REMUNERATION REPORT

BACKGROUND STATEMENT

Remgro’s remuneration philosophy is guided by its business strategy, namely a long-term approach to deliver value in a sustainable manner.

Due to the nature of the business, the remuneration framework, on an organisation-wide basis, provides for fixed remuneration (i.e. salary and benefits) and a long-term share plan, which only renders value if stretching performance conditions (where applicable) are met. As an investment holding company, the Remuneration and Nomination Committee (the committee) views increased market capitalisation, sustainable growth in the share price and above-average dividend yield as critical metrics to deliver value to shareholders over time. In line with this approach Remgro does not pay short-term incentives (i.e. cash bonuses) and believes that management’s decision-making should be long-term focused. It is aligned with the philosophy that they should be rewarded where value creation is demonstrated, without excessive risk taking in the short term. This two-tier approach makes the Remgro Remuneration Policy focused and avoids unnecessary layers of complexity. Our remuneration philosophy and policy are further detailed in the second section of this report.

Context

Remgro has a diversified portfolio of investments across industries, which include banking, healthcare, consumer products, insurance, industrial, infrastructure, as well as media and sport. The weak domestic macro environment, characterised by low economic growth, continued high levels of unemployment and rand volatility persisted during the financial year. Continued poor performance from state-owned entities (SOEs), particularly Eskom, and the resulting possibility of further downgrades contributes significantly to weakened overall trading conditions. The higher fuel prices and persistent increases in water and electricity rates, have affected disposable income and placed a significant strain on consumer spending. Consequently, these less favourable trading conditions have impacted Remgro investee companies’ earnings to varying degrees, ultimately influencing Remgro’s share price.

The most significant impact on the Remgro share price during the reporting period was the Mediclinic International plc (Mediclinic) share price performance. The rapidly implemented regulatory changes in Switzerland had a major effect on Mediclinic’s Swiss business and ultimately its overall share price.

Key activities of the committee during the year

Remgro observes the King IV Report on Corporate Governance for South Africa (2016) (King IV) principles in relation to the Remuneration Policy and disclosure. During the year, the key activities of the committee included:

  • Implementation of the revised Remgro Long-term Incentive (LTI) arrangements. The implementation activities included the following:
    • Setting of overall financial objectives
    • Agreement of individual performance objectives
    • Approval of award levels

Voting results and shareholder engagement

At the Annual General Meeting (AGM) held on 29 November 2018, Remgro’s Remuneration Policy received a favourable vote by Ordinary Shareholders of 96.02% and the Remuneration Implementation Report received a favourable vote by Ordinary Shareholders of 97.97%.

The committee remains committed to ongoing engagement with shareholders and welcomes any comment they may wish to provide.

The committee is of the view that during the 2019 financial year, Remgro’s Remuneration Policy achieved its stated objectives. At the 2019 AGM Remgro will put its Remuneration Policy and Remuneration Implementation Report to two separate non-binding advisory shareholder votes (see resolution numbers 14 and 15 in the Notice to Shareholders) and the committee looks forward to a positive outcome in this regard.

FUTURE AREAS OF FOCUS

During the 2020 financial year the committee will focus on the following forward-looking considerations:

  • To review the performance measures and targets for each of the approved LTI arrangements to ensure they remain relevant for the 2020 awards.
  • To review the multiples for future grants under the combined Share Appreciation Rights (SAR) Plan and Conditional Share Plan (CSP).

REMUNERATION POLICY

The Remuneration Policy provides an overview of Remgro’s remuneration principles for the organisation as a whole. The information provided in this policy has been approved by the Board on recommendation by the committee. This Remuneration Policy will be put to a non-binding advisory vote by shareholders at the next AGM on 28 November 2019.

Governance

The committee is appointed by the Board with delegated powers and the functioning of this dedicated Board committee is well established within Remgro’s mode of operation. In essence it is the committee’s role to ensure fair and responsible remuneration across the Company, by way of policy making and implementation, and that the disclosure of remuneration is accurate, complete and transparent. Ultimate responsibility remains with the Board.

The committee is governed by a mandate, reviewed and approved by the Board annually, that incorporates best practice governance recommendations and serves to assist members of this committee in the execution of their role and responsibilities.

The members of the committee for the year under review were:

  • Mr J P Rupert (chairman)
  • Mr P K Harris (independent non-executive director)
  • Mr G T Ferreira (lead independent non-executive director)
  • Mr F Robertson (independent non-executive director)

The Board acknowledges the recommended practice in King IV that the Chairman of the Board should not be the chairman of this committee but given the following reasons, this arrangement is deemed appropriate:

  • The necessity to align the Company’s remuneration approach with corporate strategy;
  • The Chairman receives no emoluments or fees from Remgro thus there are no conflicts with regard to the approval of non-executive director fees;
  • The Chairman is a significant shareholder in the business hence it is not regarded as unreasonable for him to chair this committee; and
  • In terms of committee composition the majority of the committee remains independent non-executive directors and currently includes the lead independent non-executive director.

The committee formally met twice during the year and had one further engagement via round robin discussions and decisions. The details on the attendance of the formal meeting are set out in the Corporate Governance Report.

The mandate set out in the terms of reference of the committee includes the following:

In respect of its nomination function –

  • Assist the Board with the process of identifying suitable candidates for appointment as directors;
  • Ensure the establishment of a formal and transparent process for the appointment of directors;
  • Oversee the development of a formal induction programme for new directors;
  • Evaluate the performance of the Board; and
  • Ensure that succession plans for the Board, Chief Executive Officer (CEO) and other Management Board members are developed and implemented.

In respect of its remuneration function –

  • Oversee the establishment of an organisation-wide Remuneration Policy that promotes positive outcomes across the economic, social and environmental context in which Remgro operates;
  • Promote an ethical culture and responsible corporate citizenship in the context of remuneration;
  • Oversee the fair, responsible and transparent setting and administering of remuneration of all employees;
  • Advise on the fees of non-executive directors, for approval by shareholders at the AGM;
  • Ensure that remuneration meets Remgro’s needs and strategic objectives and is administered in accordance with the shareholder-approved plan rules;
  • Oversee the preparation and recommendation to the Board of the Remuneration Report to be included in the Integrated Annual Report; and
  • Ensure that the Remuneration Policy and Remuneration Implementation Report are put to two separate non-binding advisory votes by shareholders at the AGM.

