CORPORATE GOVERNANCE REPORT 5Compensation and benefits of executive corporate officers Short-term variable compensation will be determined based on the following two types of components: Component type Component weighting Component description Justification of component choice Quantitative component The quantitative portion of variable The quantitative component The financial indicator chosen is particularly compensation is capped at 80% of measures Klépierre’s performance in relevant for a real estate company like Klépierre as fixed annual compensation. relation to a target net current cash it enables the following to be measured: In addition, a floor has been set flow per share. > changes in income using internal growth and at a minimum of 95% of the target. The net current cash flow per share external growth effects; Achieving the target net current cash target for fiscal year 2018 is €2.59. > efficiency of cost management (operating flow per share that is announced costs and financial costs), or even; by Klépierre to the market grants > tax exposure of current transactions. entitlement to 55% of the fixed It is one of the main indicators that the Company annual compensation. communicates to the market biannually for each six-month period. The net current cash flow per share growth momentum and the regularity thereof are fundamental parameters for the valuation of the Klépierre stock. At each publication of net current cash flow per share, a reconciliation with the EPRA Earnings per share is also published. The quantitative component is applied identically to the Executive Board members because it measures their performance as an executive team, since the Executive Board is intended to operate as a group of peers. Qualitative component The qualitative portion of variable The qualitative portion of variable The qualitative component individually measures compensation is capped at 50% of compensation is measured by the performance of each member of the Executive fixed annual compensation. applying several criteria, according to Board on the basis of specific targets, attributed the profile of each Executive Board to each of the Executive Board members on member, and for 2018 is based the basis of their particular area of involvement around the following areas: for the relevant year. > development/investments; These specific targets are decided by > management of financial the Supervisory Board for the relevant year transactions; according to the priorities set by the Board, > social and environmental on the recommendation of the Nomination and responsibility*; Compensation Committee and are communicated > the Company’s image. to Executive Board members. * With the understanding that the selected criteria applied are different from those applied in the assessment of the condition related to Klépierre’s CSR performance for the purpose of the long-term incentive. In total, therefore, the short-term variable compensation paid The performance conditions are established by the Supervisory to Executive Board members is capped at 130% of their fixed Board, on the recommendation of the Nomination and Compensation annual compensation, i.e., at the low end of what was found in the Committee, based on ambitious goals, and they are evaluated at the aforementioned Towers Watson study. end of a period of three years after their allocation. These performance In accordance with Article L. 225-82-2 of the French Commercial conditions apply to all allocations made under these plans. Code, the variable annual compensation due in respect of fiscal year At the General Meeting held on April 19, 2016, Klépierre was authorized 2018 will be paid after the Ordinary General Meeting of Klépierre’s to allocate performance shares, including those benefiting the shareholders held in 2019 to approve the 2018 financial statements, Executive Board members. and in the case of each Executive Board member, is contingent upon The plan regulations that will be implemented in 2018 will include a its approval by that Meeting. (1) three-year vesting period (except for early exercise) and a two-year c) Long-term incentive holding period for French beneficiaries and a four-year vesting period (except for early exercise)(1), with no holding period, for non-French Since 2012, the Supervisory Board has allocated performance shares beneficiaries. to executive corporate officers and the chief executives of the Group, In accordance with the AFEP-MEDEF Code guidelines, all final vesting under the authorization granted by the General Meeting. In accordance of all performance shares is subject to service and performance with the AFEP-MEDEF Code guidelines, performance shares are not conditions for all beneficiaries, assessed over a three-year period (with reserved solely for executive corporate officers. The general policy the level of fulfillment of performance conditions being assessed once for the distribution of performance shares is discussed each year by at the end of the three-year period). the Nomination and Compensation Committee, which then makes recommendations to the Supervisory Board. Beginning in 2018, the vesting of performance shares will be subject The purpose of these allocations of performance shares is to to the achievement of four performance criteria comprising financial, encourage the achievement of the Group’s operational and financial non-financial and operational criteria, which will be evaluated over a targets and thus enable an increase in the resulting creation of value three-year period. for shareholders. They encourage the executive corporate officers and the senior management of the Group to have a long-term view of their shares, thereby engendering loyalty and promoting the alignment of their interests with the corporate interests of the Company and the interests of the shareholders. They involve a large group of beneficiaries (representing around 9.5% of employees). (1) Death or disability of the beneficiary, transactions resulting in a change in control, delisting. 246 KLÉPIERRE 2017 REGISTRATION DOCUMENT