PART 1: BACKGROUND STATEMENT

The Board of Growthpoint Properties Limited (the company) and the Chairman of the Human Resources and Remuneration Committee (the committee) have pleasure in presenting the company’s remuneration report for the financial year ended 30 June 2021. Being the biggest South African, JSE primary listed REIT, Growthpoint is regarded as the domestic industry leader which sets the local benchmark. We are proud of our remuneration practices. The report sets out the company’s current remuneration policy and the detailed implementation and disclosure of remuneration for Executive Directors and Non-executive Directors.

The committee considered King IV when compiling this report. We also worked with our independent adviser, PwC, to obtain guidance on the adoption and implementation of appropriate remuneration-related decisions.

The committee endeavoured to ensure, to the extent appropriate, consistent application of the company’s remuneration policy, which was approved by our shareholders at the 2020 AGM. We incorporate the principles of fairness, transparency and consistency when it comes to the company’s remuneration practices.

Deviations from the policy

The LTI scheme vested for the first time in FY21, with only 37.62% of the FY19 awards vesting as per the scorecard here. To make way for the first LTI vestings, the STI awards for FY21 were to be reduced to 75% for the cash element and 50% for the deferred bonus element. However, this would have produced a result where STI for executives decreased 38% on average for FY21 versus FY20 which is not aligned with what shareholders experienced in the period.

As a result, the committee resolved to issue the FY21 awards at 100% for the cash element and 75% for the deferred bonus element per the scorecard here, showing alignment between shareholders’ returns and Executive Directors’ compensation, with both parties seeing a similar deterioration in returns for the FY21 reporting period. Shareholders’ distribution per share (DPS) for FY21 was down 18.8% on FY20, and distributable income per share (DIPS) was down 19.1%. In turn, Executive Directors’ Short-Term Incentive (STI) rewards at 100% for the cash element and 75% for the deferred bonus element have decreased by 12.3% on average, compared to FY20, based on the STI scorecard here:

In contrast, the share price increased 11.6% over the period, resulting in a total shareholder return of 20.5%.

Shareholder engagement and feedback

During November 2020, Growthpoint’s Chairman and the Chairman of the committee conducted the annual remuneration roadshow to all major shareholders. We delivered the remuneration structure that was promised the year before and the 2020 remuneration report was well received. Shareholders supported our move to include DIPS as a performance measure, in view of the reduction in the pay-out ratio from 100% to 80%. Investors were generally concerned about the issuing of new and additional Covid-19-related awards during that time and were pleased to see that we did not issue any in FY20.

The total votes for the remuneration policy by our shareholders at our December 2020 AGM were lower than expected, given historic voting outcomes and the positive engagement during the roadshow, as well as our consistent approach to remuneration which supports our ongoing commitment to the highest levels of corporate governance, transparency and disclosure.

Last three years’ AGM voting outcomes

The committee considered all shareholder suggestions on our remuneration structure and implementation. However, in its efforts to remain consistent and appropriate, not all have been incorporated into the FY21 remuneration structure. Feedback received and the response thereto, is set out below:

Key themes from the November 2020 remuneration roadshow
Feedback received		Response/action undertaken
Given the risk-averse environment, risk measures should have a higher weighting			Risk measures have been increased from 5% to 15% for FY21.
A net asset value (NAV) measure should be incorporated in the STI scorecard			NAV measures are included in the LTI scorecard which vests for the first time this year. In line with the committee’s focus on consistency, we have decided not to change the STI measures.
Group LTV versus SA LTV under risk measures			Given that Executive Directors are responsible for capital management and driving the internationalisation strategy, the committee has retained Group LTV as the relevant LTV measure.
Adjustment to the STI LTV KPI in the light of the November 2020 equity raise			The committee considered making changes to the STI LTV KPI as a result of the equity raise but decided not to, albeit that it was funded by investors. Executive Directors continue to steer the business in uncertain times. Bolstering our balance sheet was necessary and has placed the business in a stronger financial position, from which all stakeholders have benefited.
Use of additional awards to motivate and retain executives not supported			No additional awards have been issued in FY21.
More disclosure required for ERS awards			No ERS awards were issued in FY21. The committee will engage with shareholders should future awards be made.