Remuneration principles

The Remuneration Policy is aligned with the Company’s approach of rewarding all employees fairly, responsibly and competitively, according to their capabilities, skills, responsibilities and level of performance.

Key remuneration principles embedded in the Remuneration Policy are:

• Alignment with the overall business strategy, objectives and values of Remgro;
• Remuneration design which supports the interests of shareholders;
• Mechanisms for ensuring that executive remuneration is fair and responsible in the context of overall Company remuneration;
• Remuneration design which supports the retention and attraction of key talent and supports succession planning;
• Compliance with best practice remuneration governance standards including prevailing labour law legislation;
• Recognising and encouraging exceptional and value-added performance in line with a performance-based culture;
• Ensuring that remuneration structures are consistent with the Company’s long-term requirements and decision-making; and
• Protecting the Company’s rights by means of standard contracts of employment.


The committee is satisfied that it has carried out its responsibilities for the year in compliance with its mandate.

During the 2019 financial year, the committee has engaged external remuneration consultant PricewaterhouseCoopers Inc. (PwC) as well as management and the Board in conducting their duties and responsibilities.

We have considered the advice, opinions and services received by PwC during the 2019 financial year. We are satisfied and regard PwC as being wholly objective and independent.

Components of remuneration

Remgro has two components of remuneration, namely fixed remuneration (which includes benefits) and LTI in the form of its equity settled SAR and CSP Plans. Remgro does not pay short-term incentives and believes that management’s decision-making should be long-term focused and aligned with the philosophy that they should be rewarded where long-term value creation is demonstrated, without excessive risk taking in the short term.

The same remuneration principles and components apply to all employees of Remgro. The remuneration policies, principles and practices of investee companies are governed through remuneration committee structures in these organisations.

The details of the components are outlined below:

Fixed remuneration

Purpose
To provide competitive fixed remuneration that will attract and retain appropriate talent. Reflects an individual’s responsibilities, experience and role.

What does this contain?

Referred to as total guaranteed package (TGP), includes components such as cash salary, travel allowance and the Company’s contributions towards retirement funding and the medical scheme. All guaranteed benefits are funded from the TGP.Retirement funding contributions range between 18.5% and 27.5% of pensionable emolument and the key features of the retirement fund are as follows:

  • Retirement savings component with member investment options and a trustee default option;
  • Insured flexible death, disability and funeral benefits; and
  • Preservation options when exiting the fund.

Membership to a medical scheme is compulsory for all employees and contributions are funded from their TGP. All employees are eligible for membership of the in-house medical scheme, Remedi, and the scheme provides three different options for members to choose from annually. These options aim to accommodate the different healthcare needs and affordability of the diverse membership of the scheme.

Under specific circumstances Remgro also offers employees post-employment medical benefits. All details in this regard are disclosed in the Annual Financial Statements.

Only employees who are required to regularly travel for business purposes receive travel allowances, which is funded from their TGP.

How is THE TGP benchmarked?

Guaranteed packages are benchmarked against the upper quartile of the market for comparable companies utilising independent salary surveys.Remgro currently makes use of the Mercer Top Executive survey for the Management Board members and senior executives. For the rest of the organisation the PwC REMchannel national survey is used.

The services of an independent remuneration consultancy are contracted for this purpose. The TGP is positioned competitively to the market to ensure that the right talent is attracted and retained. It further supports the remuneration approach of no short-term cash bonuses and discourages excessive risk taking which may be driven by leveraged cash bonuses.
 
Fixed remuneration

Annual review process

The committee conducts an annual review of the TGP for executives and approves the increase percentage for employees below executive level.

Adjustments to the TGP depends upon the employee’s level of responsibility and his/her overall performance.
The CEO, who attends all committee meetings by invitation, may propose increases to the TGP, excluding his own, during such review meetings.
Variable remuneration
Share Appreciation Rights PLAN   Conditional Share Plan
     

Purpose
Ensures alignment between personal wealth creation and corporate strategy and supports long-term employee retention.

How does it work?
This is an equity settled plan whereby selected employees are awarded rights to receive shares equal to the long-term growth in the Remgro share price and market capitalisation
of the Company. These rights are awarded free of charge. The ultimate vesting of shares will be subject to prospective performance conditions for selected participants as well as an employment condition.

The participants will only become shareholders in Remgro with shareholder rights, including dividend and voting rights, on the settlement date.		 This is an equity settled plan under which all employees may be granted a conditional award of Remgro shares at a future point in time. These shares are awarded free of charge. The ultimate vesting of shares will be subject to prospective performance conditions for selected participants as well as an employment condition.

The participants will only become shareholders in Remgro with shareholder rights, including dividend and voting rights, on the settlement date, which will be shortly after the vesting date.

WHO QUALIFIES TO PARTICIPATE?
All permanent employees of the Company may participate in the SAR Plan, although it is anticipated that it will be used for executive directors and employees at senior executive level only. It is envisaged that all permanent employees of the Company may participate in the CSP.

Determination of value/Allocation

The committee makes annual awards in terms of the SAR Plan and the CSP to participants, based on a multiple of TGP. The set annual multiples are determined by reference to a participant’s job grade, role, the need to attract and/or retain key talent and the value added by the participant for Remgro and shareholders.

For the year under review, the following face value award multiples were approved by the committee:

  • CEO: 2.5x TGP
  • Executive directors and prescribed officers: 2x TGP
  • Other employees: different multiples based on the participant’s job grade, role and performance conditions (if applicable). These multiples ranges between 10% and 80% of TGP.

For executive directors, other members of the Management Board (prescribed officers) and identified investment executives these multiples are equally divided between the SAR and CSP awards (i.e. 50% SAR and 50% CSP). For all other participants, 100% of the award is under the CSP.

These multiples are within current market parameters.

In addition, the rules of the CSP allow for ad hoc awards to be made to participants in exceptional circumstances as determined by the committee.

Refer to the Remuneration Implementation Report for previous SARs and CSPs awarded.

Dividend equivalents
Not applicable Participants will be eligible to receive dividend equivalents on vested shares over the vesting period of the award. The dividend equivalent will be rolled up and delivered as additional shares on the vesting date.

