Remuneration report

Stewart Shaw-Taylor
Chairman Remuneration committee

Introduction and appreciation

At the outset I would like to thank my colleagues on the Remuneration committee (Remco) and the board for their support in delivering on our mandate.

On behalf of the Remuneration and Nomination committee I extend our thanks to Karin Eichhorn (outgoing human resources executive who worked for Hyprop for twenty years) and her team for their hard work over the year, as well as to those shareholders who continue to provide constructive feedback on our remuneration activities. We also extend our thanks and appreciation to all of the Group's employees for their hard work and dedication, particularly during the Covid-19 lockdown periods. You have once again demonstrated why you are called "Hyperformers".

Igsaan Hendricks was appointed as the new head of human resources on 1 September 2020. We welcome Igsaan and look forward to the contribution he will make to the Group.

This report is presented in three sections:

REPORT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE

The background and focus areas of the Remco that influenced the remuneration policy and remuneration outcomes in respect of the financial year.

REMUNERATION
PHILOSOPHY AND POLICY

Our primary governance tool for the management of remuneration across the Group.

IMPLEMENTATION
REPORT

The implementation and outcomes of the remuneration policy over the course of the fi nancial year.

The report should be read in its entirety to gain a full understanding of the activities of Remco, the Group’s remuneration philosophy and how this is implemented.

Report from the chairman of the Remuneration committee

The board, through Remco, is committed to ensuring total remuneration is aligned with Hyprop's sustainable value-creating strategic objectives and the reasonable expectations of all stakeholders.

In line with our commitment to fair and responsible remuneration, we continuously review our remuneration policies and practices to ensure they remain competitive, relevant and aligned with Hyprop's strategy. Our total remuneration offerings are designed to reward employees who embody our values and drive value creation in the short, medium and long-term.

Focus areas for the current year

The remuneration challenges which the Group would face in the 2020 financial year became apparent at an early stage when the guidance provided by the board in September 2019 for the 2020 financial year indicated that the Group's distributable income for the year would decrease by 10% to 13% from 2019. These challenges were compounded by the impact of the Covid-19 national lockdown restrictions in the last quarter of the financial year.

By 30 June 2020 the Company's share price had declined from R69.87 at 30 June 2019 to R22.39, and distributable income for the year ended 30 June 2020 was 34% down from 2019. These metrics are the major drivers of the Group's short- (STI) and long-term incentive (LTI) plans and had an adverse impact on the remuneration of executive directors and senior management, particularly annual cash incentives and the expected value of conditional unit plan shares.

In addition to the ongoing Remco responsibilities in terms of its charter, the following items received attention during the year:

Implementation of malus and clawback provisions – Malus and clawback provisions are to be applied to STI and LTI awards granted to executives and prescribed officers with effect from 1 July 2019.
Changes to timing of STIs – the STI year has been amended from the calendar year to the Group's financial year to align incentives with the financial year to which they relate.
Increased disclosure and refinement of remuneration reporting – members of Remco and management engaged with stakeholders to obtain feedback on our remuneration policies and disclosure thereof. We have also benchmarked the disclosure in this report against our peers and best practice.

RESPONSIBILITIES OF THE REMUNERATION AND NOMINATION COMMITTEE

In addition to the focus areas outlined above, the committee, in executing its mandate relating to remuneration for non-executive directors, executive directors, executive management and other staff, will:

Review the remuneration structures on an annual basis to ensure they are:
- appropriately performance-based, and linked to realistic performance objectives
- support the Group's strategic objectives
- representative of best practice in the industry
Ensure that stakeholders can make an informed assessment of reward practices and governance processes, and
Ensure that the remuneration practices are compliant with all applicable laws and regulatory codes.

We are committed to maintaining a strong relationship with our shareholders, built on trust and a clear understanding of our remuneration policy, and the practices that have been implemented. The committee endeavours to ensure remuneration reporting is comprehensive and transparent.

COMPOSITiON OF THE REMUNERATION AND NOMINATION COMMITTEE

The Remuneration and Nomination committee comprises three independent non-executive directors. The CEO, CFO and head of human resources attend meetings by invitation but are excluded from any deliberations pertaining to their own remuneration. For details of members attendance at Remuneration and Nomination committee meetings refer to BOARD DIVERSITY of the Integrated Annual Report.

Voting at the December 2020 annual general meeting (AGM)

One of the objectives of this report is to provide shareholders with sufficient information for them to understand and assess the Group's remuneration policies and how these are implemented, in order to make an informed decision when voting on the remuneration related resolutions which will be proposed at the AGM in terms of section 66(9) of the Companies Act, 2008.

As required by the Companies Act and King IV, the following resolutions will be tabled for shareholder approval at the AGM in November 2020, details of which can be found in the AGM notice which is available online at www.hyprop.co.za :

Advisory vote on the remuneration policy;
Advisory vote on the implementation report; and
Binding votes on non-executive directors' fees.

The remuneration resolutions were approved by shareholders at the most recent AGMs by the following majorities:

	2019	2018
Remuneration policy (Section B)	83.8%	72.1%^#
Implementation report (Section C)	88.7%	72.2%^#
Non-executive directors' fees^*	97.4%	99.9%

^*	Average vote % reported for all individual fee votes
^#	Below the requisite 75% majority recommended in terms of King IV

focus areas for 2021

The current Long-term incentive (LTI) plan was approved by shareholders and implemented in 2013, and currently applies until 2023. However, the Group has recently revised its strategy and changed its primary internal measure of performance from growth in distribution per share to total return based on balanced growth in distributable income and net asset value per share. This is in line with the changing investment environment and the sustainability of the historic REIT model of distributing 100% of distributable income each year to shareholders. As a result, the performance criteria under the current LTI plan are under review by Remco to ensure alignment with the Group's strategic objectives going forward. Recommended changes to the LTI plan will be put to shareholders for approval during the course of the 2021 financial year.