Market capitalisation benchmark

The committee’s policy is to change the market capitalisation comparator group every three years. This benchmark is used for benchmarking Executive Directors’ total remuneration, as well as Non-executive Directors’ fees. In line with this policy, and given that the comparator group was last updated in FY18, the FY21 comparator group inclusion was based on a 30-day volume weighted average price (VWAP) as of 30 June 2020. Our methodology is to include the next six companies with a market capitalisation larger than Growthpoint and the next six companies with a market capitalisation smaller than Growthpoint, excluding mining and obviously non-comparable companies. This comparator group will remain in place for FY21, FY22 and FY23 (subject to e.g. mergers) and consists of the following companies:

• Bidvest Limited
• Mediclinic Int Plc
• Mr Price Group Limited
• Multichoice Limited
• Nedbank Group Limited
• Pepkor Holdings Limited
• PSG Group Limited
• Rand Merchant Inv Holdings Limited
• Santam Limited
• The Spar Group Limited
• Tiger Brands Limited
• Woolworths Holdings Limited.

Short-term incentive (STI)

Peer group for relative performance measures

STI relative performance measures have historically been benchmarked against companies in the FTSE/JSE SA REIT Index. Last year, however, to ensure the relevance and comparability of the peer group data, we decided to only include companies from the FTSE/JSE SA REIT Index whose results spanned the period 27 March 2020 to 30 June 2020, encompassing the impact from the Covid-19 pandemic. On this basis, Attacq, Emira Property Fund, Fortress REIT, Hyprop Investments, Liberty Two Degrees, Resilient REIT and SA Corporate Real Estate were included in the peer group benchmark. To ensure fairness and consistency, and in line with what we communicated last year, the committee confirms that the same companies that were excluded last year remain excluded for the FY21 STI calculations. These companies have year ends later than Growthpoint and, as such, will potentially show a different Covid-19 impact in their numbers.

For FY22, it is intended to use the larger peer group for relative performance, including all companies in the FTSE/JSE SA REIT Index.

To ensure the independence of the peer group calculations, the committee once again utilised the services of Investec Corporate Finance to perform this work.

Financial measures

The company’s performance for the financial year was below budget. Unfortunately, the ongoing impact of the Covid-19 pandemic on the business, the weak domestic macro-economic environment and less dividends being received from our international investments, have had a negative impact on the absolute financial performance measure – where a 0% score was achieved. This KPI is based on budgeted DIPS of 162.6 cents (-11.2% decline from FY20 DIPS of 183.1 cents) versus the 148.1 cents that we delivered for FY21, which was 19.1% down on FY20. This was further impacted by the November equity raise which was not included in the budget of 162.6 cents and had a dilutionary effect on a per share basis. Our DIPS declined 2.9% on a weighted basis with Growthpoint’s weighting capped at 15%, which was at the median of where the peer group performed, placing Growthpoint on target at the median, producing a total score for financial measures of 27.5% out of 55%.

Risk measures

Feedback received from shareholders on our 2019 and 2020 remuneration roadshows was that we should increase the weighting of our risk measures for the STI, due to the risk-averse environment. Despite this recommendation from shareholders, the committee decided not to increase the weighting for FY20 as it would have benefited executives, which the committee felt was inappropriate at the time. However, as a result of a sharpened focus on balance sheet strength due to Covid-19, the committee has decided to increase the weighting for risk measures from 5% to 15% for FY21 and going forward. Both the interest rate hedging and ratio of secured to unsecured debt measures achieved a stretch score of 150%. The Group LTV measure was on target at 100% and the debt expiry profile measure was between threshold and target at 80%. A total score of 17.40% out of 15.00% was achieved for risk measures.

Non-financial measures

Non-financial measures, including environmental, social and governance (ESG) related measures have gained prominence among investors. ESG is a golden thread that runs through Growthpoint’s operations and strategy. To link ESG measures to the total remuneration outcome for Executive Directors, KPIs incorporate customer satisfaction, transformation and sustainability in both the STI and the LTI schemes. A total score of 16.82% out of 15% was achieved as a result of achieving stretch on the transformation measure, target on sustainability and between threshold and target for client satisfaction.

Given the volatile environment as a result of the second and third Covid-19 waves and the domestic unrest which had a significant impact on the KwaZulu-Natal region, it was once again inappropriate to perform the client satisfaction survey. However, the unprecedented environment since March 2020 has paved the way for increased client engagement, with rental relief having been offered to many. We believe that this has been advantageous in further solidifying relationships. As a result, this KPI was measured based on the results of the previous survey conducted.