Vesting and exercise/settlement

Participants in the SAR Plan are remunerated with Remgro shares to the value of the appreciation of their rights to a specific number of Remgro ordinary shares.The earliest intervals at which the SARs vest and are exercisable are as follows:

  • One-third after the third anniversary of the grant date;
  • An additional third after the fourth anniversary of the grant date; and
  • The remainder after the fifth anniversary of the grant date.

All SARs must be exercised within seven years after the grant date, upon which date unexercised SARs lapse.

Vesting is conditional on fulfilment of the employment period and achievement of performance conditions (where applicable).

Awards under the CSP will vest as follows:

  • One-third after the third anniversary of the grant date;
  • An additional third after the fourth anniversary of the
    grant date; and
  • The remainder after the fifth anniversary of the grant date.

Vesting is conditional on fulfilment of the employment period and achievement of performance conditions (where applicable).

Performance conditions

The SAR Plan has an embedded performance hurdle whereby participants will only benefit if there is long-term share price appreciation and thus value creation for Remgro shareholders. Following feedback from shareholders, awards made after 30 June 2019 will be subject to these additional prospective financial performance conditions:

  • The vesting of 50% of such awards will depend on the growth in the intrinsic net asset value (INAV) outperforming a predefined “real growth” benchmark. For 100% vesting, growth in INAV will need to equal or exceed the value calculated as South Africa’s consumer price index (CPI) inflation rate plus South Africa’s gross domestic product (GDP) growth rate plus an additional 1.25%, as measured over the three financial years. For 30% vesting, growth in INAV will need to equal or exceed the value calculated as CPI inflation rate. For performance between these points linear vesting will apply; and
  • The vesting of 50% of such awards will depend on the growth in the free cash flow at the centre outperforming a predefined “real growth” benchmark. For 100% vesting, growth in the free cash flow at the centre will need to equal or exceed the value calculated as CPI inflation rate plus an additional 1.25%, as measured over the three financial years. For 30% vesting, growth in free cash flow at the centre will need to equal or exceed the value calculated as CPI inflation rate. For performance between these points linear vesting will apply.

In addition, the vesting of awards can be modified based on the extent to which the participant meets personal and Group non-financial performance conditions. Note that the achievement of these non-financial performance conditions can only reduce the result of the financial performance conditions. Awards will only vest if the participant remains in service of the Remgro Group.

These performance conditions will apply to executive directors and other members of the Management Board (prescribed officers).

The CSP will be subject to the following prospective financial performance conditions:

  • The vesting of 50% of such awards will depend on the growth in the INAV outperforming a predefined “real growth” benchmark. For 100% vesting, growth in INAV will need to equal or exceed the value calculated as South Africa’s CPI inflation rate plus South Africa’s GDP growth rate plus an additional 1.25%, as measured over the three financial years. For 30% vesting, growth in INAV will need to equal or exceed the value calculated as CPI inflation rate. For performance between these points linear vesting will apply; and
  • The vesting of 50% of such awards will depend on the growth in the free cash flow at the centre outperforming a predefined “real growth” benchmark. For 100% vesting, growth in the free cash flow at the centre will need to equal or exceed the value calculated as CPI inflation rate plus an additional 1.25%, as measured over the three financial years. For 30% vesting, growth in free cash flow at the centre will need to equal or exceed the value calculated as CPI inflation rate. For performance between these points linear vesting will apply.

In addition, the vesting of awards can be modified based on the extent to which the participant meets personal and Group non-financial performance conditions. Note that the achievement of these non-financial performance conditions can only reduce the result of the financial performance conditions. Awards will only vest if the participant remains in service of the Remgro Group.
These performance conditions will apply to executive directors, other members of the Management Board (prescribed officers) and identified investment executives.

All other participants will be allocated retention awards and will have to be in the service of the Remgro Group upon vesting.

Early termination of employment

Participants may either be classified as “bad leavers” or “good leavers” and the following applies:

  • Bad leavers
    Participants will forfeit all unvested awards.
  • Good leavers
    A pro rata portion of the participant’s unvested award(s) shall early vest on the date of termination of employment to the extent to which the committee determines that the performance conditions (if any) have been met. The portion of the shares that will vest will reflect the number of complete months served from the award date to the date of termination of employment, over the total number of months in the vesting period.

Change of control
In the event of a change of control of the Company occurring before the vesting date of any award, a portion of the award held by a participant will vest as soon as reasonably practicable thereafter. The portion of the award which shall vest will be determined based on the number of months served from the award date to the change of control date, over the total number of months in the vesting period and the extent to which the performance condition(s), if applicable, have been met. Any awards which do not vest will, subject to the discretion of the committee, remain subject to the terms of the relevant award letter.

Variation in SHARE capital
Participants shall continue to participate in the SAR Plan and the CSP in the event of a variation in the Company’s share capital. The committee may make such adjustment to the award or take such other action to place participants in no worse position than they were prior to the happening of the relevant event and to provide that the fair value of the award immediately after the event is materially the same as the fair value of the award immediately before the event.

Dilution limitS

Individual basis

No award will be made to a single participant if at the time of or as a result of the making of such award, the aggregate number of Remgro ordinary shares in respect of which any unexercised SARs or CSP awards granted to the participant, shall exceed 5 290 000 Remgro ordinary shares, being approximately 1% of issued ordinary shares.

Overall basis

Similarly, no award will be made if at the time of or as a result of the making of such award, the aggregate number of Remgro ordinary shares in respect of which any unexercised SARs may be exercised or CSP awards, shall exceed 26 450 000 Remgro ordinary shares, being approximately 5% of issued ordinary shares.

Settlement considerations
If it is assumed that all of the participants to the SAR Plan exercise all options awarded to them on 1 July 2019, Remgro will have to deliver nil shares in order to settle its obligations. This calculation is based on Remgro’s closing share price on 30 June 2019 of R187.90. A 10% increase or decrease in the Remgro share price will require the number of shares to be delivered to be 1 870 shares and nil shares, respectively.

At 30 June 2019 Remgro held sufficient treasury shares to settle its obligations to deliver shares to the SAR Plan participants.		 If it is assumed that all awards made under the CSP at 1 July 2019 vest in full, Remgro will have to deliver 378 963 million shares in order to settle its obligations.
     

