GOVERNANCE AND REMUNERATION

Remuneration reportfor the year ended 30 September 2018

Nampak produces a remuneration report which is compliant with the requirements of King IV™. As such the following sections have been included in this report:

Section 1

A report from the chairman of the remuneration committee that sets out the context for remuneration consideration and decisions as well as an outline of the material matters considered during the year.

Section 2

The remuneration policy and framework to be tabled at the AGM for a non-binding vote by shareholders.

Section 3

The implementation of the remuneration policy to be tabled at the AGM for a separate non-binding vote by shareholders.

Section 4

As required by the Companies Act, non-executive directors' fees for the financial year ending 30 September 2019 will be put to shareholders by way of a special resolution.

We have retained the comprehensive version on the website at http://www.nampak.com/Content/Documents/About/remunerationreport-2018.pdf to assist with any detailed information around share plan implementation which may be required.

For details of the composition of the committee and attendance at meetings, please refer to Ensuring good corporate governance.

SECTION 1: REPORT FROM THE CHAIRMAN

Nampak's remuneration is designed to facilitate delivery of the group's strategy on a sustainable basis and to deliver value for stakeholders over the short, medium and long term. This report provides details of our remuneration policy and framework as it relates to our employees, group executive committee members, executive directors and non-executive directors. It also includes our implementation report for executive directors, group executive committee members and non-executive directors.

In February 2018, for the first time, we did not receive the required number of votes in favour of the remuneration policy and the implementation report.

The results of voting at the 2018 and 2017 annual general meetings are indicated in the table below:

Percentage vote in favour     Required percentage     February 2018     February 2017
Remuneration policy and framework     75% non-binding     62.98%     97.50%
Implementation report     75% non-binding     62.50%     Not applicable
Non-executive directors’ fees and committee membership fees     75% binding     99.82%     99.90%

As a result, the company issued a SENS announcement inviting shareholders and other interested parties to engage with the company. Constructive engagements with a number of shareholders and proxy advisers took place during 2018 either as a direct result of a query or concern or as part of general engagements linked to remuneration structures. These discussions were positive and well received. There was consensus that shareholders would have supported the remuneration policy and implementation reports had the retention payments that were approved outside of policy not been paid. Details of the engagement issues are set out below:

Topic     Shareholder/proxy adviser
comments
    Remuneration committee responses
Retention bonus payments to CEO and CFO     Concerns were raised that the retention bonus payments were outside of our remuneration philosophy and policies and this resulted in many shareholders and proxy advisers voting against both the remuneration policy and implementation resolutions at the AGM     The chairman of the remuneration committee has engaged extensively on this issue and has provided details behind the decision of the remuneration committee. At the end of 2017, there were very limited retention mechanisms and the company was at risk of losing its two most senior executives who understood the business requirements and were critical to resolving key material matters in the short term. The retention structure was deemed to be most appropriate under the circumstances. The committee will consult proactively and seek prior approval for any future material changes of this nature. No such payments to the chief executive officer and the chief financial officer were approved in 2018.
Lack of performance conditions attached to matching award under the deferred bonus plan     Concern was raised, particularly by offshore proxy advisers, that there were no performance conditions linked to the release of matching share awards in terms of the deferred bonus plan     The after-tax short-term incentive (STI) is voluntarily invested in shares to encourage share ownership and the matching shares further facilitate ownership. In order to participate in the deferred bonus plan, participants needed to have earned a short-term incentive which would have been subject to performance conditions and the deferred bonus plan structure had been introduced largely as a retention component and to encourage executives to build a shareholding in our company. The committee agreed to review this position annually. For the overall weighting in the remuneration structure, please refer to the remuneration mix.
Certain executives received retirement gratuities     The payments were made in terms of a legacy policy entitlement which had been capped at R500 000 and which was subsequently closed to executives appointed after December 2013     The remuneration committee agreed to provide more detailed disclosure in the 2018 remuneration report.

We encourage all shareholders to provide feedback and contributions regarding their position on the various voting requirements. We therefore invite shareholders wishing to engage with the chairman of the remuneration committee to do so via email at corporategovernance@nampak.com. Should we receive 25 percent dissenting vote for either the remuneration policy or the implementation report, or both, we will include an outline of the process and timing of our proposed engagement with shareholders to resolve unsatisfactory results in the SENS announcement of the voting results of the AGM.

