Abacus Property Group – Annual Financial Report 2018

DIRECTORS’ REPORT
30 June 2018
ABACUS PROPERTY GROUP
REMUNERATION REPORT (audited) (continued)
Structure
The table below sets out the structure of Abacus’ executive remuneration arrangements. Each element is
discussed in further detail in the sections that follow.
Table 2: Summary of ABP’s remuneration structure
Remuneration component Method Purpose Link to performance
Fixed remuneration Paid mainly as cash salary -
comprises base salary,
superannuation contributions
and other non-monetary benefits
(car parking and associated
fringe benefits tax).
Set with reference to role,
market, experience and skillset.
Indirect link to performance. Periodic
increases are linked to market
movements, changes in roles and
responsibilities, and incumbent
experience.
Current variable component
(capped at 75% of fixed
remuneration for the
Managing Director and at
60% for other executives)
Paid in cash in September.
To drive achievement of the
underlying profit target range
as set by the Board.
Underlying profit is a key financial
gateway for a current variable award.
Individual performance is then tested
against KPIs, key effectiveness
indicators and other internal financial
and performance measures.
Deferred variable
component (capped at 75%
of fixed remuneration for the
Managing Director and at
60% for other executives)
Awards are made in the form of
security acquisition rights.
To reward executives for
achieving sustainable
underlying profit growth over
the short to medium term and
to reduce excessive risk taking
associated with short term
performance assessment
models.
Directly linked to the increase in the
Abacus security price over the vesting
period, and the maintenance of
distributions. Claw back of prior grants
is considered if performance is not
sustained.
Abacus aims to ensure that the split of fixed and variable remuneration for executives is appropriate for the type
of business it operates, namely, a cyclical, established business that seeks to provide stable distributions to
securityholders. Volatile outcomes are not valued by long-term investors, and therefore remuneration is not highly
incentive leveraged. The result is a higher proportion of fixed remuneration for executives compared to other A-
REITs and a lower proportion of variable remuneration, with the variable remuneration designed to reward
consistency of sustainable distributions and steady improvement to the underlying financial strength of the
business. This strategy aligns with the Board’s desired positioning of the group within the A-REIT industry.
Accordingly, the Board considers it appropriate that for the key management personnel the proportion of fixed to
the potential maximum variable pay (the remuneration ratio) is 40:60 for the Managing Director and 45:55 for the
other executives, with half of the variable component generally allocated to current variable remuneration and the
other half to deferred variable remuneration. There may be variations from the ratio based on personal
performance, but each executive’s total current and deferred variable remuneration is generally capped at 150%
for the Managing Director and 120% for the other executives of their fixed remuneration.
To assist the Committee in determining remuneration, Abacus subscribes to an independent property salary and
remuneration survey recommended to it by EY. Abacus also reviews the published remuneration of the members
of the S&P ASX 200 Index and the S&P/ASX 300 A-REIT Index. This information is used by the Committee for
benchmarking purposes
Fixed Remuneration
Abacus aims to set a fair base salary. Base salary is set by reference to each executive’s position, performance
and experience, and the Committee has regard to independent benchmarking information. The Committee has
authority to engage independent advisers to assist it in its role. No external adviser provided any remuneration
recommendations in relation to any member of the KMP during the year.
Fixed remuneration is benchmarked against data for the property industry as well as data from the stock market
to determine an appropriate market-competitive level of pay. Stock market data covers listed industry companies
of comparable size and, within that, A-REITs of comparable size.
Base salaries paid to executives increased by an average of 2.0% in the year ended 30 June 2018.
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