation, are not warranted as part of an employee s contract of employment. 14. NEXT STEPS Read the online offer documentation in full as it contains important information. Any tax advice or information that is given by the Company to you in relation to the FY14 SIP Offer is general advice and information only and is not tailored to your specific circumstances. You should consider obtaining your own taxation and financial advice from a qualified adviser before deciding whether to accept this offer. 12

13 You will receive an from Link Market Services Limited containing a personalised weblink to a secure website, where you can make your online application for the FY14 SIP Offer. To accept the offer, you must complete the online application process in full by the due date as detailed in your on-line invitation. By accepting the FY14 SIP Offer, you agree to be bound by the terms of the invitation letter, this document, the online Acceptance Form, Fortescue s Securities Trading Policy, the Share Plan Rules and the Company's Constitution. 15. GLOSSARY OF TERMS "Date of Award means the date the shares are transferred into your name. "Date of Disposal means the date you sell or transfer for your shares. "Forfeiture means relinquishing ownership of a share which will be transferred back to Fortescue. "Misconduct means any unlawful, fraudulent or dishonest act, a serious breach of Fortescue s Code of Conduct and/or Policies or any other act constituting a serious breach of Fortescue s values and standards. "Non-Disposal Period" means a period of time that shares cannot be sold or transferred. Also referred to a Disposal Restrictions. "Release Date means the date the shares are released from trading restrictions and are available for the employee to trade. "Shares" means fully paid ordinary shares in the capital of the Company. "Taxable Value means the $ value of the shares that will be subject to income tax. "Tranche means a parcel of shares. END OF DOCUMENT 13