The committee is proud of the level 1 B-BBEE score that the company achieved for the period, which is an endorsement of the company’s commitment to transformation in line with its published transformation strategy. Growthpoint’s target is a minimum level 4 B-BBEE score.

ESG at Growthpoint is important and increasingly embedded into the operations of the business. We are pleased to be included, for the 12th year, in the FTSE/JSE Responsible Investment Index. We scored 2.8 out of 5, which was above the industry average of 2.5. Inclusion in the index is necessary to achieve on-target performance. In order to achieve stretch, Growthpoint would need to be a top 30 constituent, which it was not in this assessment period.

Personal measures

Due to commercial sensitivities and confidentiality, the committee has decided not to provide further details on these measures in this report. We can, however, assure stakeholders that targets are robust and that Executive Directors have done well to steer and manage the business in unprecedented and difficult times, creating value for all stakeholders.

Long-term incentive (LTI)

The first LTI awards issued in October 2018 which were based on a three-year forward measurement period including FY19, FY20 and FY21, vest in October 2021. These awards were based on 75% of FY19’s TFR and issued at a 90-day VWAP of R24.93 at the date of issue. The share price as of 30 June 2021 was R14.90, which represents a decline of 40.23% in the value of the awards since issue date. Given the 90% weighting of financial measures for LTI performance, and with the share price and NAV per share having declined 44.2% and 20.8% respectively, over the three-year measurement period, impacting both the total return and total shareholder return measures, only 37.62% of the awards vested, based on the LTI scorecard here. The financial outcome of the new LTI scheme for management has therefore been negatively impacted by both the share price decline over the three-year period and the reduced vesting percentage.

Retention

The impact of Covid-19 and the deteriorating macro-economic environment have had a significant effect on remuneration, and the committee is concerned about meaningful retention. Executive Directors are earning significantly less than they were earning two years ago:

The 44.2% decline in the share price since 30 June 2019 has affected the value of vestings for the LTI scheme, executive retention scheme and STI deferred bonus scheme, as well as shares owned directly in terms of the minimum shareholding requirements applicable to Executive Directors.

We are acutely aware of our commitments to consistency and alignment, but somehow a balance needs to be struck to provide for the retention and motivation of Executive Directors and key talent to deliver on the Growthpoint business strategy.

Given the unintended consequences of the outcomes of the above mentioned schemes on fair and reasonable remuneration and retention. We have decided that STI award percentages for FY22 will be offered to Executive Directors at a maximum STI opportunity of 200% of TFR, of which 100% can be earned in cash and 100% would be deferred into shares that vest in equal tranches over three years. In addition the FY22 LTI awards will be issued at 100% of TFR. This approach was deemed appropriate, given that there remains a strong link to pay-for-performance and it provides an additional retention leg, that is still anchored on the delivery of Growthpoint’s short-term objectives.

Use of the executive retention scheme (ERS)

In an environment where key skills are scarce and where there is an exit of key talent from the industry, our remuneration policy is a vital tool to ensure that key talent is attracted, motivated, engaged and retained. The ERS is designed to retain senior management over the long term and is not awarded on a regular basis. The last significant initial award was made in 2014, with 10% of these initial awards vesting in FY21 and the last 10% vesting on 1 April 2022. No ERS awards were granted in FY21.

Annual fixed remuneration increases

Last year, the committee reviewed its strategy for the awarding of the annual July increases and, for the first time in the company’s history, not all employees participated in the increase-award process. Only the bottom 80% of earners that performed satisfactorily received an increase.

In July this year, however, increases were awarded to all employees who performed satisfactorily.

Succession

The committee has extensively considered succession and embarked on a project that will be completed in FY22. On this basis, all positions have been realigned and roles have been specified to ensure the execution of the company’s strategy and a new corporate structure has been approved by both the committee and the Board. The final phase will be completed in FY22 and will involve placing employees in the relevant positions in the new structure and ensuring succession for each position.

Conclusion

The committee takes a long-term view on growth and success and strives to incorporate this vision into Growthpoint’s remuneration policies and practices. These are designed to facilitate the delivery of the company’s strategy on a sustainable basis.

We believe that the remuneration of Executive Directors for FY21 reflects the successful delivery of this strategy in a very challenging and unprecedented environment. The company’s risk management and conservative practices have proved their worth. In addition, the committee believes that management has done an excellent job in leading the business through the extremely challenging and unprecedented Covid-19 environment. We are also satisfied that there is a strong pay-for-performance link with targets that contain enough stretch, KPIs and targets that remain relevant and appropriate incentives for Executive Directors who will be navigating the considerable challenges that lie ahead.