Key performance deliverables for STIs for the 2021 financial year have been revised in the context of the forward looking strategy and to take into account short-term priorities brought about by the impact of the Covid-19 lockdown restrictions and the underperforming economy.

The committee will continue to ensure that the group takes cognisance of evolving legislation and remuneration practices through continuous research and monitoring.

	The committee is satisfied that the current remuneration policy is appropriate and that it complies with the recommended practices of King IV.
	A copy of the full remuneration policy is available on the website at www.hyprop.co.za

Remuneration philosophy and policy

Philosophy

As an internally managed REIT, the objective of the remuneration policy is to promote the delivery of Hyprop's strategic objectives, encourage individual performance and reward sustainable value creation. Our philosophy emphasises the role of employees in building long-term sustainable value through fair and balanced remuneration.

Hyprop's success depends on attracting and retaining talented, experienced, and motivated individuals who can execute our business strategy to achieve our vision. The Company uses both short and long-term incentives in support of its remuneration of executives, management and key staff.

Key principles

The principles of the Group's remuneration philosophy serve as the foundation to the Company's employment ethos and support the Group's strategy. The objectives of the reward strategy are to:

Ensure remuneration policies and practices are aligned with the Group's strategy and values
Attract and retain talented, experienced, and motivated individuals who can execute the business strategy
Link salary structures and policies to performance objectives that support sustainable value creation over the short, medium, and long-term and,
Align with the strategic objectives of the Group and the creation of long-term shareholder value.

Fair and reasonable remuneration

To give effect to the principles of the Group's remuneration strategy, Remco seeks to:

Ensure non-executive directors' fees are fair, transparent, and responsible
Ensure the executive directors' and executive management's remuneration is fair and responsible in the context of overall company remuneration
Consider the pay ratios between executives and other staff when determining annual salary increments
Reward employees fairly, reasonably, and responsibly for their contribution to the operating and financial performance of the Company
Identify, investigate, and address any remuneration disparities related to, inter alia, race and gender
Ensure guaranteed pay is based on equal pay for work of equal value
Ensure guaranteed pay for all employees is based on clear role descriptions, which are mapped and aligned with similar jobs. The Patterson job grading system is applied, with the six grades defining the employee's remuneration scale; and
Implement a training plan. Various training courses are provided to create an empowered work environment.

Benchmarking

Fair and competitive remuneration is vital to being an employer of choice. Remco sets the remuneration and the guaranteed packages of executives by reviewing peer group data from the JSE listed property sector and other REITs of similar market capitalisation and revenue.

Remuneration benchmarking is performed bi-annually. Basic salaries are benchmarked against median industry and national salary norms, and adjusted based on an employee's experience, qualifications, responsibilities, and performance.

Independent remuneration consultancies (PwC and 21 Century Proprietary Limited) provide the committee with market data to assist in remuneration decisions, where required and appropriate. Where surveys indicate that a job grouping is significantly out of line with the comparative benchmark, a remuneration adjustment may be considered.

Remuneration may exceed benchmarked median levels where required to attract and retain specialised skills or for employment equity purposes.

LTI peer group

The Company uses the JSE SA REIT index as the most representative list of companies, for comparison purposes.

Retaining and attracting talent

Low employee turnover ensures continuity and aligns Group performance with our long-term strategic objectives. However, we recognise that new employees will often challenge the status quo and introduce fresh ideas, thinking and bring broader experience to the Group. We aim for an appropriate balance between internal and external appointments.

Our human resources strategy is designed to contribute to the required changes in recruitment, selection and hiring, training and development, succession planning, remuneration and benefits, performance management, employee relations and company culture, that will be needed to ensure the Group achieves its strategic goals.

Elements of remuneration

We recognise and value our people as our most important asset. The Company's remuneration structure comprises fixed and variable elements aimed at enabling Hyprop to remain competitive while attracting and retaining the talent needed to deliver sustainable value.

The Group is committed to being an employer of choice with a culture, policies and procedures that set high expectations, while providing a stimulating and inclusive working environment, sustaining its reputation as a leading South African based REIT and delivering on key business priorities. Our remuneration structure is performance driven with key short and long-term targets set annually.

The Company's policy is to pay employees a base salary that is close to the median of comparable companies. In addition, the variable compensation elements are set to enable the overall compensation to move towards the upper quartile for outstanding performance.

The key elements of our remuneration framework, which guide payments to all employees, comprise total guaranteed remuneration, cash based short-term incentives and equity based long-term incentives.

		TOTAL GUARANTEED REMUNERATION
		TOTAL GUARANTEED REMUNERATION

Nature

Fixed cost of employment calculated on a total annual cost to company basis

Eligibility

All employees

Delivery method

Monthly cash payments

Approval

Approved annually by Remco based on recommendations from the CEO and human resources department, following a moderated process with the respective senior managers.

Strategic objectives

Remunerate for individual skills at the prevailing market rate for the role.

Ensure our pay is competitive in the industry.

Attract people with the necessary competencies to add value to our business.

Standard benefits

Standard benefits (subject to local labour laws) which are part of total guaranteed remuneration include:

Membership of a defined contribution pension fund with death, disability and funeral benefits;
Four months partially paid maternity leave (paid at 50% of cost to company);
Ten days partially paid paternity leave (paid at 50% of cost to company);
Annual leave rising to 20 days after five years and 25 days after 10 years consecutive service with the group;
6 days paid study leave for approved qualifications;
3 days family responsibility leave per annum; and
30 days sick leave over a 3 year period.

