Remuneration report

Philosophy

As an internally managed Real Estate Investment Trust, the skills of our people are essential to our sustainability. Accordingly, our remuneration philosophy supports our strategic objectives and encourages individual performance. It emphasises the role of ouremployees in building long-term value through fair and balanced remuneration.

The policy is based on several key principles:

	A critical success factor for Hyprop is to attract talented, experienced and motivated individuals who can execute our business strategy, vision and mission. Both short and long-term incentives are used to achieve this goal.
	Delivery-specific short-term incentives (STIs) are considered strong drivers of performance. A significant portion of senior management reward is variable, based on achieving realistic performance targets, together with individual contributions to the growth and development of the business, their division and the wider company. The company rewards employees who deliver superior performance in line with its strategic goals. In exceptional circumstances, special bonuses may be considered as additional awards.
	Long-term incentives (LTIs) are aligned to the strategic objectives of the company and the investment interests ofshareholders

Policy

The remuneration and nomination committee is responsible for implementing the remuneration policy to ensure:

	Salary structures and policies motivate superior performance, and are linked to realistic performance objectives that support sustainable long-term growth
	Stakeholders are able to make an informed assessment of reward practices and governance processes
	Compliance with all applicable laws and regulatory codes

Non-executive directors

Remuneration for non-executive directors comprises a base fee, predetermined annually and approved by shareholders at the annual general meeting.

Our policy is to reward competitively for the role while understanding the required time commitment. Fees are benchmarked against a peer group of JSE-listed companies. There are no contractual arrangements to compensate for loss of office.

The remuneration and nomination committee reviews these fees annually and makes its recommendations to the board which, in turn, proposes fees for approval by shareholders at the annual general meeting.

Non-executive directors do not receive STIs nor do they participate in any LTIs schemes except if they previously held executive office and are entitled to unvested benefits from this period. The company pays no pension contributions for non-executive directors.

Full details of non-executive directors’ fees are on page 71.

Executive directors and senior executives’ remuneration

Executive directors are permanently employed by the company under agreements that include a notice period but no restraints of trade. Hyprop aims to be an employer of choice: to attract and retain individuals of high calibre, we offer competitive remuneration packages and review these annually.

Our remuneration structure includes:

	Base salary At all levels, basic salaries are market-related, benchmarked against industry norms and adjusted for an employee’s experience, qualifications, responsibilities and nature of work. These salaries are reviewed annually.
	STIs An annual performance bonus aligns short-term rewards with annual performance and supports retention. Performance reviews are weighted significantly to output. Key performance deliverables (KPDs), agreed by the executive committee, are set annually at property and company levels and formally measured. These include: — Net income growth — Performance against budget — Increase in trading densities — New/renewed leasing rental values achieved relative to budget — New/renewed leasing escalations achieved — Tenant arrear collections and management — Tenant deposit and bank guarantee management — Documentation administration
	Exceptional performance is rewarded with higher incentives. Recommendations from general managers, regional executives and executive directors are considered. The maximum bonus for senior management is six months’ salary, at the committee’s discretion. Bonuses for executive directors are aligned with strategic objectives and are at the committee’s discretion.
	LTIs These reward long-term decisions intended to drive dividend and capital growth. They are also designed to align employee behaviour with shareholders’ interests.

The employee incentive scheme, approved in 2013 has dual aims to retain key skills and reward performance. Performance conditions are shown below:

The first awards were offered to executives, senior managers, operational and financial managers and to staff with specific core, critical and/or strategic skills in December 2013. Some 13% (27employees) of the total staff complement will participate in the scheme, which is limited to 2% of the current shares in issue with an initial vesting period of three years from January 2014.

Participants do not pay for the units. They are also not eligible for dividends until the end of the initial vesting period.

Terms of service

Minimum terms and conditions applicable to the employment of executive directors are governed by South African legislation. Should an executive director’s services be terminated, the committee oversees the settlement of terms, assisted by labour law advisers.

Remuneration of non-executive and executive directors