Remuneration 

Guidelines for executive remuneration

Scope

The executive managers and board members, including the CEO and other executive managers, fall within the provisions of these guidelines for remuneration to executive management. The guidelines are forward-looking and applicable to remuneration already agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the annual shareholders’ meeting 2024. These guidelines do not apply to any remuneration decided or approved by the general meeting.

Promotion of the company’s business strategy, long-term interests and sustainability

Pandox’s vision is to be one of the leading hotel property companies in the world with expertise in active ownership, hotel property management and development, as well as hotel operation. Pandox’s strategy is to own large hotel properties in strategic locations and to lease them to strong hotel operators under long-term revenue-based leases. In situations where conditions are not in place for a profitable lease relationship, Pandox can choose to operate the hotel itself. Pandox is an active owner with the ability to be involved throughout the hotel value chain, which both reduces risk and creates new business opportunities. Through specialisation, business flexibility and well thought-out diversification over numerous dimensions, Pandox is laying the foundation for the company’s value creation.

A prerequisite for a long-term successful and sustainable implementation of the company’s business strategy is that the company is able to recruit and retain qualified personnel. To this end, it is necessary that the company offers competitive remuneration. These guidelines enable the company to offer the executive management a competitive total remuneration.              

Variable cash remuneration covered by these guidelines shall aim at promoting the company’s business strategy and long-term interests, including its sustainability.  

Remuneration to executive management

Types of remuneration etc.

The remuneration shall be on market terms and may consist of the following components: fixed cash salary, short-term variable cash remuneration based on fixed cash salary, cash-based incentive programs (existing and ongoing LTI-program that, according to the terms, now runs for one year at a time), pension benefits and other benefits. In addition, the remuneration guidelines allow for a performance-based long-term cash-based incentive program linked to the share price for executive managers and other key employees within Pandox (“LTIP 2024”). The performance criteria in LTIP 2024 are measured during the period from and including 1 January 2024 - 31 December 2025 and payment under LTIP 2024 shall be made in cash as soon as possible after 31 December 2025. Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-, share price-related and performance-based remunerations.

For the CEO, the short-term variable cash remuneration based on fixed cash salary shall amount to not more than six months’ salary and not more than four months’ salary for other executive managers. In addition thereto, the CEO and other executive managers shall be offered the opportunity to participate in cash-based incentive programs which, if such incentive programs are implemented by the board of directors and remuneration committee, shall be structured similarly to Pandox’s existing cash-based incentive program. The criteria under the program may vary. Cash-based incentive programs may be continuous and ongoing. If such cash-based incentive programs are implemented, it shall continue to be possible to receive several annual salaries within the scope of the program, provided that the return for the company’s shareholders has been very good during the same period.

For the CEO and other executive managers, pension benefits shall be premium defined. The pension premiums for premium defined pensions, shall amount to not more than 35 per cent of the fixed annual cash salary. Variable cash remuneration shall not qualify for pension benefits.

Other benefits may include, for example, life insurance, medical insurance (Sw: sjukvårdsförsäkring) and company cars. Such benefits shall not constitute a substantial part of the total remuneration.

Additional cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are limited in time and only made on an individual basis, either for the purpose of recruiting or retaining executives, or as remuneration for extraordinary work performance beyond the individual’s ordinary tasks. Such remuneration shall be commercially justified, in proportion to the individuals fixed salary and not be paid more than once a year and per person. Any resolution on such remuneration shall be made by the board of directors based on a proposal from the remuneration committee.

For employments governed by rules other than Swedish these may be duly adjusted for compliance with such mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.

Criteria for awarding variable cash remuneration, etc.

The short-term variable cash remuneration based on fixed cash salary and remuneration awarded under cash-based incentive programs (existing and ongoing LTI-program and LTIP 2024) shall be linked to predetermined and measurable criteria which can be financial or non-financial. Fulfilment of the criteria for awarding variable cash remuneration based on fixed cash salary may be measured for a period of one year. Fulfilment of criteria’s for payments under the cash-based incentive program shall be measured, and settled, for a period of one year but for targets set for the long term.

