Corio - Why people buy

Variable remuneration

All members of the Management Board are eligible for variable remuneration if they achieve certain pre-agreed performance criteria that support Corio’s short and long-term objectives. The variable remuneration components are predominantly of a long-term nature (maximum 60% of base salary on long term; 40% of base salary on short term), in cases of ‘on target’ performance in both the long term and the short term. The variable remuneration aligns with the objectives of the company of delivering both annual operational results and long-term shareholders return, while keeping in mind the risk profile attached to both performance objectives.

In the event of unforeseen circumstances the Supervisory Board has the ability as far as deemed reasonable to adjust any annual variable remuneration of the Management Board. The Supervisory Board has the right to reduce, cancel or claw back bonuses, either in full or in part, that have already been awarded if subsequently it is discovered that they had been wrongly awarded (on the basis of incorrect financial data or otherwise).

A. Short term incentive scheme

The short-term incentive scheme relates to the operational results of the company and includes financial and non-financial indicators that are relevant to the company’s value creation. In the event of short-term ‘on-target’ performance, the annual incentive amounts to 40% of the Management Board member’s base salary. The maximum short-term incentive is 60%, in the event of excellent performance against the targets. Two-thirds of the short-term incentive performance criteria consist of the metric ‘growth in the company’s Operating Result’; one-third relates to measurable individual targets. The Operating Result consists of ‘direct results’ and ‘additions to the pipeline’. The pipeline is relevant for future years’ turnover growth. Performance against targets for 2008 was reviewed in 2009.

Targets for 2008 and performance against these targets were as follows:

• the direct result target was based on the 2008 budget. The target was reached;
• the pipeline target has been met since the pipeline was successfully restructured related to market circumstances;
• non-financial targets, including CSR, are tuned to specific responsibilities of individual Board members and have been appraised.

After assessment and discussion by the Supervisory Board an ‘on- target’ bonus of 38.9% was granted. This is the average short term incentive for members of the Management Board with full responsibility at holding level.

Financial information on the short-term bonus can be found on page 121 of this annual report.

B. Long term incentive scheme

The long-term incentive scheme was further detailed in 2008. Under the ‘Performance Phantom Share Plan’, conditional share units are awarded annually. Three years after the award date, vested units are paid out in cash. The number of units that vest depends on the ‘total shareholder return’ generated by Corio N.V. during the three-year period, compared to the total shareholder returns generated by companies in a pre-defined peer group. The amount payable in respect of the vested units is the value of the units as at the payment date. Unvested units forfeit.

The units represent the average value of Corio shares over a three-month period, starting January 1st. This three-month average aims to minimise the influence of short-term volatility on the share price. The three-month average also applies when calculating the relative total shareholders return of Corio N.V. and of the companies included in the performance reference group. The rules of the plan contain a provision to ensure that movements in the share price related to exceptional transactions do not affect the value of the units; e.g. in case of a take-over, the unit value is ‘frozen’ by limiting the value to the amount measured over the three-month period preceding the month before the notice of a change in control is made public.

The annual award value of units does not exceed 60% of annual base salary as determined after 1 May of the award year. The specific percentage is determined by the Supervisory Board and fixed in the individual contract.

The following scale applies to determine the number of units that vest, depending on the relative total shareholders return generated. The percentage of the units vesting ranges from 0% for below median performance, to 150% of the awarded number of units if Corio ranks first in the performance reference group. The scale used to determine the number of units to be paid out is as follows:

* This percentage applies to the number of units that have been awarded (conditionally) three years before the vesting date.

The performance reference group consists of Corio and eight other listed property companies that primarily focus on retail. The performance reference group used for awards in 2009 consisted of Corio and the following companies.

Deutsche Euroshop                 Liberty International
Eurocommercial Properties      Unibail-Rodamco
Hammerson                           Vastned Retail
Klépierre                               Wereldhave

The Remuneration Committee reviews the performance reference group periodically and adjusts it if necessary.

The Supervisory Board has the ability to adjust conditional awards if it believes that the application of the remuneration policy produces an unreasonable and unintended result or does not reflect Corio N.V.’s underlying financial performance.

In 2009, conditional units were awarded under the plan rules to Mr. Groener, relating to the years 2008 and 2009. Other members of the Management Board will receive units relating to the year(s) 2008 and 2009 in 2010.

Overview of Phantom Performance Shares awarded in 2009 relating to 2008 and 2009 (all were unvested in 2009):

Financial information on the long-term incentive awards can be found on page 122 of this report.

Source: Annual Report 2009, Chapter Overview & Strategy, page 33 (PDF, 13.679 kB)

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