Quantum

Base salaries are benchmarked against median industry and national salary norms and adjusted based on an employee's experience, qualifications, responsibilities, and performance.

Remuneration may exceed benchmarked levels where required to attract and retain specialised skills or for employment equity purposes.

Salary increases and reviews

Salary increases and reviews are based on the performance of the Company, projected inflation, affordability and the performance of the individual employee.

		SHORT-TERM INCENTIVES
		SHORT-TERM INCENTIVES

Nature

Annual performance bonus paid in cash, based on company and individual performance

Eligibility

All employees

Delivery method

Annual cash payment

Quantum

Calculated with reference to total guaranteed remuneration of individual employees.

KPDs and individual performance reviews form the basis of the STIs.

Approval

STIs are awarded annually at Remco's discretion.

KPDs are set in conjunction with executive directors and approved by Remco.

The results of actual performance against the KPDs are reported to Remco which approves final STI payments.

Strategic objectives

Create a high-performance culture by awarding a cash bonus based on achieving predetermined company and individual performance criteria.

Allocation

STIs are awarded based on achievement of group key performance deliverables, as well as individual employees' performance review scores, which reflect their individual contributions to the growth and development of their business, division and the Group, as follows:

Exceptional performance by executive directors and senior management may be rewarded at Remco's discretion.

Other employees:

KPD and performance review weightings are dependent on job grade. Maximum STI potential is determined by job grade.

Exceptional performance may be rewarded with higher incentives, after considering recommendations from general managers, portfolio executives and executive directors.

Individual performance

review scores

Individual performance reviews are completed annually after performance discussions between employees and their manager. These reviews assist the manager and employee to build on strengths and identify areas for improvement.

All employees participate in the same appraisals process and rating criteria. This encourages equality and imposes standard measures of performance across the Company.

Review criteria

Professional conduct; business processes; business operations; employee management; customer service and implementation of company strategy.

Key performance deliverables (KPD)

KPDs comprise financial, operational, environmental, social and corporate governance measures.

Targets are set annually at group, company, portfolio and business unit level.

Performance is measured against these targets, weighted by responsibility and job grade.

KPD targets are approved by Remco to ensure that employee performance is aligned with the
company's strategy.

Progress in achieving KPD targets is communicated to management teams at mid-year, with final evaluations at the end of the financial year.

Individual performance is measured on a five-point scale that offers a high degree of structure

Individual performance review scale	Performance review score
Performance is unsatisfactory	1
Performance requires improvement	2
Performance consistently meets expectations	3
Performance exceeds expectations	4
Exceptional performance delivery	5

		LONG-TERM INCENTIVES
		LONG-TERM INCENTIVES

Nature

Conditional unit plan (CUP) shares. The CUP was approved by shareholders in 2013 and applies until 2023.

Eligibility

Executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills.

Quantum

Annual awards are calculated with reference to:

Total guaranteed remuneration of individual employees; and
the 30 day volume weighted average share price of Hyprop shares on the award date.

Approval

All CUP awards and vesting of shares are subject to Remco's discretion and approval.

Strategic objectives

Attract, motivate and retain executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills and
align employee performance with stakeholder interests.

Delivery method

CUP shares are allocated annually in two components:

Performance award (70%) vesting after 3 years, and
Retention award (30%) vesting after 5 years.

Retention shares

Retention shares vest five years after initial allocation, subject to continuous employment over the vesting period.

Dividends

Participants only receive dividends after the CUP shares have vested.

Malus and clawback provisions

Malus and clawback provisions are to be applied to STI and LTI awards granted to executives and prescribed officers with effect from 1 July 2019.

Performance shares

Performance shares vest three years after initial allocation, provided the relevant performance conditions have been met.

The peer group comprises the five largest South African REIT companies by market capitalization, listed on the JSE.

⁽¹⁾ DPS growth is measured as simple growth in distribution per share over the performance period.

⁽²⁾ Share price growth is measured as growth in share price over the performance period (difference between share price at the end and start of the performance period).

⁽³⁾ The strategic component is determined by Remco when awards are issued.

Performance thresholds for vesting of performance shares

Performance condition	Threshold	On target	Stretch
DPS growth vs. peer group	95%	102.5%	110%
Share price growth vs. peer group	95%	105%	120%
Strategic component	Determined by the Remuneration and Nomination committee at time of award.

Percentage of awards which vest^*
Minimum Threshold		50%, none vest below threshold.
On Target		100%
Stretch Target		150%

^*	Linear vesting will apply for performance between "Threshold" and "On target" or between "On target" and "Stretch" performance. For example, where performance is exactly halfway between threshold and on target, the portion of performance shares that will vest will reflect a similar ratio, i.e. 75%

Executive directors' remuneration policy

Executive directors are permanent employees. Each executive director has an employment contract which is governed by South African labour legislation and includes a minimum 3 month notice period and standard confidentiality provisions. There are no restraints of trade.

Executive directors' remuneration comprises fixed and variable components, including total guaranteed remuneration, short-term incentives and long-term incentives. The remuneration packages are designed to ensure an appropriate portion of the total remuneration package is linked to the achievement of the Company's strategic objectives, thereby aligning incentives to the creation of sustainable long-term shareholder value. Remuneration packages are reviewed by Remco annually.

If an executive director's services are terminated, Remco oversees any settlement, assisted by labour law advisers where appropriate.

Non-executive directors' remuneration policy

Non-executive directors do not have employment contracts with the Company, nor do they participate in any of the Company's incentive plans. There are no contractual arrangements applicable to loss of office. Non-executive directors are subject to retirement by rotation and may be re-elected by shareholders in accordance with the Memorandum of Incorporation of the Company.