While remuneration is a complex and controversial matter, the committee believes that the company’s remuneration policy is fair, responsible, and aligned with best practice. Its consistent application will sustain the performance culture in the company and lead to sustained value creation for all our stakeholders. We are therefore satisfied that the remuneration policy fulfilled its objectives for FY21 and believe that we adequately fulfilled our duties. As such, the committee trusts that shareholders will support the remuneration resolutions at the AGM on 16 November 2021.

Signed on behalf of the Board of Directors

John Hayward
Human Resources and Remuneration Committee Chairman

PART 2: REMUNERATION POLICY

Fair and reasonable pay

Growthpoint is committed to ensuring that its remuneration policy and philosophy is fair, responsible, and aligned with all South African legislation as well as the “Equal Pay for Work of Equal Value” code of good practice. Central to this philosophy is the principle that overall compensation at Growthpoint is tied to performance at both employee and company levels. At the beginning of each financial year, managers identify key performance objectives they want employees to achieve. Delivery against these objectives is assessed twice a year and the employee’s annual fixed remuneration is reviewed annually. Based on the company’s and the employee’s individual performance outcome, the review may lead to an increase in the employee’s fixed remuneration and the award of a cash performance bonus.

Our pay for performance objectives are as follows:

• To attract, recruit, develop and retain the talent requireds to realise business goals
• To communicate and reinforce the values, goals and objectives of the company
• To engage employees in Growthpoint’s success
• To reward employees for the company’s achievement and their contribution to this achievement
• To ensure that Growthpoint’s remuneration is competitive as measured through various remuneration surveys
• To promote our employee value proposition, which includes the creation of a performance-orientated corporate culture, underpinned by our values.

To realise our objective of being an employer of choice and to ensure that all our employees stay engaged and motivated, we continue to make awards of zero-cost share options to all staff, excluding the Executive Directors and other Executive Committee members under the Growthpoint Staff Incentive Scheme (GSIS).

Growthpoint continues to make strides in ensuring that our total rewards make a significant improvement to the quality of life of our employees, especially those at lower-earning levels. Our goal is to ensure that all our employees are paid a living wage, defined as the minimum income necessary for a staff member to meet their basic needs. Due to the subjective nature of the term “needs”, there is no one universally accepted measure of what must be included in our definition of a living wage, and it will vary by household type. Furthermore, the living wage differs from the national minimum wage in that the latter is governed by national legislation and may fail to meet the requirements to have a basic quality of life, leaving a family to rely on various government grants for additional income. Growthpoint’s philosophy on the living wage is to provide a level of income that enables our lowest paid employees to afford a modest but decent standard of living. This generally means that our employees should be able to afford food, shelter, clothing, utilities, transport, healthcare and childcare. In addition to fixed and variable pay and awards made under the GSIS, there are benefits enjoyed by employees, which are solely paid for by the employer.

These include:

• Admed Insurance gap cover, which covers employees’ medical cost shortfalls
• Personal accident cover
• Dread disease cover
• Educational assistance for qualifying employees’ dependants through our GEMS programme (see here).

Growthpoint values all staff and strives to ensure that remuneration is structured fairly. Superior performance is encouraged and rewarded. We recognise that remuneration forms an integral part of the employment offering that enables us to attract, reward and retain the talent we need to meet the company’s objectives. We are particularly proud of our GSIS and believe that the participation of all employees (excluding Executives) in the GSIS, through the granting of zero-cost share options, helps us to create a culture of ownership in which employees are satisfied, engaged and motivated to perform to the best of their ability.

The company participates in annual market remuneration surveys to ensure that our remuneration remains competitive.

As a designated employer (an employer with 150 or more employees), Growthpoint is also required by law, as regulated in the Employment Equity Act, to analyse the actual remuneration paid to all employees. This analysis is conducted annually to ensure that there are no disparities based on race, gender or arbitrary grounds and that differences are based on justifiable grounds as allowed for in law, for example scarce skills experience and tenure. Growthpoint also provides a process to advise if gaps exist and how these are being or will be addressed. In terms of section 27(1) of the Employment Equity Act 55 of 1998 as amended, Growthpoint submits to the Department of Labour the income differential statement by 15 January annually.