SCENARIOS OF POSSIBLE TOTAL REMUNERATION OUTCOMES

The following illustrations depict the pay mix and the possible remuneration outcomes for the CEO, Chief Financial Officer and the prescribed officer average at minimum, on-target and stretch levels.

Element Minimum On-target Stretch
TGP TGP as at 30 June 2020, see here. Benefits assumed in line with those paid in the 2019 financial year.
LTI Nil The maximum number of instruments granted in the 2018 financial year that might vest multiplied by the fair value on grant over the grant period, multiplied by the on-target vesting expectation
of 60%.		 The maximum number of instruments granted in the 2018 financial year that might vest multiplied by the share value based on a 100% increase in the fair value on grant over the grant period for SARs and the grant price for CSPs.

 

FAIR AND RESPONSIBLE REMUNERATION ACROSS THE COMPANY

Remgro is committed to the principle of fair and responsible remuneration for the whole Company. Actions in this regard include:

  • Assessment of remuneration conditions between employees at the same level in accordance with the principle of “equal pay for work of equal value” to identify and address any unjustifiable remuneration disparities.
  • Investing in its people initiatives, which include: talent management; development opportunities for all employees; various training courses as per identified needs and an employee value proposition aligned to the corporate values and culture.

Executive employment contracts

Executive directors and members of the Management Board do not have fixed-term contracts, but are employed in terms of the Company’s standard contract of employment applicable to all employees. The notice period for termination of service is one calendar month and the normal retirement age is 63. Executive directors and members of the Management Board also do not have exceptional benefits associated with the termination of their services. Upon termination of employment, any payments made to employees will be as required in respect of unvested and unexercised SARs in terms of legislation, and the consequences in respect of unexercised SARs and/or unvested CSP awards will be governed by the rules of the SAR Plan and CSP based on the reasons for the termination of employment.

Non-executive directors’ remuneration

Independent non-executive directors

Independent non-executive directors do not have any employment contracts, do not receive any benefits associated with permanent employment and do not participate in the Company’s LTI plans.

Furthermore, they are categorised as independent on the basis that the Board concludes that they have no interest, position, association or relationship which, judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making in the best interest of the Company.

The independence of independent non-executive directors is reviewed annually and the independence of non-executive directors, who have served on the Board for more than nine years, is subject to a rigorous review by the Board. The Board is satisfied with the independence of the independent, non-executive directors, including the independence of Messrs F Robertson, P K Harris and M Morobe, who each has served on the Board for 18 years, 17 years and 12 years respectively. Based on the evaluation there is no evidence of any circumstances and/or relationships that will impair their judgement, and their independence is in no way affected by the length of service.

Independent non-executive directors are paid a fixed annual board fee. Committee fees are also determined on a fixed annual basis. The fee structure is reviewed annually on 1 July, based on independent market benchmarks for non-executive directors’ fees, taking into account the nature and size of Remgro’s operations. Remgro utilises the Mercer Top Executive survey to benchmark the remuneration levels of non-executive director fees. The trends identified in this survey are then validated through a focused secondary survey among a selected group of companies. Non-executive director fees are approved by shareholders at the Company’s AGM by special resolution prior to payment. Remgro also pays for all travelling and accommodation expenses reasonably and properly incurred in order to attend meetings.

The annual fees payable to independent non-executive directors for the period commencing on 1 July 2018 were approved by shareholders at the AGM on 29 November 2018.

Non-independent non-executive directors

Mr J P Rupert, Mr A E Rupert, Dr E de la H Hertzog and Mr J Malherbe are regarded as non-independent non-executive directors.

The Chairman and Mr A E Rupert receive no emoluments or fees from Remgro, whilst Dr Hertzog and Mr Malherbe receive the approved annual board and committee fees paid to independent non-executive directors.

As in the case of independent non-executive directors, these directors do not participate in the Company’s LTI plans.

The proposed fee structure payable to non-executive directors for the year ending 30 June 2020 is presented in the table below. Also see Special Resolution Number 1 in the Notice to Shareholders.

Type of fee (Rand) Current fee
for the
year ended
30 June 2019		 Proposed fee
for the
year ending
30 June 2020		 % Change
     
Board member R367 500 R390 000 6.1
Chairman of the Audit and Risk Committee R280 000 R297 000 6.1
Member of the Audit and Risk Committee R138 500 R147 500 6.5
Member of the Remuneration and Nomination Committee R61 500 R65 500 6.5
Chairman of the Social and Ethics Committee R112 500 R120 000 6.7
Member of the Social and Ethics Committee R61 500 R65 500 6.5
Meeting fee for ad-hoc Committees (i.e. Investment- & Treasury Committee) R24 000 R25 000 4.2
Fees are excluding VAT.      

Shareholder engagement and non-binding ADVISORY vote

The Remuneration Policy and Remuneration Implementation Report are respectively tabled for separate non-binding advisory votes by the shareholders at each AGM.

The committee will engage with shareholders in the event of a 25% or more dissenting vote on either or both the Remuneration Policy or Remuneration Implementation Report. In that event, the Company will, in its voting results announcement provide for (1) an invitation to dissenting shareholders to engage with the Company, and (2) the manner and timing of such engagement. In this regard the Company intends to (1) invite the dissenting shareholders to provide the Company with their written submissions as to why they voted against the Remuneration Policy or Remuneration Implementation Report, (2) to address the legitimate and reasonable objections of dissenting shareholders, and (3) report back to the dissenting shareholders. If appropriate and practical, the Company may engage with dissenting shareholders either individually or collectively at meetings called for that purpose. Other methods of shareholder engagement may include conference calls, emails and investor roadshows.

REMUNERATION IMPLEMENTATION REPORT


The Remuneration Implementation Report provides details on how Remgro implemented its Remuneration Policy during the 2019 financial year. (The information below was audited). This Remuneration Implementation Report will be put to a non-binding advisory vote by shareholders at the next AGM on 28 November 2019.

