Manulife US REIT - Annual Report 2021

ANNUAL REPORT 2021 125 The role of the NRC is to make recommendations to the Board on all appointment and remuneration matters. The NRC also reviews and makes recommendations on succession plans for the Board and the executive officers. The NRC’s responsibilities in relation to remuneration matters also include, amongst others: • reviewing and recommending to the Board a general framework of remuneration for the Board and the executive officers; • reviewing and recommending to the Board the specific remuneration packages for each Director as well as for the executive officers; • reviewing MUST’s obligations arising in the event of termination of executive officers’ contracts of service and ensuring that such contracts of service contain fair and reasonable termination clauses which are not overly generous; and • reviewing the disclosures in the Annual Report on the Manager’s remuneration policies, level and mix of remuneration, and the procedure for setting remuneration. The NRC reviews the remuneration policy and the overall remuneration packages for executive officers and Directors annually taking into account feedback from MFC’s executive compensation governance and human resource teams. The NRC, Board and MFC teams come together to ensure that the Manager’s remuneration policy is aligned with the wider Manulife Group’s compensation policy and is benchmarked to the market and that the remuneration payable is in line with the objectives of the remuneration policies. The NRC and the Board have given assurance that the level and structure of remuneration of Directors align with the long- term interests and risk management policies of MUST for FY2021. The Manager’s compensation programme is well balanced, competitive, performance-based and aligned with the achievement of each employee’s short-, medium- and long-term goals. On an annual basis, quantitative and qualitative performance measures are set by the Manager. The performance scorecard monitors factors in distributable income, DPU, total Unitholders’ returns, leasing activities, implementation and enhancement of infrastructure, capital management, investor engagement, corporate governance, sustainable initiatives and training and development. At the end of each calendar year, the performance scores are calculated and awards made accordingly. These factors were chosen because of their measure of both short- and long-term goals and to capture the qualitative versus quantitative targets of performance measurement. The NRC and the Board review the performance measures and the outcome on an annual cycle. In determining the actual quantum of the variable component of remuneration paid to the key management personnel, the NRC had taken into account the extent to which the performance conditions, as set out above, have been met. The NRC is of the view that the performance conditions for 2021 were met and remuneration was aligned with performance during FY2021. The Manager did not engage a remuneration consultant for FY2021. While the approach reflects a pay-for-performance culture, it is also designed to attract, motivate and retain high- performing and high-potential employees in their respective field of expertise. Employees are also incentivised through annual variable bonus awards that are tied to a variety of financial and non-financial measures and key staff are eligible for a Long-Term Incentive Scheme. The NRC has ensured that the Manager’s compensation programme conforms to the Financial Stability Board’s (FSB) principles for sound compensation practices as well as the FSB’s implementation standards. The FSB is an international body endorsed by the G20 nations that monitors and makes recommendations about the global financial system. The FSB’s set of principles were developed in 2009 to align compensation with prudent risk-taking. The Long-Term Incentive Scheme is designed to motivate the performance of management personnel, and promote greater alignment of interests with Unitholders. Based on Manulife’s internal equity policy, the CEO and key management personnel of the Manager are granted Restricted Share Units (RSUs) under the Long-Term Incentive Scheme which has been linked to MUST Units from its listing in 2016 onwards. MUST RSUs are vested on a three-year cycle. The RSUs entitles the holder to receive payment in cash linked to the value of the MUST Units at the time of vesting. No employee share option schemes or share schemes have been implemented by MUST. The Long-Term Incentive Scheme has been put in place to increase the Manager’s flexibility and effectiveness in its continuing efforts to reward, retain and motivate employees to achieve superior performance and to motivate them to continue to strive for long-term Unitholder value.