Elements of remuneration

The organisation-wide remuneration structure provides for fixed and variable elements for its Executive Directors and Executive Committee members (jointly referred to as Executives) and all other employees.

Executive remuneration has the following elements:

Total fixed remuneration (TFR)
Fixed remuneration		Fixed remuneration is paid in cash. Executive Directors’ fixed remuneration is targeted at the market median of the comparator group (see above), while remuneration for key employees may be set at the upper quartile to ensure attraction and retention of high-performing talent.
Benefits		Competitive benefits for executives and all other employees include a defined contribution provident or pension fund, medical aid schemes and life cover. Company-paid benefits include personal accident, dread disease, approved medical gap cover, disability and death benefit cover.
Variable remuneration
Short-term incentive (STI) – cash bonus		For Executive Directors, performance measures for the STI include threshold and stretch targets, measured over a 12-month period: Group measure – 85% of STI(1): 55% Financial: 27.5% Absolute DIPS growth relative to budget 27.5% Relative DIPS growth to peers in the FTSE/JSE SA REIT Index. 15% Risk measures: 3% Group LTV ratio 3% debt expiry profile 3% interest rate hedging 3% secured versus unsecured debt 3% Moody’s rating. 15% Non-financial: 5% customer satisfaction survey 5% transformation achievements against the Board-approved transformation strategy which links to the internal target on B-BBEE scorecard 5% sustainability achievements relative to inclusion in the FTSE/JSE Responsible Investment Index to achieve on-target performance, and inclusion as a top-30 constituent to achieve stretch. Personal measure – 15% of STI(1): Delivery on strategy and specific personal targets and objectives. Absolute DIPS is scored relative to budget DIPS which is set at the beginning of the financial year and is derived from a rigorous bottom-up budgeting process. A 1% delta both up and down determines the modifier for absolute DIPS growth as follows: Achievement against budget Vesting level Applicable modifier More than 1% below budget Below threshold 0% 1% below budget Threshold 50% Equal to budget DIPS Target 100% More than 1% above budget Stretch Capped at 150% Linear interpolation will occur on the modifier between the threshold and target performance and between target and stretch performance. Relative DIPS growth is benchmarked to peers in the FTSE/JSE SA REIT Index. For FY21, the same companies that were excluded for the FY20 calculation have once again been excluded. Constituents’ DIPS growth is weighted by market capitalisation, including Growthpoint, with all constituents capped at 15%, over a 12-month rolling period and is ranked according to percentiles as follows: Percentile (X) Vesting level Applicable modifier < 25% Below threshold 0% 25% Threshold 50% 50% Target 100% ≥ 75% Stretch Capped at 150% Short-term incentive ( STI) – cash bonus (%) Linear interpolation will occur on the modifier between the threshold and target performance and between target and stretch performance. For FY21, the cash bonus under the STI scheme for Executive Directors was awarded at a maximum of 100% of TFR, which was then modified according to performance on the scorecard, see below. For FY22, the cash bonus will again be awarded at a maximum of 100% of TFR, which will then be modified according to performance. The above performance measures apply to all Executive Committee members. However, the weightings between Group and personal measures will vary from member to member, as well as the participation ratio. For all other employees, excluding executives, the annual cash bonus is determined by comparing individual performance to agreed performance objectives.
Short-term incentive (STI) – deferred bonus under the GSIS		All Executives receive a deferred bonus in the form of zero-cost share options, vesting over a three-year period of one third each, following the award date, with no further performance conditions. For FY21, the deferred bonus under the STI for Executive Directors was decreased and awarded at a maximum of 75%, previously 100%, of TFR which was then modified according to performance on the scorecard, see below. For FY22 the deferred bonus for Executive Directors will be increased and awarded at a maximum of 100% of TFR, which will then be modified according to performance. The only zero-cost share options awarded to executives are for the deferred bonus as part of their STI. The committee, in appropriate circumstances and to ensure fairness, applies its discretion to determine an appropriate STI for executives, ensuring that both the quantum and the change in total STI from the previous year are not grossly misaligned with the overall performance of the company, at all times considering alignment with what shareholders have experienced over the same period.
