Growthpoint Interactive Annual Report 2018

Remuneration report Letter from the Chair of the Nomination, Remuneration and HR Committee Dear Securityholders, On behalf of the Board of Growthpoint Properties Australia, I am pleased to present our FY18 Remuneration Report. Our remuneration structures have been designed to align compensation for Key Management Personnel (KMP) with both financial and non-financial outcomes of the Group as they relate to strategy and performance. This framework has been established with the intention of generating the best long-term outcomes for Growthpoint’s Securityholders, its employees and the community. The primary objective of the Group remains to provide investors with a growing income stream and long-term capital appreciation. Remuneration of KMP at Growthpoint is therefore tied closely to the success in achieving these objectives in a sustainable way. Pleasingly, the FY18 remuneration report reflects another year of strong growth in Securityholder returns. Declared distributions over FY18 amounted to 22.2 cents per security, representing 3.3% growth on FY17. This, coupled with strong share price growth over the year delivered Securityholders with Total Securityholder Return (TSR) of 22.3% 1 to 30 June 2018, exceeding the ASX A-REIT 300 Accumulation Index return of 13.2% 1 . This continues a long period of outperformance on this metric for the Group, as can be seen from the graph at right. Funds From Operations (FFO) over the year was also strong at 25.0 cents per security following upgrades to guidance in October 2017. While FFO per security reduced by 2.0% versus FY17, this largely related to a “spike” in the prior year due to the timing of the takeover of the GPT Metro Office Property Fund. The Board recognises the Group’s ability to continue growing distributions for Securityholders relies predominantly on its ability to continue growing earnings, and growth in these financial outcomes will continue to be linked as they have been over the long-term. The table below provides medium to long-term growth rates for FFO and distributions per security. The Board is also pleased to report strong sustainability outcomes over the year. Our GRESB score for 2017 increased by 18.5% over the 2016 achievement. The Group also delivered an above-average CDP score of B. More information on the Group’s performance on sustainability can be found in the FY18 Sustainability Report. What’s changed There was little change in the remuneration framework between FY17 and FY18, with only the performance criteria of the non-financial component of the KMP Short-Term Incentive (STI) changing. The reasons for this change 40 are discussed in the section on STI on page 40. While feedback on Growthpoint’s remuneration framework continues to be positive, to ensure the Group is maintaining pace with best practice across the sector, PwC were asked as part of their annual engagement to review the existing executive remuneration framework and provide alternative remuneration frameworks for consideration by the Nomination, Remuneration and HR Committee (the Committee) for FY19 and beyond. This analysis included a high-level overview of business metrics used by competitors as well as the broader market. The Committee has recommended to implement three key changes having regard to the PwC analysis for the Group’s FY19 remuneration structure. These are: t t Change the backward-looking LTI structure to a forward-looking structure to align more closely with market practice; t t Introduce deferral for part of the STI awarded to KMP, with two thirds paid as cash and one third paid in Performance Rights which vest over two years; and t t Introduce a Minimum Securityholding Requirement (MSR) whereby Non- Executive Directors are required to hold 100% of their base fees, the Managing Director 100% of Total Fixed Remuneration (TFR) and other KMP 50% of their TFR in Growthpoint securities. The Committee believes these changes will further align compensation of KMP with the interests of Securityholders. More details on each of these changes are included in the relevant sections of this Remuneration Report. The Committee and the Board remain committed to implementing remuneration policies that incentivise management to carry out the strategy of the Group in the best long-term interests of Securityholders. Norbert Sasse Chair - Nomination, Remuneration and HR Committee Strong growth in Securityholder returns (%) 1 1 year 13.2 22.3 3 years compound 10.0 11.8 5 years compound 12.2 16.2 Growthpoint TSR ASX300-REIT Index TSR Compound annual growth rates (CAGR) FY13 FY16 FY18 2 year CAGR 5 year CAGR FFO per security (cents) 19.4 22.9 25.0 4.5% 5.2% Distribution per security (cents) 18.3 20.5 22.2 4.1% 3.9% NTA per security (cents) 200.0 261.0 320.0 10.7% 9.9% 1. Source: UBS Investment Research: Annual compound returns to 30 June 2018. Growthpoint Properties Australia 2018 Annual Report 37 Financial Report Portfolio Review Financial Management Business Overview Governance Additional Information