Growthpoint Interactive Half Year Report 2019

Notes to the Financial Statements (cont.) 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 Following an independent review of the remuneration structures for Growthpoint Properties Australia, the Nomination, Remuneration and HR Committee (the Committee) decided to move the current Long-Term Incentive (LTI) structure from a “backward looking” to a “forward looking” structure. For the financial year ending on 30 June 2019, instead of measuring performance during the 3-year period from 1 July 2016 to 30 June 2019 and determining relative Total Shareholder Return (TSR) and Return on Equity (ROE) for that period, the assessment period will instead be from 1 July 2018 to 30 June 2021. The same relative TSR and ROE measures will be used with the same hurdle rates. Once the assessment of performance is complete at the end of the performance period, the relevant performance rights will vest (i.e. in three years’ time). There will be a transition period between when the current plans cease, and the new plans become fully effective (no vesting under the new plan can occur until after the measurement of the first three-year performance period ending 30 June 2021 is complete). The Group will continue to operate “backward looking” LTI plans in the transition period with steadily reducing opportunities under each “backward looking” plan until they are phased out completely with the first vesting under the new “forward looking” structure. The Committee asked for an independent review of these transitional arrangements and it was found that there is no advantage/ disadvantage arising from the transitional arrangements to either the Group or the employees. The reason for this change is to bring the structure of the LTI measurement into line with general market practice. During the period, $173,000 was recognised in the share-based payments reserve (Dec 17: $617,712). This represents the amounts recognised under the 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 securities to be granted and vested in the future cannot be determined until the performance rights fully vest. Backward looking LTI At 31 December 2018, the Group has the following share-based payment arrangements: Backward looking Employee Incentive Plans FY15, FY16, FY17, FY18 and FY19 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 Committee and/or the Board are described in full on page 43 (in the remuneration report section of the directors’ report) in the 2018 Annual Report of the Group. 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 under each plan, 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 relevant vesting date. 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. 42 Growthpoint Properties Australia | 2019 Half Year Report