FIXED REMUNERATION REVIEW

From the end of the year under review to the next review period, the executive directors and other members of the Management Board will receive an average salary increase of 3.4% (2018: 6.8%), compared to an average salary increase awarded to general staff of 6.3% (2018: 7.3%). Specifically the executive directors and other members of the Management Board (prescribed officers) will receive the following increases:

  Annual salary as at  
R’000 30 June 2019 30 June 2020 % Change
 
J J Durand(1) 14 326 14 756 3.0
M Lubbe 3 028 3 282 8.4
N J Williams 5 854 6 030 3.0
P R Louw(2) 3 690 3 895 5.6
R S M Ndlovu(2) 3 229 3 455 7.0
P J Uys(2) 7 370 7 370 0.0
(1) The Remuneration Committee approved a 5.5% increase for Mr J J Durand but he declined circa 2.5% of this increase and requested that the equivalent of the declined increase amount should be included in the Remgro Corporate Social Investment (CSI) budget for local CSI initiatives.
(2) Prescribed officers.
(3) The remaining executive directors and prescribed officers received increases in line with their current level of remuneration compared to their external and internal reference group and their individual contribution during the 2018/19 financial year.

 

SHORT-TERM INCENTIVES OUTCOME

Remgro’s Remuneration Policy does not provide for any short-term incentives, therefore no outcomes are reported in terms of this.

LONG-TERM INCENTIVES OUTCOME

Awards historically granted under the SAR Scheme did not have performance conditions attached. Based on the methodology set out in King IV, the awards therefore included in the single figure of remuneration are those which vest and become exercisable in the 12 months after year-end. The share price at year-end used to calculate the value in the table below is R187.90, being the Remgro closing price on 30 June 2019.

Participant Offer date Offer price
(Rand)		 Adjusted
offer price
(Rand)		 Number of
SARs vesting
in 12 months
after year-
end for single-
figure table		 Value
of
shares(1)
(R’000)		 Value of shares
included in single
figure table
(R’000)
 
J J Durand 26-Nov-14 253.53 245.53 36 156 (2 084) –
24-Nov-15 272.00 262.77 64 225 (4 809) –
01-Dec-16 209.11 209.11 50 292 (1 067) –
Total LTI vesting (7 960) –
 
M Lubbe 26-Nov-14 253.53 245.53 1 337 (78) –
24-Nov-15 272.00 262.77 2 678 (201) –
01-Dec-16 209.11 209.11 21 878 (465) –
Total LTI vesting (744) –
 
N J Williams 26-Nov-14 253.53 245.53 5 476 (316) –
24-Nov-15 272.00 262.77 9 164 (687) –
01-Dec-16 209.11 209.11 32 906 (698) –
Total LTI vesting (1 701) –
 
P R Louw 26-Nov-14 253.53 245.53 1 984 (115) –
24-Nov-15 272.00 262.77 3 165 (237) –
01-Dec-16 209.11 209.11 30 374 (645) –
Total LTI vesting (997) –
 
R S M Ndlovu 26-Nov-14 253.53 245.53 360 (21) –
24-Nov-15 272.00 262.77 3 566 (267) –
01-Dec-16 209.11 209.11 5 203 (111) –
Total LTI vesting (399) –
 
P J Uys 26-Nov-14 253.53 245.53 4 924 (284) –
24-Nov-15 272.00 262.77 3 844 (288) –
01-Dec-16 209.11 209.11 30 489 (647) –
Total LTI vesting (1 219) –
 
(1) Negative amounts indicate the extent to which awards are “under water”. Negative amounts are not reported as negative amounts in the single-figure remuneration table on the next page.

 

TOTAL REMUNERATION (SINGLE FIGURE)

The tables below provide information on the single figure remuneration for executive directors and prescribed officers, which comprises a fixed annual amount, as well as the value of the shares vesting 12 months after year-end.

EXECUTIVE DIRECTORS

R’000 Fees Salaries Retirement
fund 		Other
benefits(2)		 Fixed
remune-
ration 		LTI(3) Total
 
30 June 2019
J J Durand 368 11 286 2 296 372 14 322 – 14 322
M Lubbe 368 1 837 437 385 3 027 – 3 027
N J Williams 368 4 201 906 379 5 854 – 5 854
Total 1 104 17 324 3 639 1 136 23 203 – 23 203
           
30 June 2018          
W E Bührmann(1) 288 2 286 587 278 3 439 – 3 439
J J Durand 345 10 482 2 147 349 13 323 596 13 919
M Lubbe 345 1 512 369 361 2 587 47 2 634
N J Williams 345 3 899 842 360 5 446 142 5 588
Total 1 323 18 179 3 945 1 348 24 795 785 25 580
(1) Mr W E Bührmann retired on 30 April 2018.
(2) Benefits include medical scheme contributions, vehicle benefits and UIF contributions.
(3) LTI includes SARs which vest and become exercisable in the 12 months following the end of the reporting period.

 

PRESCRIBED Officers

R’000 Salaries Retirement
fund		 Other
benefits (2)		 Fixed
remune-
ration		 LTI(3) Total
 
30 June 2019
P R Louw 2 758 547 385 3 690 – 3 690
R S M Ndlovu 2 379 472 379 3 230 – 3 230
P J Uys 6 070 1 156 385 7 611 – 7 611
Total 11 207 2 175 1 149 14 531 – 14 531
         
30 June 2018        
P R Louw 2 585 513 361 3 459 82 3 541
R S M Ndlovu(1) 337 73 60 470 7 477
P J Uys 5 496 1 090 361 6 947 21 6 968
Total 8 418 1 676 782 10 876 110 10 986
(1) Mr R S M Ndlovu was appointed on 1 May 2018.
(2) Benefits include medical scheme contributions, vehicle benefits and UIF contributions.
(3) LTI includes SARs which vest and become exercisable in the 12 months following the end of the reporting period.
(4) All three prescribed officers are members of the Management Board. Messrs P R Louw and P J Uys are also members of the Social and
Ethics Committee.

LONG-TERM INCENTIVES summary

The tables below provide information on a director and prescribed officer basis of SARs granted and accepted during the year and the indicative value of SARs not yet exercised (outstanding SARs). It also illustrates the cash value of SARs exercised during the year.