The criteria for short-term as well as long-term variable cash remuneration shall be designed so as to contribute to the company’s business strategy and long-term interests, including its sustainability and shareholder returns (for existing and ongoing LTI-program, profit in cash earning per share, profit in EPRA NRV per share and sustainability apply) by for example being clearly linked to the business strategy or promote the executive’s long-term development. The criteria for short-term variable cash remuneration may also be individualized, quantitative or qualitative objectives. At least one third (1/3) of the net bonus received in the cash-based incentive programs shall be reinvested in shares in the in the company during the year. These shares shall be retained for at least two years from the date of acquisition.

To which extent the criteria for awarding variable cash remuneration has been satisfied shall be determined when the measurement period has ended. The remuneration committee is responsible for the evaluation. For financial objectives, the evaluation shall be based on the latest financial information made public by the company.

The board of directors shall have the possibility, under applicable law or contractual provisions, subject to the restrictions that may apply under law or contract, to in whole or in part reclaim variable remuneration paid on incorrect grounds.

Long-term incentive program 2024 (“LTIP 2024”)

LTIP 2024 is a performance-based long-term cash-based incentive program linked to the share price for executive managers and other key employees within Pandox. The purpose of LTIP 2024 is to align the incentives of the participants with the interest of the shareholders through two, for Pandox, strategically important parameters: (i) the total share return and (ii) the development of the net asset value discount. The board of directors is convinced that LTIP 2024 benefits the company’s shareholders as it contributes to the opportunity to retain strategically important employees. The program is also expected to lead to increased commitment and motivation for the participants and will strengthen the participants’ ties to Pandox and its shareholders.

Participants in LTIP 2024

LTIP 2024 comprises a maximum of 18 participants within the Pandox group, which are divided into three categories: CEO ("Category 1"), participants with significant importance for LTIP 2024 (a maximum of 9 persons) ("Category 2") and other participants (a maximum of 8 persons) ("Category 3").

Main terms and conditions LTIP 2024

The main terms and conditions of the LTIP 2024 are:

• Payment under LTIP 2024 will be made in cash as soon as possible after 31 December 2025 (the "Vesting Period"). The Vesting Period is thus two years, which is motivated by the board of directors’ ambition to prioritise activities that support the share price development and valuation in the near future.
• Payment of LTIP 2024 requires, with certain exceptions, that the participant is still employed by the Pandox group during the Vesting Period and is depending on the level of fulfilment of the performance criteria for LTIP 2024.
• Provided that the performance criteria are met, the participant in Category 1 receives approximately 13.5 per cent of the total cost of the program, participants in Category 2 receive approximately 7.6 per cent of the total cost of the program per participant, and participants in Category 3 receive approximately 2.2 per cent of the total cost of the program per participant.
• At least one third (1/3) of the net amount paid to participants in Category 1 and Category 2 under LTIP 2024 shall be re-invested in shares in Pandox. The shares may not be sold by the participant during a period of two years from the date from the date of acquisition.

Performance criteria for LTIP 2024

Payment after the Vesting Period depends on the level of fulfilment of the parameters (i) total share return and (ii) development of the net asset value discount during the period from and including 1 January 2024 up to and including 31 December 2025 (the "Measurement Period"). The performance criteria are measured separately. Half of the total outcome in LTIP 2024 is measured on the total share return and half on the development of the net asset value discount.

Total share return

The assessment of the total share return consists of Pandox’s share price development during the Measurement Period and also includes reversed dividends. Goal fulfilment is measured linearly, whereby the minimum increase for goal fulfilment is 10 per cent per year and the maximum increase is 20 per cent per year. The assessment of whether the performance criteria is achieved is measured on the basis of the outcome during the entire Measurement Period and the performance criteria does not have to be achieved in a single year to be considered fulfilled.