Zero-cost options – under the GSIS		All Growthpoint employees, excluding executives, are annually awarded zero-cost options under the GSIS that vest over a five-year period. The quantum is based on a target percentage of their fixed remuneration. Target percentages are linked to market benchmarks and can be increased by approval of the committee for critical skills and individual retention. The vesting profile allows for 0% of the awards to vest after year one, and 25% to vest in each successive year from year two, with the last vesting of each award taking place after five years.
Long-term incentive executive retention scheme (ERS) awards under the GSIS		Executives and a limited number of key senior managers participate in the ERS as part of the GSIS. The ERS is a notional share purchase scheme which simulates a share purchase scheme that is half funded with debt. The initial options granted on 1 April 2014 had an initial strike price of R11.43 based on a 50% discount to the Growthpoint 30-day clean VWAP as traded on the JSE on the day of granting of the initial options. Each option’s strike price is adjusted on a notional basis by: Increasing the strike price by 8.25% per annum, compounding on the distribution payment date and representing interest on the notional debt Decreasing the strike price by the actual distribution per share declared and paid by the company. The characteristics of the ERS provide for perfect alignment between Executive Directors and shareholders, in that the eventual value that an executive will receive under the ERS is driven by the actual DPS, growth in the DPS, and the share price. These options vest on 1 April each year over eight years and give the optionholder the right to acquire one Growthpoint share at the variable strike price at the vesting date. The vesting schedule in respect of the initial awards was as follows: 1 April 2015 0% 1 April 2016 and 1 April 2017 10% pa 1 April 2018, 1 April 2019 and 1 April 2020 20% pa 1 April 2021 and 1 April 2022 10% pa
LTI scheme under the GSIS		The LTI scheme gives executives conditional rights to shares. It includes threshold and stretch targets and has a forward measurement period of three years with awards settled in shares. Awards are made based on the LTI award percentage, which for FY22 will be a maximum of 100% of TFR, and expressed as a number of Growthpoint shares based on a 90-day VWAP calculated on an ex-distribution basis, on the grant date. The FY21 LTI awards will vest in FY24, and the vesting percentage will be subject to the following three-year performance measures: Financial – 90% of LTI 30% absolute total return (TR)2 where TR is measured against Growthpoint’s weighted average cost of capital (WACC) calculated as the average risk-free rate over three years, plus 3% 30% relative TR measured against peers in the FTSE/JSE SA REIT Index 30% relative total shareholder return (TSR)3 measured relative to peers in the FTSE/JSE SA REIT Index. Non-financial – 10% of LTI Average of non-financial measures over three years per the STI scorecard: 3.33% customer satisfaction survey 3.33% transformation achievements measured against the Board-approved transformation strategy which links to the internal target on B-BBEE scorecard 3.33% sustainability achievements relative to inclusion in the FTSE/JSE Responsible Investment Index to achieve on-target performance, and inclusion as a top-30 constituent to achieve stretch. Absolute TR will be scored relative to WACC per above. A 1% delta, both up and down, will determine the modifier for absolute TR as follows: Achievement against WACC Vesting level Applicable modifier More than 1% below WACC Below threshold 0% 1% below WACC Threshold 50% Equal to WACC Target 100% More than 1% above WACC Stretch Capped at 150% Linear interpolation will occur on the modifier between the threshold and target performance and between target and stretch performance. TR and TSR relative to peers in the FTSE/JSE SA REIT Index will be market capitalisation weighted, including Growthpoint, capped at 15%, over a 36-month rolling period and will be ranked according to percentiles as follows: Percentile (X) Vesting level Applicable modifier <25% Below threshold 0% 25% Threshold 50% 50% Target 100% >75% Stretch Capped at 150% LTI scheme under the GSIS (%) Linear interpolation will occur on the modifier between the threshold and target performance and between target and stretch performance. The vesting percentage will be multiplied by the number of shares which constituted the award which can then be exercised.