Remco recommends the level of fees payable to non-executive directors to the board for final approval by shareholders. Fees are not dependent on meeting attendance but are structured to reflect the complexity, risk and amount of preparation required for each role. The fees are benchmarked against a peer group of JSE listed companies every two years, with CPI adjustments in alternate years. There are no other supplementary fees payable.

Annual fees payable to non-executive directors for the 2020 financial year were approved by shareholders at the AGM on 2 December 2019, as follows:

2020 Financial year fees per annum (Rand)	Chairperson	Member
Board of directors	542 360	362 678
Audit and Risk committee	203 200	152 646
Remuneration and Nomination committee	139 529	98 048
Social and Ethics committee	92 364	74 602
Investment committee	104 300	83 440

Notwithstanding shareholder approval for a CPI adjustment to fees, Remco has recommended and the board has approved that the fees payable to the non-executive directors will not be increased for the 2021 financial year.

Implementation report

This implementation report provides details how the Company's remuneration policy has been implemented over the course of the financial year and the success in achieving the Group's human resource and remuneration objectives, broadly summarised as:

Ensure remuneration policies and practices are aligned with the Group's strategy and values
Attract and retain talented, experienced, and motivated individuals who can execute the business strategy
Link salary structures and policies to performance objectives that support sustainable value creation over the short, medium, and long-term and,
Align long-term incentives (LTI) with the strategic objectives of the Group and the creation of long-term shareholder value.

Retaining and attracting talent

While low employee turnover ensures continuity and aligns group performance with our long-term strategic objectives, we aim for an appropriate balance between internal and external appointments. Staff retention for the 2020 financial year was 94% (2019: 88%) with an average tenure of service of 10 years (2019: 8 years).

		TOTAL GUARANTEED REMUNERATION
		TOTAL GUARANTEED REMUNERATION

Total guaranteed remuneration is defined in terms of a total cost of employment (CTC) package. Total guaranteed remuneration includes base salary, travel allowance, retirement savings, death, disability and healthcare contributions.

2020 FINANCIAL YEAR

Salary increases

In determining the increase in base salaries Remco considered:

the projected inflation rate,
the performance of the Company and the affordability of the increased salary cost, and
as an added measure, the basic increase of 5.5% was compared to the salary increases granted by peer companies.

The increases applied were in line with the industry.

To address the earnings gap, Remco approved higher salary increases for lower earning employees, as was done in the previous three years. Annual base salary increases were effective from 1 January 2020.

Base salary increases applied	2020	2019
Executive directors	5.5%	6.0%
Strategic management	5.5%	6.0%
Executive and senior management	5.5%	6.0%
Other employees	5.5% – 6%	6% – 6.5%
CPI^*	4.3%	5.0%
Minimum CTC – lowest level of employee (per annum)	118 418	111 715

^*CPI reflects the indicator measured by Statistics South Africa in the preceding October of each year.

Salary benchmarking

Benchmark reviews were conducted externally and include market analyses by industry specialists. Bespoke benchmarks include an industry peer group and comparable companies in various industries selected according to where we compete for talent. The peer group used for the analysis included property management companies and South African REITs.

Adjustments to base salaries were considered and approved for jobs that were significantly out of line with the survey report.

Base salaries adjusted	2020	2019
Executive directors	1	1
Strategic management	1	1
Executive and senior management	7	3
Other employees	45	34
Total	54	39

The Patterson system is used to grade positions in the Company. All position grades were reviewed during the year. Similar positions are aligned within a salary band taking into consideration an employee's experience, qualifications, the nature of work and the level of responsibility. This practice accords with the Company's commitment to fair remuneration and equal pay for work of equal value.

Base salaries paid	2020			2019
Base salaries paid	No. of staff	R'000	Var. %	No. of staff	R'000	Var. %
Executive directors	3	10 891	8.3%	3	10 056	37.4%
Strategic management	4	8 041	18.5%	3	6 788	6.0%
Executive and senior management	21	29 410	3.0%	23	28 563	(8.1%)
Other employees	199	71 731	7.3%	190	66 864	4.7%
Total	227	120 073	6.9%	219	112 271	3.3%

Employee benefits

Our employee surveys confirmed that our employee benefits contribute to the loyalty and commitment of our employees. Details of employee surveys are given on our people.

Defined contribution pension fund

216 (2019: 208) employees are members of the Company's pension fund and R13,9 million (2019: R12,6 million) was contributed to the pension fund during the year. In addition to retirement savings, membership of the fund provides life, disability and funeral insurance.

	Benefit
Life insurance	Four times annual pensionable salary. Education protector to third year tertiary education.
Disability insurance	75% of monthly pensionable salary.
Funeral insurance	R 25 000.

Parental leave

Hyprop offers four months partially paid maternity leave and 10 days partially paid paternity leave.

A total of R98 882 (2019: R88 000) was paid to seven (2019: two) employees who received a total of 350 days (2019: four months') partially paid maternity and paternity leave during the year.

2021 FINANCIAL YEAR

Salary increases for the 2021 financial year

In determining the increase in base salaries Remco considered:

the projected inflation rate, and
the performance of the Company and the affordability of the increased salary cost.

No base salary increases have been granted to executive directors, strategic management and executive and senior management employees for the 2021 financial year. All other employees' base salaries will be increased by CPI with effect from 1 January 2021.

		SHORT-TERM INCENTIVES
		SHORT-TERM INCENTIVES

STIs are based on achieving Key Performance Deliverables (KPDs) and employees' individual performance review scores.

2020 FINANCIAL YEAR

Key performance deliverables

Performance against KPDs is measured to ensure the Group achieves its strategic priorities and delivers value for stakeholders. KPDs for the 2020 financial year were approved by Remco in May 2019. Actual performance is measured against targets and communicated to management in December 2019 and June 2020.