External advice to the committee

Together with input obtained from shareholders and proxy advisers during the year, we have considered it prudent to retain the current policy, target structures and frameworks with some minor adjustments to individual performance conditions in the short-term incentive plan (STI). In the past, the STI has been slanted towards financial performance measures with a smaller portion linked towards other economic, social, environmental and governance requirements. During the year, the focus has shifted to identify and include more key drivers of sustainable profitability and this trend will continue into 2019.

Activities undertaken in 2018

The committee attended to all activities set out in its charter and the annual committee work plan during the year. The committee charter is available on the website at http://www.nampak.com/Content/Documents/About/remuneration-committee-charter.pdf.

Engagement with shareholders and proxy advisers continued in order for the committee members to understand and discuss the material issues on the remuneration policy and framework and implementation report with the board.

The committee implemented the change to a more simplified share plan structure consisting of two plans, namely the performance share plan and deferred bonus plan for executive directors and group executive committee members. The overall benchmark remuneration for on-target performance remained. Participation in the share appreciation plan has been retained for senior management levels that do not receive any awards under the other share plans as a mechanism to attract, motivate and retain the appropriate calibre of talent and diversity.

Achievement of objectives

The overall annual increases for executive director and group executive committee members amounted to 5.5% and remained below the average annual increases granted to other staff. This is in line with our objective to improve wages and the socio-economic conditions of our lower level workers.

The group headline earnings per share target linked to the STI was fully achieved resulting in this portion of the incentive bonus being released. Various levels of EBITDA adjusted for interest, trading income and key performance objectives were achieved and these are reflected in the incentives earned by the operational and support executives. These levels of achievement are consistently reflected in other managerial STI payments.

The performance conditions aligned to the performance share plan and share appreciation plan were not achieved and as a result none of the December 2015 awards will vest.

The actual earnings reported under section three of this document reflect the levels of achievement against the performance targets at executive director and group executive committee levels.

Decisions taken during 2018

The committee:

  • Approved the guaranteed packages for executive directors and group executives.
  • Approved the terms and conditions of the executive directors.
  • Approved the STI payments for executive directors and group executives after considering achievement against performance conditions.
  • Approved the LTI awards for all participants and determined the performance conditions.
  • Reviewed the defined benefits liability strategy and implementation against plans.
  • Reviewed the fee recommendations for non-executive directors and committee fees, excluding the fees for the remuneration committee before submission to the board for consideration.
Areas of focus for 2019

The committee considers the financial performance conditions and targets for the STI and LTI plans annually to ensure that they are relevant and fair to the different stakeholder groups. In light of lower GDP growth rates, declining inflation and increasing unemployment depressing consumer demand, together with benchmark data, the committee approved changes to the 2019 targets. These changes are reflected in the Elements of remuneration and policy table of this report. The committee considers the revised targets to be prudent and yet still provide alignment between executive remuneration and shareholder experience.

The committee has requested a review of its equality in income distribution position and a wage gap analysis for our continuing operations in order to manage fair and responsible remuneration including the wage gap and any gender pay disparities more comprehensively. Current basic salary and benefit levels for non-managerial employees exceed the industry norms by some margin which contributes to a stronger gini-coefficient for the company versus industry norms. In addition, retirement, insured benefits and voluntary medical aid membership remain an integral part of the remuneration structures of the vast majority of our employees.

RC Andersen

Chairman of the remuneration committee1

16 November 2018

1 PM Surgey resigned on 10 October 2018. RC Andersen appointed on 10 October 2018.

SECTION 2: REMUNERATION POLICY

Our remuneration policy at executive level remains largely unchanged from previous years and continues to focus on delivery of financial and non-financial measures that underpin the group's strategy and sustainable profitability objectives.

The components of the remuneration structures applicable to other managerial and non-managerial employees are set out in the Elements of remuneration and policy table of this report.

The balance of the report is focused on executive director and group executive remuneration policy and frameworks and this is also the case for the implementation report.

Remuneration mix

The remuneration structure for executive directors and group executive committee members has been designed to reward consistent improvements in short- and medium-term sustainable profitability which underpin value creation for shareholders. Guaranteed packages are generally clustered at the median of the benchmark. There is a larger weighting towards at-risk or variable pay components which are provided in the form of an annual short-term incentive (STI) and longer-term share plans (LTI) participation. Challenging performance conditions that are aligned with shareholder requirements and expectations are set and must be achieved for earnings to accrue to participants. If these targets are achieved, upper quartile remuneration should be delivered from the variable pay structure for executive directors, group executive committee members and certain senior managers. For purposes of illustration below, 60% of maximum is assumed to represent threshold performance and target reflects full achievement for both the STI and LTI components.