FY22 remuneration scenarios

The FY22 remuneration scenarios are depicted below using FY22 TFR and assuming the following:

• LTI vestings per the table of unvested awards below
• STI participation ratio for the cash and deferred bonus portion of 100% each for both the Group CEO and SA CEO, 75% each for the Group FD and 40% each for the Human Resources Director.

Group CEO FY22 remuneration scenarios		Group Financial Direct or FY22 remuneration scenarios		RSA CEO FY22 remuneration scenarios		Human Resources Director FY22 remuneration scenarios

GSIS

The first awards under the GSIS were made in 2008. The aggregate number of options/shares that may be awarded to participants over the duration of the GSIS is currently 75m, representing around 2.2% of the issued shares of the company. As of 30 June 2021, 66m shares had been awarded and 9m forfeited by participants, leaving 18m shares available for issue.

In the case of termination of employment, the GSIS provides for forfeiture of all unvested options. In certain instances, at the discretion of the committee, pro rata future vesting may be allowed (for instance in the case of retirement and death in service).

Service contracts

The Group CEO and RSA CEO have service contracts with Growthpoint which provide for the following:

• An indefinite period of service, subject to the normal retirement age of 65 as per the company policy, with a reciprocal six months’ notice of termination provision
• Paid “garden leave” for Executives at the company’s discretion
• Unpaid restraints in relation to the company’s clients, staff and corporate opportunities
• The KPAs and KPIs against which the executives are measured.

The Group Financial Director and the Human Resources Director have employment contracts which provide for paid garden leave, restraint and reciprocal six months’ notice of termination provisions.

Malus and clawback

Deferred bonus shares awarded to Executives under the STI scheme, as well as shares awarded to executives under the new LTI scheme, are subject to malus and clawback provisions which are at the discretion of the committee. Malus will be applied to unvested or unpaid incentives and clawback will be applied to vested and settled incentives. Reasons for malus and clawback include:

• Gross misconduct of an executive
• Material misstatement of the company’s audited financial results.

Earnings from independent subsidiary and associated company appointments

Executive and Non-executive Directors of Growthpoint may be, and are from time to time, appointed to serve on Boards of independent companies in which Growthpoint has acquired controlling or strategic shareholdings. Such appointments are made with the approval of Growthpoint’s Board. Non-executive Directors of Growthpoint who hold such Board positions are permitted to receive and retain Directors’ fees paid to them by such subsidiaries or associated companies. Executives of Growthpoint so appointed shall fulfil their roles on the boards of such subsidiaries or associated companies as part of their executive responsibilities towards Growthpoint and any Directors’ fees earned by them from such companies shall be payable to Growthpoint, except to the extent that the committee may from time to time decide otherwise (as is the case in respect of such fees earned from GOZ Board appointments). Details of the remuneration earned and/or received by Executive Directors, Non-executive Directors and other executives for services rendered to independent subsidiaries and associated companies are reflected in note 23 of the FY21 annual financial statements (AFS).

Executives are not permitted to hold external directorships in other publicly traded entities without the approval of Growthpoint’s Board.

Minimum shareholding requirements

In line with shareholder feedback and in order to align our Executive Directors’ interests with those of our shareholders and demonstrate their commitment to long-term growth, minimum shareholding requirements are in place. Executive Directors have been given five years from the adoption of the policy, 1 July 2018, or from their appointment to accumulate their holdings:

PART 3: IMPLEMENTATION OF REMUNERATION POLICY

Fixed remuneration adjustments

Salary increases were awarded with effect from 1 July 2021 and are applicable for the period July 2021 to June 2022. The average rate of increases for Executive Directors was 4.8%, which is in line with the rest of staff and also considering that increases were not awarded to the top 20% of earners in FY20. There were no market adjustments for Executive Directors. The average rate of increases for Executive Committee members was 4.93% or 4.87% exclusive of market adjustments. The salary increases for all other staff resulted in an overall increase in their salary costs of 6.09% or 5.19% exclusive of market adjustments.

Given there are no real comparator companies in the property sector with the size and complexity of Growthpoint, benchmarking is challenging. Accordingly, in addition to the annual market capitalisation comparator group benchmarking, PwC prepares an annual regression analysis on both TFR and TRem (total remuneration) earned by Executive Directors of property companies included in the FTSE/JSE SA REIT Index. Based on the assessment of various regression factors which take into account the size, performance and complexity of the organisation and include aspects such as market capitalisation, distributable income, total assets, total shareholder return, total debt and total square metres under management, a comparative ratio of a maximum of 150% was considered reasonable for TFR.

In the context of TRem, once size and relative complexity are considered in conjunction with performance (with variable pay typically comprising two-thirds of TRem), a reasonable maximum compa-ratio would range between 167% to 200%, where Growthpoint delivers stretch performance relative to industry peers who delivered a threshold to target performance. Based on the regression analysis performed for on-target performance, the committee considered the below compa-ratios to be acceptable.