Share Appreciation rights (sars)

DIRECTORS

Participant Offer date(2) Offer price(3) (Rand) Number of SARs offered and accepted Fair value of SARs on offer date (R’000) Balance of SARs accepted as at 30 June 2018 Adjusted offer price (Rand) SARs accepted/ (exercised or expired) during the year Share price on exercise date (Rand) Cash value of SARs exercised during the year(4) (R’000) Balance of SARs accepted as at 30 June 2019(5) Fair value of SARs as at 30 June 2019(6) (R’000)
Executive
W E Bührmann(1) 29-Nov-12 147.25 98 817 3 921 98 817 142.04 (98 817) 203.00 6 024 – –
04-Dec-13 191.70 25 485 1 386 25 485 185.07 (25 485) 203.00 457 – –
26-Nov-14 253.53 8 958 615 8 958 245.53 (8 958) – –
24-Nov-15 272.00 26 470 2 142 26 470 262.77 (26 470) – –
01-Dec-16 209.11 82 971 5 804 82 971 209.11 (82 971) – –
J J Durand 29-Nov-12 147.25 271 258 10 763 271 258 142.04 271 258 12 849
04-Dec-13 191.70 93 128 5 064 93 128 185.07 93 128 2 321
26-Nov-14 253.53 108 468 7 442 108 468 245.53 108 468 1 415
24-Nov-15 272.00 192 676 15 591 192 676 262.77 192 676 2 859
01-Dec-16 209.11 150 872 10 554 150 872 209.11 150 872 5 001
14-Dec-17 206.35 132 309 9 705 132 309 206.35 132 309 5 656
05-Dec-18 205.07 87 135 5 436 – 205.07 87 135 87 135 2 489
M Lubbe 29-Nov-12 147.25 13 961 554 13 961 142.04 13 961 661
04-Dec-13 191.70 7 444 405 7 444 185.07 7 444 185
26-Nov-14 253.53 4 011 275 4 011 245.53 4 011 52
24-Nov-15 272.00 8 036 650 8 036 262.77 8 036 119
01-Dec-16 209.11 65 632 4 591 65 632 209.11 65 632 2 175
14-Dec-17 206.35 15 481 1 136 15 481 206.35 15 481 662
05-Dec-18 205.07 14 648 914 – 205.07 14 648 14 648 418
N J Williams 29-Nov-12 147.25 81 901 3 250 81 901 142.04 81 901 3 880
04-Dec-13 191.70 22 221 1 208 22 221 185.07 22 221 554
26-Nov-14 253.53 16 430 1 127 16 430 245.53 16 430 214
24-Nov-15 272.00 27 492 2 225 27 492 262.77 27 492 408
01-Dec-16 209.11 98 716 6 905 98 716 209.11 98 716 3 272
14-Dec-17 206.35 55 677 4 084 55 677 206.35 55 677 2 380
05-Dec-18 205.07 28 465 1 776 – 205.07 28 465 28 465 813
Total 1 608 414 (112 453) 6 481 1 495 961 48 383
(1) Mr W E Bührmann retired on 30 April 2018. In terms of the rules of the SAR Scheme, participants going into retirement are entitled to exercise all their SARs granted to them at any time within 12 months after the date of retirement or before the expiry of the SAR period (being seven years from the grant date), whichever is the earlier.
The 8 958 (R245.53), 26 470 (R262.77) and 82 971 (R209.11) SARs expired on 30 April 2019 as the Remgro share price was less than the adjusted offer price on the last day that it could be exercised.
(2) Unless otherwise indicated, one-third of the SARs are exercisable after the third anniversary of the grant date, an additional third after the fourth anniversary of the
grant date and the remainder after the fifth anniversary of the grant date. All SARs must be exercised within seven years after the grant date, upon which date unexercised SARs lapse.
(3) Offer price of SARs granted before December 2018 is equal to the face value on grant date. Offer price of SARs granted from December 2018 onwards is the five-day VWAP on offer date.
(4) This refers to the increase in value of the SAR Plan shares of the indicated participants from the offer date to the date of exercise.
(5) SARs offered from December 2018 onwards, have performance conditions and reflect the number of SARs as if performance conditions were fully met.
(6) Fair value was calculated using the standard binomial pricing model. The estimated vesting percentage is considered to be the on-target performance level of 60%

 

Participant Offer date(2) Offer price(3) (Rand) Number of SARs offered and accepted Fair value of SARs on offer date (R’000) Balance of SARs accepted as at 30 June 2017 Adjusted offer price (Rand) SARs accepted/ (exercised) during the year Share price on exercise date (Rand) Cash value of SARs exercised during the year(4) (R’000) Balance of SARs accepted as at 30 June 2018 Fair value of SARs as at 30 June 2018(5) (R’000)
Executive
W E Bührmann(1) 29-Nov-12 147.25 98 817 3 921 98 817 142.04 98 817 6 540
4-Dec-13 191.70 25 485 1 386 25 485 185.07 25 485 1 075
26-Nov-14 253.53 8 958 615 8 958 245.53 8 958 275
24-Nov-15 272.00 26 470 2 142 26 470 262.77 26 470 864
1-Dec-16 209.11 82 971 5 804 82 971 209.11 82 971 4 527
J J Durand 29-Nov-10 108.69 235 895 7 868 157 262 92.83 (157 262) 209.29 18 315 – –
29-Nov-12 147.25 271 258 10 763 271 258 142.04 271 258 17 954
4-Dec-13 191.70 93 128 5 064 93 128 185.07 93 128 3 927
26-Nov-14 253.53 108 468 7 442 108 468 245.53 108 468 3 329
24-Nov-15 272.00 192 676 15 591 192 676 262.77 192 676 6 291
1-Dec-16 209.11 150 872 10 554 150 872 209.11 150 872 8 231
14-Dec-17 206.35 132 309 9 705 – 206.35 132 309 132 309 8 140
M Lubbe 29-Nov-12 147.25 13 961 554 13 961 142.04 13 961 924
4-Dec-13 191.70 7 444 405 7 444 185.07 7 444 314
26-Nov-14 253.53 4 011 275 4 011 245.53 4 011 123
24-Nov-15 272.00 8 036 650 8 036 262.77 8 036 262
1-Dec-16 209.11 65 632 4 591 65 632 209.11 65 632 3 581
14-Dec-17 206.35 15 481 1 136 – 206.35 15 481 15 481 952
N J Williams 29-Nov-10 108.69 38 652 1 289 19 768 92.83 (19 768) 210.75 2 331 – –
29-Nov-12 147.25 81 901 3 250 81 901 142.04 81 901 5 421
4-Dec-13 191.70 22 221 1 208 22 221 185.07 22 221 937
26-Nov-14 253.53 16 430 1 127 16 430 245.53 16 430 504
24-Nov-15 272.00 27 492 2 225 27 492 262.77 27 492 898
1-Dec-16 209.11 98 716 6 905 98 716 209.11 98 716 5 386
14-Dec-17 206.35 55 677 4 084 – 206.35 55 677 55 677 3 425
Total 1 581 977 26 437 20 646 1 608 414 83 880
(1) Mr W E Bührmann retired on 30 April 2018. In terms of the rules of the SAR Scheme, participants going into retirement are entitled to exercise all their SARs granted to them at any time within 12 months after the date of retirement or before the expiry of the SAR period (being seven years from the grant date), whichever is the earlier.
(2) Unless otherwise indicated, one-third of the SARs are exercisable after the third anniversary of the grant date, an additional third after the fourth anniversary of the grant date and the remainder after the fifth anniversary of the grant date. All SARs must be exercised within seven years after the grant date, upon which date unexercised SARs lapse.
(3) Offer price is equal to face value on grant date.
(4) This refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of exercise.
(5) Fair value was calculated using the standard binomial pricing model.