KPD scores against targets relating to the 2020 financial year will be applied to STIs allocated for the 2020 financial year, to be paid in December 2020. Remco reviewed the targets for the executive directors, senior management and management teams during the year.

KPD outcomes were significantly impacted in the last quarter of the financial year due to the Covid-19 national lockdown.

KPD outcomes – 2020 financial year

Key performance indicator	Weighting	Target
Financial targets	55%		Performance against KPD targets for the eight months to February 2020 was on target. However, the outbreak of Covid-19 and the resultant national lockdowns impacted the Group's overall operational and financial performance, and resulted in none of the KPD targets being achieved for the year ended30 June 2020, other than the GRESB score which was 68 (compared to the target of 65). In light of this, no STIs will be paid to executive directors, strategic management or executive and senior management for the 2020 financial year.
Distributable income per share	20%	668 cents distributable income per share
Total return on investment	20%	Total return on investment relative to peer group – 102.5%
Loan to value ratio (based on a fully consolidated loan to value ratio calculation)	15%	Reduce loan to value ratio by 4.5%
Operational targets	25%
Trading density growth (year on year)	10%	South Africa: 1.5% Eastern Europe: 2.5%
Tenant turnover growth (year on year)	10%	South Africa: 1.5% Eastern Europe: 3%
Foot count growth – South Africa	5%	South Africa: consistent with previous year
Environmental targets	20%
Operations risk and environmental impact	13.5%	Global Real Estate Sustainability Benchmark (GRESB) score of 65
Operations risk and environmental impact	6.5%	Two solar photovoltaic projects implemented within budget during the year
Total	100%


Modifier
Transformation	0% to –10%	BBBEE verification rating improved by one level
Innovation	0% to 5%	Implement an innovation project that contributes to the strategic objectives
Total	100%

Individual performance reviews

Individual performance reviews were conducted during October 2019. The rating process was done through the Company's employee self-service system (ESS) after meetings between the employees and line managers. Discussions are structured to cover work goals achieved, training needs and job performance, and to set personal job goals for the next 12 months. The performance of any employee that requires improvement is addressed during the year through consultation, and if required, training.

Individual performance reviews for the 2020 financial year will be completed by 31 October 2020.

Performance management score and STI allocations

2019 Financial year paid in 2020

STIs for the year ended 30 June 2019 were paid in December 2019. Remco considered the outcome of the performance reviews conducted in October 2019 and the June 2019 KPD score (84%) when approving the STIs for the financial year ended 30 June 2019. STIs paid for the year aligned with the remuneration policy.

STIs paid during the 2020 and 2019 financial years	2020	2019	Variance

	R000	R000	%
Executive directors	1 830	5 894	(68.9%)
Strategic management	1 952	2 614	(25.3%)
Executives and senior management	7 093	8 132	(12.8%)
Other employees	8 953	10 556	(15.2%)
Total	19 829	27 196	(27.1%)

The amounts shown in 2020 are the amounts paid in December 2019 in relation to the 2019 performance year.

2020 Financial year

As a result of the KPDs for the 2020 financial year not being achieved, no STIs will be paid to eligible participants for the 2020 financial year. Remco will however consider discretionary bonuses for exceptional performance during the Covid-19 lockdown period. These amounts, if any, will be paid to participants in December 2020.

Remco has provisionally approved the payment of a "13th cheque" to all employees who do not participate in the CUP, and whose individual performance review score for the 2020 financial year meets or exceeds expectations. These amounts will be paid to employees in December 2020.

2021 FINANCIAL YEAR

Key performance deliverables for STIs for the 2021 financial year have been revised by Remco in the context of the strategy and the short-term priorities brought about by the impact of the Covid-19 lockdown restrictions and underperforming economy. Remco has also taken into account the fact that the board has resolved not to provide guidance on distributable income or dividends for the financial year ending 30 June 2021.

The overall KPD's for executive directors for the year ending 30 June 2021, as set out below, were approved by Remco in October 2020.

KPD targets – 2021 financial year

Key performance indicator	CEO	CFO	CIO
Human Capital
Review of organisational structure and overheads
Review of remuneration policy for implementation on 1 July 2021
Asset Management
Resolution of Hystead shareholders' agreement
Disposal of remaining sub-Saharan Africa investments
Review of South African property portfolio
Positive progress on IT investment and exposure / Non-tangible asset strategy
Property Management
Achieve cost savings greater than R50 million
Limit overall vacancies
Arrears management
Funding
Mitigation of currency risk pertaining to funding of European investments
Refinancing of loan facilities, falling due twelve months subsequent to 2021 financial year end, to be completed
BBBEE
Rating improvement of at least one level
Governance
Internal audit plan for Hystead to be agreed
Innovation
Retain distributions to repay debt without losing REIT status
Business Growth and Development
Optimise the financial reporting and systems

Similar KPDs will be set for the strategic and senior management teams for the year ending 30 June 2021, taking into account their roles within the Company and relevant-short term priorities. The relative weightings of each KPD will be aligned accordingly.

Performance against targets and payment of STIs will be reviewed and approved by Remco, based on a bonus pool of up to 75% of the guaranteed total remuneration of the participating executives and 50% of the guaranteed total remuneration of senior and strategic management employees, and taking into account market conditions, and the performance of the Company and individual employees.

		LONG-TERM INCENTIVES
		LONG-TERM INCENTIVES

Awards issued in 2020 financial year

Awards over 267 570 CUP shares (Tranche 9) were approved by Remco and made to 28 participants in July 2019.

Shares vested in 2020 financial year

The 1 July 2016 Performance CUP award (Tranche 4) and the 1 July 2014 Retention CUP award (Tranche 2), vested in October and September 2019 respectively. The 1 January 2017 Performance CUP award (Tranche 5) vested in March 2020.

