Growthpoint Interactive Half Year Report 2018

Growthpoint Properties Australia 2018 Half Year Report 46 Notes to the Financial Statements continued 3.5 Share based payment arrangements Determination of fair values Fair value is calculated based on the present value of the performance right on the date of issuance in future periods, discounted at a market-related discount rate. Share-based payment arrangements At 31 December 2017, the Group has the following share based payment arrangements: Employee Incentive Plans FY14, FY15, FY16, FY17 and FY18 The Group has introduced employee incentive plans for all employees (including the Managing Director). The plans are designed to link employees’ remuneration with the long-term goals and performance of the Group and with the maximisation of wealth for its Securityholders. The current measures for the plans, which are reviewed regularly by the Nomination, Remuneration & HR Committee and/or the Board are described in full on page 46 (in the remuneration report section of the directors’ report) in the 2017 Annual Report. Under each plan, each eligible employee is sent a letter of invitation to the plan which outlines the percentage of their base salary that they can earn as performance rights. Acceptance of this invitation is the grant date for those performance rights. The percentage of the maximum possible earnings for each employee is determined by the percentage of the measures under each plan that are achieved. Subject to the employee remaining employed by the Group, on or about 30 September of each year the employee will receive 25% of his or her performance rights, as they vest, by the issue of stapled securities in the Group. Securities will be issued for an equivalent amount at an issue price per security based on the volume weighted average price of the securities over the first 20 trading days in September prior to the vesting date of the first tranche of each plan. Any director in the plan will have their grant ratified at the Group’s Annual General Meeting and following approval will be issued their securities on the same basis as the employees. The performance rights are cumulative and, subject to some exceptions, immediately vest in the case of a takeover of the Group or a redundancy. During the period, the first tranche of the FY17, second tranche of the FY16, third tranche of the FY15 and fourth tranche of the FY14 Employee Incentive Plan performance rights were determined with the results shown on the table below: Plan identification Plan participants Tranche Cost $ FY17 Plan Director 1 175,230 FY17 Plan Employees 1 300,222 FY16 Plan Director 2 83,427 FY16 Plan Employees 2 112,019 FY15 Plan Director 3 129,540 FY15 Plan Employees 3 140,308 FY14 Plan Director 4 128,653 FY14 Plan Employees 4 125,944 The first tranche of the FY17 Employee Incentive Plan performance rights vested during the period. The fair value of performance rights under the FY18 Employee Incentive Plan was determined on the grant date of those rights and then “trued-up” at 31 December 2017 where allowed. The fair value of these rights for directors is estimated as $371,700 and for other employees $714,437. This estimate is based on achieving 50.0% of the maximum payable under the FY18 plan. This is seen as a reasonable estimate for fair value as it is based on the percentage achieved for comparable elements in the FY16 plan which were then adjusted for information available on likely achievement as at 31 December 2017. The actual costs of performance rights cannot be determined until FY19 and the first issue of securities under the FY18 plan will not occur until FY19. During the period, $617,712 was recognised in the share based payments reserve (Dec 16: $640,177). This represents the amounts recognised under the four plans in operation and is the portion of the fair value of the total cost recognised of the unissued securities, which remain conditional on employment with the Group at the relevant vesting date. As of the date of the report, the number of equity shares to be granted and vested in the future cannot be determined until the rights fully vest.