CORPORATE GOVERNANCE REPORT 5Compensation and benefits of executive corporate officers Increase in the weight accorded to the internal performance The goals set out in the 2018 plan are in line with the goals set for the criterion based on the net rental income trend same criteria in the five-year CSR strategy. Thus: The internal criterion weighting, which measures the trend in net > reducing the Group’s energy usage: the 30% goal assessed at the rental income over three years, will be increased from 20% to 40%, 2018 plan horizon is in line with the five-year 40% target; insofar as this criterion seems particularly good at assessing the > shopping centers obtaining sustainable development certification: Company’s business growth and the efforts of the teams to increase the 80% goal assessed at the 2018 plan horizon is in line with the rental income (on a like-for-like basis) and thereby maximize returns five-year 100% target; from the real estate assets within the Group’s property portfolio. Rental income growth on a like-for-like basis includes: > shopping centers contributing to local employment: the 70% goal assessed at the 2018 plan horizon is in line with the five-year 100% > reversion (increase in guaranteed minimum rent at lease renewal) target; which reflects the Group’s capacity to integrate the best retailers > employees receiving training: the 94% goal assessed at the 2018 in its centers and to optimize the rental value of available spaces; plan horizon is in line with the five-year 100% target. > vacancy reduction; and In addition, please see pages 271 and following of this registration > optimum management of the expenses of shopping centers. document for more information concerning the performance conditions and the applicable achievement level for plans with a Net rental income growth on a like-for-like basis should be at least 3% vesting date prior to the date of this registration document. on average over the three years preceding the share allocation date for the criterion to be considered as fully met. Specific rules applicable to corporate officers This is actually a very ambitious growth target considering that the Allocation limits Group renews, on average, only 8% of all its leases every year. The General Meeting of April 19, 2016 capped the number of shares The ambitious nature of the target can be measured in the light of that can be awarded at 0.5% of the share capital for a period of past performance, that of Klépierre or of its main competitors. 38 months and, within this limit, capped the number of shares that (1) can be awarded to members of the Executive Board at 0.2% of the In fact, based on Klépierre’s results since 2005 , the performance share capital. criterion has been met in only five fiscal years, i.e., in one out of every two years for the 2007 to 2016 period (2007 being the first year for In accordance with the compensation policy approved by the calculating three-year averages). If we only take the years after the Supervisory Board, annual allocations made to members of the 2008 crisis into consideration, the criterion has been met in only two Executive Board may not represent more than 125% of the short-term fiscal years, i.e., in one out of three for the 2011-2016 period. compensation (fixed annual compensation plus target short-term By taking account of the results of Klépierre’s main competitors since variable compensation) for the previous year for Executive Board 2012(2), 56% of them have reported average growth of their net rental members. income(3) on a like-for-like basis exceeding 3% for the 2012-2014 Holding obligation period, 33% for the 2013-2015 period and only 33% for the 2014-2016 period. Pursuant to Article L. 225-197-1 of the French Commercial Code as developed in the AFEP-MEDEF Code, the Supervisory Board set the Introduction of a CSR criterion holding obligation for members of the Executive Board as follows: the In addition to the three above-mentioned criteria, which make it members of the Executive Board are required to hold in registered possible to (i) assess shareholder returns having regard to the form a number of shares equivalent to 50% of the gain on acquisition stock price performance and dividends received, (ii) compare this net of tax and expenses when the shares are delivered until their return with that of Klépierre’s competitors and (iii) evaluate, from appointment ends. The members of the Executive Board are thus an operational perspective, the Company’s performance in terms encouraged to hold a large and increasing number of shares. of the trend in net rental income, the Supervisory Board felt that it In accordance with the AFEP-MEDEF Code, this amount will be would be beneficial to factor in the achievement of the Group’s CSR reviewed and set by the Supervisory Board in light of the situation of commitments in the performance measurement systems in light of each executive corporate officer periodically and at least every time the importance of CSR challenges for Klépierre. they are reappointed. Because of these stringent holding requirements In fact, Klépierre defined a new CSR strategy beginning in 2018 and imposed on members of the Executive Board, the Supervisory Board set itself ambitious goals along with a certain number of priorities to does not require them to buy shares from their own capital at the time achieve as part of a five-year plan. The achievement of these priorities the performance shares are delivered. will be assessed annually by an independent third-party organization. Other restrictions In this regard, the Supervisory Board would like to introduce the following fourth performance condition: (i) Klepierre must be among In accordance with the AFEP-MEDEF Code, the members of the top five and be rated “5 stars,” reserved for the best performers the Executive Board have undertaken not to enter into hedging and (ii) the achievement within three years of the priorities of the transactions until the end of the holding period imposed by the Group’s CSR strategy as set out in the above table. performance share plans. (1) For the years prior to 2013, the Company calculated like-for-like growth for its rental income on the basis of its gross income only. In addition, for purposes of comparability, the calculations were made over the entire period by retaining just the shopping centers portfolio which represents, since 2013, more than 95% of the value of the property portfolio. (2) These companies are the real estate companies listed in continental Europe and holders of the property portfolios of the largest shopping centers. Unibail Rodamco, Wereldhave, Eurocommercial, Deutsche Euroshop, Citycon, Mercialys, Vastned, Immobiliare Gran Dis and Atrium. Carmila was excluded from the sample considering its recent market flotation which is an obstacle to obtaining data prior to 2017. (3) Based on the like-for-like net rental income as published by the companies, by retaining just the portfolio of shopping centers where the data is available. 250 KLÉPIERRE 2017 REGISTRATION DOCUMENT