Performance conditions applied for the Tranche 4 Performance CUP award

The performance shares awarded are subject to performance conditions relating to distributions and share price growth from 1 July 2016 to 30 June 2019 (the performance period) measured against the five largest South African REITs. The comparative companies were Growthpoint, Redefine, Fortress, Investec Property Fund and Vukile.

Performance condition	Threshold	Target	Stretch	Growth over performance period	Weighted peer group growth over performance period	Hyprop’s growth relative to peer group	Weighting	% of the award vested	Weighted total vested
Growth in distribution per unit relative to the peer group	95%	105%	110%	20.2%	17.9%	112.5%	50%	150%	75%
Unit price performance relative to the peer group	95%	102.5%	120%	(46.2%)	(13.07%)	–	50%	0%	0%
Strategic element	Not applicable
% of shares awarded which vested	75%

Remco approved the 75% performance condition met, pursuant to which 26 762 retention shares vested and 35 962 performance shares were forfeited.

Performance conditions applied for the Tranche 5 Performance CUP award made on 1 January 2017

Performance condition	Threshold	Target	Stretch	Growth over performance period	Weighted peer group growth over performance period	Hyprop's growth relative to peer group	Weighting	% of the award vested	Weighted total vested
Growth in distribution per unit relative to the peer group	95%	105%	110%	(52.2%)	(20.1%)	Did not trigger minimum threshold	50%	0%	0%
Unit price performance relative to the peer group	95%	102.5%	120%	(0.2%)	(15.2%)	Did not trigger minimum threshold	50%	0%	0%
Strategic element	Not applicable
% of shares awarded which vested	0%

None of the performance conditions were met for the Tranche 5 performance shares, pursuant to which no performance shares vested and 5 982 performance shares were forfeited.

Total LTIs awarded SINCE INCEPTION

The total number of shares awarded under the CUP since inception:

RETENTION SHARES				Number of shares
RETENTION SHARES	Award date	FV at grant date	Number of participants	Issued	Forfeited	Vested	Unvested
Tranche 1	1-Jan-14	R 57.98	27	46 100	(8 148)	(37 952)	–
Tranche 2	1-Jul-14	R 59.08	26	47 324	(18 010)	(29 314)	–
Tranche 3	1-Jul-15	R 96.68	26	33 549	(13 465)	(729)	19 355
Tranche 4	1-Jul-16	R 102.32	26	33 499	(12 837)	(102)	20 560
Tranche 5*	1-Jan-17	R 90.07	1	2 564	–	–	2 564
Tranche 6	1-Jul-17	R 86.70	25	35 114	(12 043)	–	23 071
Tranche 7	1-Jul-18	R 70.72	25	41 281	(8 915)	–	32 366
Tranche 8	1-Jan-19	R 51.24	2	16 835	–	–	16 835
Tranche 9	1-Jul-19	R 39.50	28	80 330	–	–	80 330
Total retention shares				336 596	(73 418)	(68 097)	195 081

Number of shares

PERFORMANCE SHARES

Performance
conditions
met

Award
date

FV at
grant date

Number of participants

Issued

Forfeited

Vested

Unvested

Tranche 1

100.0%

1-Jan-14

R 57.98

107 563

(6 302)

(101 261)

–

Tranche 2

89.4%

1-Jul-14

R 59.08

110 422

(14 133)

(96 289)

–

Tranche 3

75.0%^**

1-Jul-15

R 96.68

78 282

(28 723)

(49 559)

–

Tranche 4

75.0%^**

1-Jul-16

R 102.32

80 979

(43 253)

(37 726)

–

Tranche 5^*

0.0%^**

1-Jan-17

R 90.07

5 982

(5 982)

–

Tranche 6

1-Jul-17

R 86.70

84 840

(30 230)

(790)

53 820

Tranche 7

1-Jul-18

R 70.72

96 302

(20 800)

–

75 502

Tranche 8

1-Jan-19

R 51.24

39 281

–

39 281

Tranche 9

1-Jul-19

R 39.50

187 420

–

187 420

Total performance shares

791 071

(149 422)

(285 625)

356 024

Total performance and retention shares

1 127 667

(222 840)

(353 722)

551 104

*	Special allocation
**	Resignations and performance conditions not met

Reconciliation of movement in total number and value of CUP shares from 1 July 2019 to 30 June 2020

Unit reconciliation for the year ended 30 June 2020	Balance at the beginning of the year	Issued	Forfeited	Vested	Balance at the end of the year
Retention shares	141 513	80 330		(26 762)	195 081
Performance shares	210 547	187 420	(5 982)	(35 962)	356 024
Total number of shares	352 060	267 570	(5 982)	(62 724)	551 105

Value reconciliation for the year ended 30 June 2020

Value at the
beginning of
the year⁽¹⁾

Awarded ⁽²⁾

Forfeited ⁽¹⁾

Vested⁽³⁾

Change in market value

Value at the end of the year ⁽⁴⁾

R'000

Retention shares

9 888

3 173

–

(1 574)

(7 119)

4 368

Performance shares

1 411

9 246

(418)

(2 114)

(13 453)

7 971

Total value of shares

24 598

12 419

(418)

(3 688)

(20 572)

12 339

1)	Shares outstanding at the beginning of the year and shares forfeited are valued at the closing share price of R69.87 on 30 June 2019
2)	Shares awarded during the year are valued at the 30 day VWAP on grant date of R 68.71
3)	Shares vested during the year are valued at the share price on vesting date of R58.80
4)	Shares outstanding at the end of the year are valued at the closing share price of R22.39