PRESCRIBED OFFICERS

Participant Offer date(1) Offer price(2) (Rand) Number of SARs offered and accepted Fair value of SARs on offer date (R’000) Balance of SARs accepted as at 30 June 2018 Adjusted offer price (Rand) SARs accepted/ (exercised) during the year Share price on exercise date (Rand) Cash value of SARs exercised during the year(3) (R’000) Balance of SARs accepted as at 30 June 2019(4) Fair value of SARs as at 30 June 2019(5) (R’000)
                       
P R Louw 29-Nov-12 147.25 22 646 899 22 646 142.04       22 646 1 073
  04-Dec-13 191.70 12 944 704 12 944 185.07       12 944 323
  26-Nov-14 253.53 5 952 408 5 952 245.53       5 952 78
  24-Nov-15 272.00 9 497 768 9 497 262.77       9 497 141
  01-Dec-16 209.11 91 120 6 374 91 120 209.11       91 120 3 020
  14-Dec-17 206.35 20 301 1 489 20 301 206.35       20 301 868
  05-Dec-18 205.07 17 881 1 116 – 205.07 17 881     17 881 511
                       
R S M Ndlovu 04-Dec-13 191.70 375 20 375 185.07       375 9
  26-Nov-14 253.53 1 080 74 1 080 245.53       1 080 14
  24-Nov-15 272.00 10 699 866 10 699 262.77       10 699 159
  01-Dec-16 209.11 15 605 1 092 15 605 209.11       15 605 517
  14-Dec-17 206.35 10 267 753 10 267 206.35       10 267 439
  05-Dec-18 205.07 15 665 977 – 205.07 15 665     15 665 448
                       
P J Uys 02-Apr-13 183.15 218 400 10 519 218 400 177.24       218 400 4 963
  04-Dec-13 191.70 3 325 181 3 325 185.07       3 325 83
  26-Nov-14 253.53 14 774 1 014 14 774 245.53       14 774 193
  24-Nov-15 272.00 11 533 933 11 533 262.77       11 533 171
  01-Dec-16 209.11 91 463 6 398 91 463 209.11       91 463 3 032
  14-Dec-17 206.35 85 936 6 303 85 936 206.35       85 936 3 673
  05-Dec-18 205.07 35 822 2 235 – 205.07 35 822     35 822 1 024
Total         625 917   69 368   – 695 285 20 739
                       
(1) Unless otherwise indicated, one-third of the SARs are exercisable after the third anniversary of the grant date, an additional third after the fourth anniversary of the grant date and the remainder after the fifth anniversary of the grant date. All SARs must be exercised within seven years after grant date, upon which date unexercised SARs lapse.
(2) Offer price of SARs granted before December 2018 is equal to the face value on grant date. Offer price of SARs granted from December 2018 onwards is the five-day VWAP on offer date.
(3) This refers to the increase in value of the SAR Plan shares of the indicated participants from the offer date to the date of exercise.
(4) SARs offered from December 2018 onwards, have performance conditions and reflect the number of SARs as if performance conditions were fully met.
(5) Fair value was calculated using the standard binomial pricing model. The estimated vesting percentage is considered to be the on-target performance level of 60%.

Participant Offer date(2) Offer price(3)(Rand) Number of SARs offered and accepted Fair value of SARson offer date (R’000) Balance of SARs accepted as at 30 June 2017 Adjusted offerprice (Rand) SARs accepted/ (exercised) duringthe year Share price onexercise date (Rand) Cash value of SARs exercised during the year(4) (R’000) Balance of SARs accepted as at 30 June 2018 Fair value of SARs as at 30 June 2018(5) (R’000)
                       
P R Louw 29-Nov-10 108.69 27 432 915 27 432 92.83 (27 432) 223.73 3 591 – –
  29-Nov-12 147.25 22 646 899 22 646 142.04       22 646 1 499
  4-Dec-13 191.70 12 944 704 12 944 185.07       12 944 546
  26-Nov-14 253.53 5 952 408 5 952 245.53       5 952 183
  24-Nov-15 272.00 9 497 768 9 497 262.77       9 497 310
  1-Dec-16 209.11 91 120 6 374 91 120 209.11       91 120 4 971
  14-Dec-17 206.35 20 301 1 489 – 206.35 20 301     20 301 1 249
                       
R S M Ndlovu(1) 4-Dec-13 191.70 375 20 – 185.07 375     375 16
  26-Nov-14 253.53 1 080 74 – 245.53 1 080     1 080 33
  24-Nov-15 272.00 10 699 866 – 262.77 10 699     10 699 349
  1-Dec-16 209.11 15 605 1 092 – 209.11 15 605     15 605 851
  14-Dec-17 206.35 10 267 753 – 206.35 10 267     10 267 632
                       
