Strategic Report Strategic Report Strategic Report Financial Additional Overview Strategy Performance Governance Statements Information Notes to the Policy table Cash salary The Remuneration Committee has the discretion under the Policy to change the currency in which cash salary is paid and also has the discretion to determine the appropriate exchange rates for determining the cash salary to be paid. Deferred share salary Deferred share salary is the most important element of the Executive Director’s fixed annual remuneration and is commensurate with his or her role within the Group. By weighting salary towards a deferred share salary that vest over five years rather than cash, the Executive Director’s day-to-day actions are geared towards achievement of the Group’s strategic goals and sustained Group performance over the long term. Deferred share salary is granted towards the beginning of the work year and vests 25% on each of the second, third, fourth and fifth anniversary from the start of the work year (i.e. over five years from the start of the work year). The deferred share salary is neither a bonus nor an LTIP: it is salary fixed in an Executive Director’s service agreement(s) and is therefore not subject to performance targets or measures. That salary increases or declines in value depending on Group performance over the five-year total vesting period, aligning the Executive Director’s interests directly and naturally with those of shareholders. Under the new Policy, nil cost options for deferred share salary will be awarded towards the beginning of the work year rather than at the end as under the prior BGEO Group Plc’s remuneration policy (although they will not vest in the work year to which they relate, nor in the year after, in accordance with the vesting schedule, and will lapse pro rata for any incomplete years worked as well as in other circumstances as further detailed below). The Group will amend the vesting schedule in the Executive Directors’ service agreement(s) to reflect this, subject to the new Policy being approved at the 2019 AGM. For 2019, deferred share salary will be awarded after the Policy becomes effective, but vesting will be adjusted as if it had been awarded in January 2019 and so 25% will vest in each January 2021, January 2022, January 2023 and January 2024. Performance-based (discretionary deferred share) Remuneration No cash bonuses are paid to Executive Directors. Further the Group does not operate an LTIP because it believes there is sufficient long-term incentive built into its deferred share salary. Instead, an Executive Director’s individual and Group performance is rewarded through an annual award of discretionary deferred shares which will vest in two tranches: 40% on the third and 60% on the fourth anniversary of the start of the work year, and are subject to a further holding period of two years, so that there is a total maximum vesting and holding period of five years. The Remuneration Committee will determine the aggregate number of shares (if any) that will be awarded to an Executive Director and as in the table above, the maximum opportunity that Mr Gachechiladze, the current CEO, may be awarded in a given year is equivalent to 100% of total salary (i.e. cash salary and deferred share salary). This maximum bonus opportunity is calculated as follows: (i) for the share salary element, the number of deferred salary shares; plus (ii) for the cash salary element, cash salary converted into a number of shares calculated using the most recent closing price at the time and date of the Remuneration Committee meeting at which the discretionary deferred share award is determined. The Remuneration Committee will make the determination on number of shares to be award annually in respect of the Executive Directors and the Executive Management Team and will consider the defined maximum opportunity, the Group’s performance and the individual’s KPIs when making a determination. Performance measures are chosen to reflect strategic priorities for the Group and will be chosen by the Remuneration Committee annually towards the beginning of the performance year. The aggregate pool of shares available each year for awards of discretionary deferred share compensation for the Executive Directors and Executive Management as a whole is determined annually by the Remuneration Committee in its absolute discretion, based on a number of factors including: •financial results; •strategic objectives; and •people and culture objectives. Annual Report 2018Bank of Georgia Group PLC 135