Value of LTIs which vested during the year

LTIs which vested during the 2020 financial year	30 June 2020	30 June 2019
	R000	R000
Executive directors	–	1 751
Strategic management	1 393	1 471
Executives and senior management	2 295	4 202
Total value of shares vested	3 688	7 424

		EXECUTIVE DIRECTORS' REMUNERATION
		EXECUTIVE DIRECTORS' REMUNERATION

TOTAL REMUNERATION

Total guaranteed remuneration and STIs

	Basic salary	Pension fund contributions	Performance bonus	Vested shares	Other benefits	Total
June 2020	R000	R000	R000	R000	R000	R000
Morné Wilken (CEO)	4 507	303	590	–	36	5 436
Brett Till (CFO)	2 685	247	541	–	60	3 533
Wilhelm Nauta (CIO)	2 639	178	700	–	60	3 577
Total	9 831	728	1 831	-	156	12 546

June 2019
Morné Wilken (CEO) ⁽¹⁾	2 087	162	–	–	492	2 741
Wilhelm Nauta (CIO)	2 432	280	2 186	–	77	4 975
Brett Till (CFO) ⁽²⁾	1 719	295	–	–	33	2 047
Pieter Prinsloo (former CEO) ⁽³⁾	2 493	118	3 708	1 751	447	8 517
Laurence Cohen (former CFO) ⁽⁴⁾	202	35	–	–	66	303
Total	8 933	890	5 894	1 751	1 115	18 583

⁽¹⁾ Appointed with effect from 27 December 2018
⁽²⁾ Appointed with effect from 1 October 2018
⁽³⁾Resigned with effect from 31 January 2019
⁽⁴⁾ Resigned with effect from 31 July 2018

LONG-TERM INCENTIVES

Number of shares outstanding under the CUP

June 2020	Outstanding at the beginning of the year # of shares	Awarded # of shares	Forfeited # of shares	Vested # of shares	Outstanding at the end of the year # of shares	Market value of shares outstanding at the end of the year R'000
Morné Wilken (CEO)	37 190	48 043	–	–	85 233	1 908
Wilhelm Nauta (CIO)	26 754	24 450	(5 982)	–	45 222	1 013
Brett Till (CFO)	18 927	25 183	–	–	44 110	988
Total	82 871	97 676	(5 982)	–	174 565	3 909

June 2019

Morné Wilken (CEO)

–

37 190

–

37 190

2 598

Wilhelm Nauta (CIO) ⁽¹⁾

16 742

10 012

–

26 754

1 869

Brett Till (CFO)

–

18 927

–

18 927

1 322

Pieter Prinsloo (former CEO)

88 045

29 715

(109 123)

(8 637)

–

Laurence Cohen (former CFO)

47 541

–

(47 541)

–

Total

152 328

95 844

(156 664)

(8 637)

82 871

5 789

⁽¹⁾ The unvested shares shown for Mr Nauta include all share allocations granted during his tenure, including prior to becoming an executive director on 5 July 2018

Value of shares outstanding under the CUP

June 2020	Outstanding at the beginning of the year⁽²⁾R'000	Awarded ⁽³⁾ R'000	Forfeited ⁽²⁾R'000	Vested R'000	Change in market value R'000	Outstanding at the end of the year at market value⁽⁴⁾ R'000
Morné Wilken (CEO)	2 598	3 301	–	–	(3 991)	1 908
Wilhelm Nauta (CIO)	1 869	1 680	(418)	–	(2 118)	1 013
Brett Till (CFO)	1 322	1 730	–	–	(2 064)	988
Total	5 789	6 711	(418)	–	(8 173)	3 909

⁽²⁾ Shares outstanding at the beginning of the year and shares forfeited are valued at the closing share price of R69.87 on 30 June 2019

⁽³⁾ Shares awarded during the year are valued at the 30 day VWAP on grant date of R 68.71

⁽⁴⁾ Shares outstanding at the end of the year are valued at the closing share price of R22.39

June 2019

Outstanding
at the
beginning of
the year ⁽⁵⁾
R'000

Awarded ⁽⁶⁾
R'000

Forfeited ⁽⁵⁾
R'000

Vested
R'000

Change in market value
R'000

Outstanding
at the end
of the year
at market
value ⁽⁷⁾
R'000

Morné Wilken (CEO)

–

3 301

–

(703)

2 598

Wilhelm Nauta (CIO)

1 713

889

–

(733)

1 869

Brett Till (CFO)

–

1 680

–

(358)

1 322

Pieter Prinsloo (former CEO)

9 011

2 638

(9 898)

(1 751)

–

Laurence Cohen (former CFO)

4 865

–

(4 865)

–

Total

15 589

8 508

(14 763)

(1 751)

(1 794)

5 789

⁽⁵⁾	Shares outstanding at the beginning of the year and shares forfeited are valued at the closing share price of R102.34 on 30 June 2018
⁽⁶⁾	Shares awarded during the year are valued at the 30 day VWAP on grant date of R 88.77
⁽⁷⁾	Shares outstanding at the end of the year are valued at the closing share price of R69.87

Total guaranteed remuneration

Approved increases

In determining the salary increases for executive directors, the Remuneration committee considered inflation, market conditions, industry benchmarks and changes in roles and responsibilities.

	30 June 2020	30 June 2019	Variance
Approved increases (applied in January 2020)	Rands	Rands	%
MC Wilken – CEO	4 975 000	4 716 000	5.5%
BC Till – CFO	3 100 000	2 884 000	7.5%
AW Nauta – CIO	2 954 000	2 800 000	5.5%
Total	11 029 000	10 400 000	6.0%

		SHORT-TERM INCENTIVES
		SHORT-TERM INCENTIVES

Short-term performance incentives relating to the 2019 financial year were paid in December 2019 based on the KPD performance below.