Chief executive officer (R’000)

Chief financial officer (R’000)

Group HRD (R’000)


GEC operations (R’000)

GEC support (R’000)


Alignment to value creation

The remuneration structures for executive directors and group executive committee members have been designed to encourage sustainable profitability on a consistent basis. This has been achieved by consistent application of appropriate financial targets linked to the STI and LTI components. The social, environmental and governance performance will ultimately reflect in consistent financial performance over the long term. Therefore, and in order to ensure the self-funding nature of STI and LTI remuneration structures, the performance targets are more heavily weighted towards quantitative achievements.

Individual key performance indicators form up to 60% of the STI for executive directors and group executive committee members. These are reviewed and set annually and focus on essential drivers of value that may impact negatively on short-term performance, as well as focus on material matters that could have a negative impact on the group's sustainability. For 2018 and going into 2019 the individual key deliverables include drivers such as:

  • attraction, retention and development of a diverse and skilled workforce;
  • a safe and healthy working environment;
  • a strengthened balance sheet and focus on cash and liquidity management;
  • improvements in operational efficiencies and asset utilisation that positions the company to take advantage of future growth opportunities as macroeconomic conditions improve;
  • appropriate site consolidations and operational footprint;
  • a competitive fixed cost baseline; and
  • management of governance and ethics.

The LTI elements provide the board with a tool to attract and retain the right calibre of executives. The performance targets are set over three-year performance periods and require consistent achievement of challenging financial performance conditions. Experience of executives is aligned with that of shareholders as once vested, the shares are released in three tranches and executive earnings are impacted by movements in the share price and dividends earned. The deferred bonus plan has been included in the LTI components to encourage executives to purchase and hold shares in the company. These shares may only be purchased using proceeds from STI earnings once those performance conditions have been achieved.

Contractual terms and payments on termination of employment

The chief executive officer and chief financial officer have indefinite service contracts with a six-month notice period. In order to ensure that the notice period remains relevant and necessary, at the end of September each year, the notice period returns to three months. The committee reviewed and agreed the applicable notice period for the next year. The notice periods were renewed for the year ahead.

The group human resources director and the other group executive committee members have indefinite service contracts with three-month notice periods.

In the event of redundancy, executive directors and other group executive members are entitled to receive payment, in addition to notice pay, in terms of the Nampak redundancy policy. Redundancy pay is calculated based on length of service and age and varies between two weeks and four weeks for every year of service and is calculated using 75% of guaranteed package. The maximum entitlement is capped at 60 weeks. Certain long service executives are entitled to a retirement gratuity from a legacy policy which was capped at R500 000 and then closed to future appointments after December 2013. The executive directors are not entitled to the retirement gratuity, however, certain of the other group executive committee members have retained this capped benefit.

The service contracts do not contain any other provisions relating to payments due on termination of employment (for whatsoever reason) or following a change of control of the company. In the event of a change of control, executive share allocations will be dealt with in terms of the rules of the relevant share plans. Further, the directors and executives have no entitlement to a restraint of trade payment and are not entitled to any other material ex-gratia payment.

ELEMENTS OF REMUNERATION AND POLICY

GUARANTEED PACKAGE   SHORT-TERM INCENTIVES
Basic salary   Benefits   Performance share plan (PSP)
Remuneration principles
  • Designed to attract and retain executives with appropriate competence and experience levels and diversity of skills and views to deliver sustainable profitability for the benefit of all stakeholders
 
Remuneration principles
  • There is a trade-off between receiving compulsory benefits and voluntary benefits from an employee value proposition. The company understands the importance of saving for retirement from an early age and therefore continues to provide the benefit
 
Remuneration principles
  • Intended to provide a variable pay element for executive directors and group executive committee members which is earned against stretch performance targets
  • Places emphasis on delivering strategic imperatives which may impact negatively on short-term financial performance and which are vital to long-term sustainability
  • Covers all aspects which underpin sustainable profitability and ethical governance
External advisers
  • The Deloitte SA Executive Guide 2018
  • PwC Research Services’ REMchannel®
 
External advisers
  • Various professional advisers and administrators recognised in their respective jurisdictions
 
External advisers
  • The Deloitte SA Executive Guide 2018
  • PwC Research Services’ REMchannel®
Competitiveness of offer
  • Benchmarked using survey data from external advisers. The published remuneration of other listed companies of similar size and complexity is also considered
 