FY21 STI outcomes (cash and deferred STI into zero-cost share options)

STI scorecards:

Norbert Sasse/Estienne de Klerk/Gerald Völkel

Olive Chauke

FY21 LTI outcomes for the 1 October 2018 awards that vested based on FY19, FY20 and FY21’s performance

LTI scorecard

Vesting outcome

FY21 LTI awards

These awards were granted for FY21, on 1 October 2020, based on the FY21 TFR, which was the TFR at the time of the award. These awards have a forward measurement period of three years, with all FY21 awards vesting in FY23 subject to three-year performance measures.

Executive Directors’ FY21 remuneration

In the table below, the cash STI and deferred STI awards for FY21 are disclosed. The FY21 deferred STI awards will vest equally in three tranches in FY22, FY23 and FY24 with no further performance measures. ERS awards which vested in FY21 are also disclosed as well as the first vesting of the LTI awards, awarded on 1 October 2018, based on FY19, FY20 and FY21’s performance.

FY21 remuneration

Executive Directors’ single figure remuneration

The single figure remuneration is intended to enhance the transparency of Executive Director remuneration disclosure by consolidating all relevant information relating to current performance into a single table. This table provides a summary of all remuneration that was received or receivable for the FY21 reporting period, and all the remuneration elements that it comprises, where applicable, disclosed at fair value.

Executive Directors’ table of unvested awards and cash settlement

This table details all unvested and outstanding awards under the deferred STI, LTI and ERS at FY21. It also details the cash value of all awards made under variable remuneration, deferred STI and ERS awards that vested in FY21.

PART 4: NON-EXECUTIVE REMUNERATION

The following principles apply to the remuneration of Non-executive Directors:

• The fee structure is recommended to the committee by executives and independent advice is sought if required
• Fees are structured as an annual retainer component plus an attendance fee for scheduled meetings
• Fees are reviewed annually and proposed at AGMs for approval
• Fees are benchmarked annually to the same comparator group used for Executive Directors.

The FY21 comparator group is disclosed above:

• The remuneration of Non-executive Directors is targeted between the median and the upper quartile of the comparator group given the level of responsibility, time and competence required, complexity of the business, Growthpoint’s growing international footprint and size
• Non-executive Directors do not participate in the company’s annual bonus plan or in any of its long-term incentive plans
• None of the Non-executive Directors has a contract of employment with the company. Their appointments are made in terms of the company’s Memorandum of Incorporation and are confirmed at the first AGM of shareholders following their appointment, and thereafter at three-yearly intervals when they retire by rotation in terms of the Memorandum of Incorporation
• Annual assessments of independence and performance are conducted in respect of the Non-executive Directors, details of which can be found here.

Policy statements on Non-executive Director fees

1. The attendance fees for scheduled meetings shall be as agreed by shareholders on the Board’s recommendation, at the AGM (held in November each year)
2. Each Non-executive Director will be obliged to attend, without compensation, the first two unscheduled meetings in any financial year, whether these are Board meetings or committee meetings
3. The Board’s annual off-site strategy conference, whether spanning one or more days, will be regarded as one Board meeting and will be remunerated on that basis
4. The Audit Committee meeting each year to review and approve the company’s annual integrated report, shall be regarded as a scheduled meeting and committee members in attendance shall be remunerated accordingly
5. Subject to point 2 hereof, for an unscheduled meeting involving the Board or any meeting that lasts for more than one consecutive day, the respective attendance fees shall be paid for each day
6. Subject to points 2 and 5 above, attendance at meetings of any special-purpose committee appointed by the Board ad hoc shall be remunerated on the basis applicable to an existing committee whose purpose most closely relates to that of the special-purpose committee
7. Fees for special assignments, including any shareholder engagement required or property due diligence inspections, by one or more tasked members of the Board or of any committee, which may also include travel on business locally or abroad, are to be agreed upfront with the Chairman of the Board. Travel and fares and reasonable subsistence shall be in line with Growthpoint’s relevant policies as they apply to Executive Directors.

The following fees are proposed for FY22 for Non-executive Directors at an average increase of 4%:

Schedule of retainer fees and fees payable per meeting

Actual fees paid to Non-executive Directors for FY21

The fees paid to Non-executive Directors for FY21 were paid on the basis presented in the tables on page 48 of the AFS, as approved by the committee and by the Board, on authority granted by shareholders at the AGM held on 8 December 2020.

In addition to the above meetings, Non-executive Directors attended an additional two Board meetings during the year for which they were not remunerated. One special Human Resources and Remuneration Committee meeting and one special Audit Committee meeting were held for which Non-executive Directors were also not remunerated.