01 02 Governance 03 04 The Remuneration Committee does not use strict weighting of performance measures to ensure that flexibility is encouraged if, for example, strategic objectives evolve as the Group does or business circumstances change during the year. The Remuneration Committee believes that this flexibility ensures that the Board can work with an Executive Director so that he/she does not take excessive risk to achieve KPIs when, for example, markets have turned. The Committee has the discretion to reduce awards, including to zero, when performance outcomes do not align to the shareholder experience. The precise measures will be determined by the Remuneration Committee and disclosed retrospectively in the Remuneration Report following the year of the Remuneration Committee’s determination. As mentioned in the Policy table above, the current maximum value of discretionary deferred share compensation that Mr Gamkrelidze may be awarded in a given year for the remainder of his service contract with the Group is capped at 150% of his total salary. For these purposes, total salary comprises the annual cash salary and the deferred share salary shares provided for in Mr Gamkrelidze’s service contract, the latter being valued, for the current service contract, by reference to the share price as at 14 December 2018 being the date on which the Remuneration Committee adopted, subject to shareholder feedback and approval, the terms of the new compensation and bonus structure reflected in this Policy. Clawback and malus Discretionary deferred shares remuneration are subject to malus, and clawback for up to two years from vesting, in the following circumstances: • significant financial losses, serious failure of risk management or serious damage to the reputation of the Company or JSC Georgia Healthcare caused by misconduct or gross negligence (including inaction); • material misstatement or material errors in the Financial Statements that relates to the area of responsibility of the executive or can be attributed to action or inaction of the executive’s performance of duties. • deliberately misleadigte Copany or JSC Georgia Healthcare; • misconduct in the performance of or failure to perform duties; and • payments based on erroneous or misleading date, for which malus and clawback of discretionary deferred remuneration apply to discretionary deferred remuneration awarded for year in question. Provided that the Policy is approved by shareholders at the AGM 2019 these above provisions will form part of Mr Gamkrelidze’s service contract either by amending his existing contract or entering into a new one. The Company also intends to amend the Executive Share Equity Compensation Plan to reflect the above. Furthermore, for the Company’s current Executive Director and CEO, Mr Gamkrelidze, the Group also has unusually strong “natural malus” provisions since all unvested shares (including deferred share salary and discretionary deferred shares) lapse if the contract is terminated under certain circumstances, including for “cause” such as gross misconduct, failure to perform duties, material breach of obligations and unethical behaviour. This may result in loss of several years of salary deferred shares and discretionary deferred shares. See the “Termination of the JSC GHG service agreement” in the table below for more information. Discretion The Remuneration Committee retains certain discretion in relation to this Policy. This includes: • The determination of discretionary deferred remuneration award, if any; • Selection of KPIs that will determine the discretionary deferred remuneration, which may vary from year to year in order to align with strategy and financial objectives; • Any adjustments required to an Executive Director’s KPIs during the work year when, for example, there has been a change in strategy or business circumstances which results in one or more of KPIs becoming an inaccurate gauge of performance; and • The discretion to override formulaic outcomes where it considers it reasonable in the circumstances to do so prior to or upon vesting of discretionary deferred shares. Equity compensation trust An equity compensation trust has been established for the purpose of satisfying deferred share salary and discretionary deferred share compensation in the form of nil-cost options awarded to any eligible executive. The trust was established in 2015. Business expenses Executive Directors are reimbursed for reasonable business expenses incurred in the course of carrying out duties under their service contract, on provision of valid receipts. 95