Key performance indicator				Weighted score
Key performance indicator	Target	Performance achieved	Weighting	CEO MC Wilken	CFO BC Till	CIO AW Nauta
Financial targets			58%	40.6%	40.6%	40.6%
Distributable income growth	5% to 7% (per division)	1.5% negative growth year on year	70%	23.1%	23.1%	23.1%
Budgeted income and expense management	On budget	8% below budget	70%	17.5%	17.5%	17.5%
Operational targets			26%	23.8%	23.8%	23.8%
Trading performance	4% trading density increase year on year	0.61% increase in trading density year on year	85%	2.6%	2.6%	2.6%
Trading performance	Foot count consistent with previous year	1.36% decline in foot count year on year	85%	2.6%	2.6%	2.6%
Leasing	Vacancy movement – 0% increase year on year	Reduced vacancies year on year by 27%	92%	15.6%	15.6%	15.6%
	Rentals achieved – on budget.Rental escalation on new and renewed leases – 7%	Rentals achieved lower than budget due to rent reversions.Rental escalations achieved – 7.2%
	2% of lease documentation in the process of being finalised	11% of lease documentation in the process of being finalised
Tenant arrears and deposits	2% arrears outstanding as a % of total rent roll raised	Outstanding arrears of 0.98% of annual rent roll raised	93%	5.6%	5.6%	5.6%
Tenant arrears and deposits	1.5% deposits outstanding as a % of deposits raised	15.2% deposits outstanding as a % of deposits raised	93%	5.6%	5.6%	5.6%
Environmental, social and corporate governance			16%	19.6%	19.6%	19.6%
Operations risk and environmental impact	Building compliance files 90% complete	94% complete	110%	6.6%	6.6%	6.6%
	80% waste recycling rate	81% of waste recycled during the year
	3% kWh saving year on year	5.57% kWh saving achieved year on year
Transformation	75% of all new and internal appointments to be black as defined in the BBBEE Act	88% of all new appointments were black employees as defined in the BBBEE Act	130%	6.5%	6.5%	6.5%
Transformation	75% of all procurement from suppliers rated between BEE levels 1 – 4	80% of all procurement from suppliers rated between BEE levels 1 – 4	130%	6.5%	6.5%	6.5%
Total			100%	84%	84%	84%

STI allocated				589 500	540 800	700 000
STI as a % of base salary				12%	18%	24%

STIs for MC Wilken and BC Till were allocated pro-rata, based on the number of months from the date they joined the Company to 30 June 2019.

		LONG-TERM INCENTIVES
		LONG-TERM INCENTIVES

The total number of shares awarded to executive directors in terms of the CUP are as follows:

	Award date	Issued	Forfeited	Vested	Unvested
MC Wilken – CEO
Retention shares
Tranche 8	1 January 2019	11 157	–	–	11 157
Tranche 9	1 July 2019	14 413	–	–	14 413
		25 570	–	–	25 570
Performance shares
Tranche 8	1 January 2019	26 033	–	–	26 033
Tranche 9	1 July 2019	33 630	–	–	33 630
		59 663	–	–	59 663
Total shares		85 233	–	–	85 233

BC Till – CFO
Retention shares
Tranche 8	1 January 2019	5 678	–	–	5 678
Tranche 9	1 July 2019	7 555	–	–	7 555
		13 233	–	–	13 233
Performance shares
Tranche 8	1 January 2019	13 249	–	–	13 249
Tranche 9	1 July 2019	17 628	–	–	17 628
		30 877	–	–	30 877
Total shares		44 110	–	–	44 110

AW Nauta – CIO
Retention shares
Tranche 5	1 January 2017	2 564	–	–	2 564
Tranche 6	1 July 2017	2 459	–	–	2 459
Tranche 7	1 July 2018	3.004	–	–	3 004
Tranche 9	1 July 2019	7 335	–	–	7 335
		15 362	–	–	15 362
Performance shares
Tranche 5	1 January 2017	5 982	(5 982)	–	–
Tranche 6	1 July 2017	5 737	–	–	5 737
Tranche 7	1 July 2018	7 008	–	–	7 008
Tranche 9	1 July 2019	17 115	–	–	17 115
		35 842	(5 982)	–	29 860
Total shares		51 204	(5 982)	–	45 222

Total compensation ratio

The graphs below reflect the actual remuneration paid to the executive directors in the 2020 financial year compared to their potential total remuneration, including total guaranteed remuneration, STIs and LTIs for the 2020 financial year.

Actual amounts comprise total guaranteed remuneration for the 2020 financial year, STIs for the 2019 financial year which were paid in the 2020 financial year, STIs for the 2020 financial year (which were Nil) and the value of LTIs (CUP shares) awarded during the 2020 financial year.

Different scenarios are shown for the potential STI and LTI amounts, as follows:

STI – value of potential cash bonuses based on achieving the threshold, target or stretch criteria for the current year KPDs
LTI – values are based on the number and value of CUP shares awarded during the year, the potential number of shares which will vest on achieving threshold, target or stretch criteria and the market price of Hyprop shares on the award date. The actual LTI amounts for the 2020 financial year which vest will only be quantified at the end of the three/five year vesting periods.

	30 June 2020	30 June 2019
Independent non-executive directors
Gavin Tipper (chairman)	902	807
Lindie Engelbrecht	–	230
Zuleka Jasper	506	479
Mike Lewin	221	421
Nonyameko Mandindi	440	383
Thabo Mokgatlha	652	567
Stewart Shaw-Taylor	705	637
Annabel Dallamore	444	–
Non-executive directors
Kevin Ellerine	438	397
Louis Norval	438	397
Total	4 747	4 318