P J Uys 2-Apr-13 183.15 218 400 10 519 218 400 177.24       218 400 9 200
  4-Dec-13 191.70 3 325 181 3 325 185.07       3 325 140
  26-Nov-14 253.53 14 774 1 014 14 774 245.53       14 774 453
  24-Nov-15 272.00 11 533 933 11 533 262.77       11 533 377
  1-Dec-16 209.11 91 463 6 398 91 463 209.11       91 463 4 990
  14-Dec-17 206.35 85 936 6 303 – 206.35 85 936     85 936 5 287
Total         509 086   116 831   3 591 625 917 31 086
                       
(1) Mr R S M Ndlovu was appointed with effect from 1 May 2018. SARs accepted/(exercised) during the year refer to the balance of SARs granted and accepted by him prior to 1 May 2018.
(2) Unless otherwise indicated, one-third of the SARs are exercisable after the third anniversary of the grant date, an additional third after the fourth anniversary of the grant date and the remainder after the fifth anniversary of the grant date. All SARs must be exercised within seven years after grant date, upon which date unexercised SARs lapse.
(3) Offer price is equal to face value on grant date.
(4) This refers to the increase in value of the SAR Scheme shares of the indicated participants from the offer date to the date of exercise.
(5) Fair value was calculated using the standard binomial pricing model.

The tables below provide information on a director and prescribed officer basis of CSPs granted and accepted during the year. It also illustrates the cash value of CSPs vested during the year.

conditional share plan shares (csps)

DIRECTORS

Participant Offer date(1) Offer price(2) (Rand) Number of CSPs offered and accepted Fair value of CSPs on offer date (R’000) Balance of CSPs accepted as at 30 June 2018 CSPs accepted during the year Share price on vesting date(3) (Rand) Cash value of CSPs vesting in year(4) (R’000) Balance of CSPs accepted as at 30 June 2019(5, 6) Fair value of CSPs as at 30 June 2019(7)
(R’000)
                     
Executive                    
J J Durand 05-Dec-18 205.07 87 135 15 933 – 87 135     87 135 9 030
M Lubbe 05-Dec-18 205.07 14 648 2 678 – 14 648     14 648 1 518
N J Williams 05-Dec-18 205.07 28 465 5 205 – 28 465     28 465 2 950
Total         – 130 248     130 248 13 498
                     
(1) Unless otherwise indicated, one-third of the CSPs vest, after the third anniversary of the grant date, an additional third after the fourth anniversary of the grant date and the remainder after the fifth anniversary of the grant date.
(2) Offer price of CSPs granted is the 5-day VWAP on offer date.
(3) Five-day VWAP of Remgro on vesting date.
(4) This refers to the total value of the CSP shares on vesting.
(5) CSPs have performance conditions and reflect the number of CSP shares as if performance conditions were fully met.
(6) Dividend equivalents will be accumulated and delivered in shares upon vesting.
(7) Fair value was calculated using the standard binomial pricing model. The estimated vesting percentage is considered to be the on-target performance level
of 60%.


PRESCRIBED OFFICERS

Participant Offer date(1) Offer price(2) (Rand) Number of CSPs offered and accepted Fair valueof CSPs on offer date (R’000) Balance of CSPs accepted as at 30 June 2018 CSPs accepted during the year Share price on vesting date(3) (Rand) Cash value of CSPs vesting in year(4) (R’000) Balance of CSPs accepted as at 30 June 2019(5, 6) Fair value of CSPs as at 30 June 2019(7)
(R’000)
                     
P R Louw 05-Dec-18 205.07 17 881 3 270 – 17 881     17 881 1 853
R S M Ndlovu 05-Dec-18 205.07 15 665 2 864 – 15 665     15 665 1 624
P J Uys 05-Dec-18 205.07 35 822 6 550 – 35 822     35 822 3 712
Total         – 69 368     69 368 7 189
                     
(1) Unless otherwise indicated, one-third of the CSPs vest, after the third anniversary of the grant date, an additional third after the fourth anniversary of the grant date and the remainder after the fifth anniversary of the grant date.
(2) Offer price of CSPs granted is the 5-day VWAP on offer date.
(3) 5-day VWAP of Remgro on vesting date.
(4) This refers to the total value of the CSP shares on vesting date.
(5) CSPs have performance conditions and reflect the number of CSP shares as if performance conditions were fully met.
(6) Dividend equivalents will be accumulated and delivered in shares upon vesting.
(7) Fair value was calculated using the standard binomial pricing model. The estimated vesting percentage is considered to be the on-target performance level
of 60%.

 

NON-EXECUTIVE DIRECTORS’ FEES

The committee approved a fee increase of 6.8% for non-executive directors’ annual fees. The non-executive directors’ fees for the 2019 financial year, which were approved by the shareholders, are disclosed below (on a designation basis).

Type of fee (Rand) Fee for the
year ended
30 June 2019		 Fee for the
year ended
30 June 2018
 
Board member 367 500 345 000
Chairman of the Audit and Risk Committee 280 000 260 000
Member of the Audit and Risk Committee 138 500 130 000
Member of the Remuneration and Nomination Committee 61 500 57 500
Chairman of the Social and Ethics Committee 112 500 100 000
Member of the Social and Ethics Committee 61 500 57 500
Meeting fee for ad-hoc Committees 24 000 24 000
Fees are excluding VAT.    

The actual fees paid to non-executive directors are disclosed below (on an individual basis).

R’000 Fee for the
year ended
30 June 2019		 Fee for the
year ended
30 June 2018
 
Non-executive (independent)  
G T Ferreira 429 403
P K Harris 429 403
N P Mageza(1) 568 533
P J Moleketi 506 475
M Morobe 480 445
F Robertson 568 533
S E N De Bruyn 709 663
Subtotal 3 689 3 455
   
Non-executive (non-independent)  
E de la H Hertzog 368 345
J Malherbe 368 345
A E Rupert(2, 3) – –
J P Rupert(3) – –
Subtotal 736 690
Total 4 425 4 145
(1) During the year under review Mr N P Mageza also received R697 000 (2018: R654 000) as director’s fees from RCL Foods Limited, a subsidiary of Remgro Limited.
(2) Mr A E Rupert was appointed as a non-executive director with effect from 29 November 2018.
(3) Messrs A E Rupert and J P Rupert receive no emoluments.

 

Johann Rupert
Chairman of the Remuneration and Nomination Committee

Stellenbosch
19 September 2019