76 CapitaLand Ascott Trust Under the Remuneration Framework, a significant proportion of the total remuneration for the KMP, including the CEO, is in the form of variable compensation, awarded in a combination of short-term, deferred and long-term incentives, to ensure alignment of the CEO’s and KMP’s interests with those of the Stapled Securityholders, with an emphasis on linking pay to business and individual performance. Performance targets are hence set at realistic yet stretched levels each year to motivate a high degree of business performance with emphasis on both shorter-term and longer-term quantifiable objectives. There are four key components of the remuneration for the CEO and KMP: A Salary: Includes the base salary, fixed allowances and compulsory employer contribution to an employee’s Central Provident Fund. The base salary is remunerated based on an employee’s competencies, experience, responsibilities and performance. It is typically reviewed on an annual basis to ensure market competitiveness. B Performance Bonus: Using the Balanced Scorecard (BSC) framework, the Stapled Group’s strategies and goals are translated to performance outcomes comprising both quantitative and qualitative targets in the dimensions of REIT Performance, Preparing for Future, Sustainability and Managers’ Financial Health. These BSC targets are approved by the Boards and cascaded down throughout the organisation, thereby creating alignment across the Stapled Group. The performance measures in each dimension and their relative weights are reviewed annually to reflect the Stapled Group’s business priorities and focus for the relevant year. Business Alignment REIT Performance Preparing for Future Key Objectives This includes targets relating to profitability and distributions, capital structure, financial and risk management, as well as investor engagement. This includes targets relating to asset enhancements, portfolio reconstitution, asset performance and renewal of master leases and management contracts. Sustainability Managers’ Financial Health Key Objectives This includes targets relating to talent retention, succession planning and sustainable corporate practices (including workplace safety). This includes targets relating to the Managers’ financial viability and efficiency. After the close of each financial year, the Boards review the Stapled Group’s achievements against the BSC targets and determine the overall performance taking into consideration qualitative factors such as the quality of earnings, operating environment, regulatory landscape and industry trends. In determining the Performance Bonus payout quantum for each KMP, the NRC considers the overall business and individual performance, as well as the affordability of the payout to the Managers. The Performance Bonus is paid out in the form of a cash bonus and deferred Stapled Security awards with senior management grade employees receiving a greater proportion of their payout in deferred Stapled Securities. Deferred Stapled Security awards are awarded pursuant to the Managers’ Restricted Stapled Security Plan (RSSP) and vest in three equal annual tranches without further performance conditions, with the first tranche vesting in the year of grant. Recipients will receive fully paid Stapled Securities, their equivalent cash value or combinations thereof. These Stapled Security awards ensure ongoing alignment between remuneration and sustainable business performance. C Long-term Incentives: The Managers have established the Performance Stapled Security Plan (PSSP) and RSSP, together, the Stapled Security Plans, to promote the alignment of Management’s interests with that of the Stapled Securityholders and CLAS’ long-term growth and value. The obligation to deliver the Stapled Securities is satisfied out of existing Stapled Securities held by the Managers. The NRC has approved Stapled Security ownership guidelines for senior management to instil stronger identification with the long-term performance and growth of the Stapled Group. Under these guidelines, senior management are required to retain a prescribed proportion of Stapled Securities received under the Stapled Security Plans worth up to at least one year of basic salary. Stapled Securities vested pursuant to the Stapled Security Plans may be clawed back in circumstances where the relevant participants are found to be involved in financial misstatement, misconduct, fraud or malfeasance to the detriment of the Stapled Group. Corporate Governance
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