Executive Compensation New business value: measures the change in shareholders’ economic value as a result of sales in the period. Calculated as the present value of shareholders’ interest in expected future distributable earnings, after the cost of capital, on actual new business sold in the period. Relationship net promoter score (rNPS) gauges customer loyalty and advocacy based on the response customers provide when asked how likely are they to recommend Manulife to family, friends, or colleagues. rNPS is measured by a third-party market research study of customers. Straight-through processing (STP) is defined as customer interactions, including money processing, that are completely digital within Manulife as a proportion of total customer interactions. Non-GAAP and other financial measures The company prepares our Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. We use a number of non-GAAP and other financial measures to evaluate overall performance and to assess each of our businesses. This section includes information required by National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure in respect of “specified financial measures” (as defined therein). Non-GAAP financial measures include core earnings (loss); core earnings available to common shareholders; core earnings before income taxes; core general expenses; assets under management (AUM); assets under management and administration (AUMA); and Global WAM managed AUMA. In addition, non-GAAP financial measures include any of the foregoing non-GAAP financial measures; net income attributed to shareholders; and common shareholders’ net income. Non-GAAP ratios include core ROE; diluted core earnings per common share (core EPS); and expense efficiency ratio. In addition, non-GAAP ratios include the percentage growth/decline on a CER basis in any of the above non-GAAP financial measures; general expenses; basic earnings per common share; and diluted earnings per common share. Other specified financial measures include assets under administration (AUA); new business value (NBV); annualized premium equivalent (APE) sales; net flows; remittances; any of the foregoing specified financial measures stated on a CER basis; and percentage growth/decline in any of the foregoing specified financial measures on a CER basis. Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under GAAP and, therefore, might not be comparable to similar financial measures disclosed by other issuers. Therefore, they should not be considered in isolation or as a substitute for any other financial information prepared in accordance with GAAP. For more information about non-GAAP and other financial measures, see that section in our 2022 Management’s Discussion and Analysis which is incorporated by reference and can be found on the company’s website at www.manulife.com/en/investors/results-and-reports. 2022 annual incentive While we achieved record net income and posted above-target performance on our strategic initiatives, the company performance score for the 2022 annual incentive award was 87% for the named executives because core earnings, new business value and Global WAM core earnings fell below the ambitious targets set for the year. Please see the table on the next page for additional details. These targets, along with our performance ranges, are set each November, align with our board-approved business plan, and are influenced by the macro environment at the time when they are established. In particular, the following context is important when assessing the difficulty of the 2022 targets: • The plan considered that the U.S. variable annuity transactions would reduce the core earnings and net income of the company by approximately $200 million per year. • The targets were set prior to the end of the 2021, which had an exceptionally strong finish. Taking into consideration the above, at the time the goals were set, the targeted net income and core earnings growth for 2022 was approximately 10%. In addition, the plan did not anticipate the prolonged impact the COVID-19 pandemic continued to have on our Asia business for most of 2022. 2023 Management information circular 57