The development of the net asset value discount

The assessment of the development of the net asset value discount consists of the net asset value discount during the Measurement Period expressed as the difference between the share price and EPRA NDV (net asset value according to equity in the balance sheet, adjusted for goodwill and surplus value of Operating Properties) and EPRA NRV. Target achievement is measured by comparing the share price with EPRA NDV (floor) and EPRA NRV (ceiling). If the share price is equal to EPRA NDV, the outcome is zero per cent. If the share price is equal to EPRA NRV, the outcome is 100 per cent. Outcomes in between are settled linearly. The assessment of whether the performance criteria is met is measured on the basis of the outcome during the entire Measurement Period.

Preparation of the proposal and the structuring and management of LTIP 2024

LTIP 2024 has been prepared by the remuneration committee in consultation with external advisors and major shareholders. In addition, LTIP 2024 has been reviewed by the board of directors. LTIP 2024 is part of the board of directors’ proposal of remuneration guidelines to senior executives which are adopted with simple majority at the annual shareholders’ meeting 2024.

The board of directors and the remuneration committee are responsible for preparing the detailed structure and administration of the terms and conditions of the new long-term incentive program, including appropriate provisions on what applies in case of various corporate events, when participants leave Pandox, etc. The board of directors and the remuneration committee may make adjustments to take into account mandatory rules as well as foreign rules, local market practice or market conditions. The board of directors and the remuneration committee may make other appropriate adjustments, including with respect to performance targets and calculation bases, to the extent required by material changes in Pandox or its business environment which result in the terms of the program no longer being reasonably considered to meet its objectives.

Costs for LTIP 2024

The maximum cost for LTIP 2024, including social contributions, is estimated to approximately SEK 12 million per year (in case the performance criteria are achieved to 100 per cent), based on an average tax rate for social contributions of 30 per cent. The costs will be expensed over the Vesting Period and are expected to have a marginal impact on Pandox's key ratio. Since LTIP 2024 is paid in cash, there is no dilution for the shareholders. No hedging arrangements for the program’s financial exposure are intended to be made.

Remuneration to board members

Remuneration to board members for their work in the board of directors of Pandox shall be resolved upon by the general meeting. The board of directors are only entitled to remuneration resolved by the general meeting. However, board members may receive additional remuneration for services board members provide to Pandox within their respective areas of expertise in addition to their duties as board members. Such remuneration shall be on market terms and based in a consultancy agreement approved by the board of directors.

Employment conditions

Salary and employment conditions for employees

In the preparation of the board of directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information on the employees’ total income, the components of the remuneration and increase and growth rate over time, in the remuneration committee’s and the board of directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.

Termination of employment

The notice period for the CEO and other executive managers may not exceed six to twelve months if notice of termination of employment is made by the company. When termination is made by the executive, the notice period may not exceed six months. When termination of the CEO’s employment is made by the company, the CEO shall receive a severance pay of an amount equivalent to the CEO’s monthly salary for eighteen months, which can be reduced if the CEO receives other income. Severance pay shall not be paid to other executive managers.

Decision-making process, amendments and deviations, etc.

The decision-making process to determine, review and implement the policy

The board of directors has established a remuneration committee. The committee’s tasks include preparing the board of directors’ decision to propose guidelines for executive remuneration. The board of directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting. The remuneration committee shall also monitor and evaluate programs for variable remuneration for the executive management, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the company. The members of the remuneration committee are independent of the company and its executive management. The CEO and other members of the executive management do not participate in the board of directors’ processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.

Derogation from the guidelines

The board of directors may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the company’s long-term interests, including its sustainability, or to ensure the company’s financial viability. As set out above, the remuneration committee’s tasks include preparing the board of directors’ resolutions in remuneration-related matters. This includes any resolutions to derogate from the guidelines.

Description of significant changes to the guidelines compared to previously guidelines

Four years have passed since the previous guidelines for executive management were adopted, why the company’s board of directors and remuneration committee have reviewed the guidelines. Following the review, a new performance-based long-term cash-based incentive program linked to the share price has been included (LTIP 2024) to align the incentives of the participants with the interest of the shareholders through two, for Pandox, strategically important parameters: (i) the total share return and (ii) the development of the net asset value discount. In addition, minor editorial changes have been considered necessary compared to previous guidelines. These guidelines apply from the annual shareholders’ meeting 2024 until further notice.