Competitiveness of offer
  • Compulsory levels of retirement saving and life and disability cover is set using published survey data
  • Optional medical aid membership
  • Car allowance linked to requirements for business travel
 
Competitiveness of offer
  • Benchmarked using survey data from external advisers
  • Relevant to strategic intent
Performance metrics
  • Individual performance, contribution and future growth potential are considered
 
Performance metrics
  • Not applicable
 
Performance metrics

A combination of group, divisional and individual metrics are used as follows:

  Weighting
within STI
      Component       Metric       Threshold       On-target       Stretch
  Between 20% and 70%       Group financial       Improvement in HEPS       CPI       CPI + 5.4%       CPI + 9%
  Operational executive only – up to 40%       Divisional financial       EBITDA adjusted for interest or trading income Improvements is required by each division are set at commencement of the performance period     Sufficient stretch and aligned to achievement of the group financial target
  Up to 60% (all executives)       Individual key performance indicators     Linked to strategic issues and material matters that underpin sustainable profitability
  Up to 40% (other managers)

The proposed group financial target for 2019 is as follows:

Improvement in HEPS
Threshold CPI
On-target CPI + 3.6%
Stretch CPI + 6%
Maximum limits
  • Target level for guaranteed packages for executives and prescribed officers is clustered around the median
 
Maximum limits
  • Flexibility within guaranteed package governed by income tax regulations
 
Maximum limits
        Maximum potential STI as percentage of guaranteed package
  Role       Total       Group       Divisional       Individual
  CEO       125%       85%             40%
  CFO       105%       74%             31%
  Group HRD       95%       38%             57%
  GEC operations       95%       19%       53%       23%
  GEC support       85%       38%             47%
Performance period
  • Annual review
 
Performance period
  • n/a
 
Performance period
  • Annual cash award payable in December
  • Performance period 1 October to 30 September
Governance requirement
  • Set out in contracts of employment
 
Governance requirement
  • Set out in group policies
 
Governance requirement
  • The committee has discretion to withdraw or change the STI. In addition, the committee holds overriding discretion on incentive bonus payments should circumstances warrant
  • Approval of STI payments only takes place after the annual financial statements have been audited and approved by the board
Other employees
  • Managerial employees receive guaranteed packages
  • Other employees receive a basic salary, shift allowances, overtime and benefits on a build-up basis
  • The target guaranteed package for other employees is the median. The 75th percentile is considered for top performers and positions where we have scarce skill risks
  • Our levels of pay and benefits for our shopfloor employees are significantly higher than the agreed sector wage levels
 
Other employees
  • Employees in all jurisdictions have access to retirement funding and insured benefit arrangements in line with local regulations. Expatriate employees in certain countries receive remuneration for retirement funding and insured benefits where local options are not appropriate
  • Employees have voluntary access to medical aid or similar arrangements
  • Employees have access to EAP counselling
 
Other employees
  • Managerial employees participate in the group’s STI scheme at different capped levels ranging between 65% and 75% of guaranteed package per annum
  • Individual key performance indicators generally form up to 40% of the maximum potential incentive with the balance accruing based on achievement of the divisional performance targets
  • Key performance targets address sustainable drivers for future success on a line of sight basis to their role requirements
  • Various productivity incentives provide line of sight rewards for non-managerial employees

ELEMENTS OF REMUNERATION AND POLICY

LONG-TERM INCENTIVES            
Performance share plan (PSP)   Deferred bonus plan (DBP)       Share appreciation plan (SAP)
(not applicable for executive directors and group executive committee members)
Remuneration principles
  • Aimed at aligning executive remuneration directly with that of shareholders interests
  • Challenging performance targets underpin executive earnings and, if achieved, will deliver sustainable value to shareholders and underlying investors over the longer term
  • Because of staggered release of shares at the end of the third, fourth and fifth years from the original award date, executive remuneration is directly aligned to share price movements and dividend performance along with investors
 
Remuneration principles
  • Provides a retention element to the remuneration structure
  • Encourages executives to build shareholding in Nampak Limited
  • Aligns executive remuneration with share price and dividend performance experienced by shareholders
     
Remuneration principles
  • Provides the chief executive officer with a reward and retention element for employees at middle management levels
External advisers

PwC People and Organisation (Reward) (PwC)

 
External advisers

PwC

     
External advisers

PwC

Competitiveness of offer
  • PwC are formally engaged annually to provide recommendations against market data for share plan awards to executive directors, group executive committee members and senior managers. They also provide guidance on whether vesting performance conditions linked to prior year allocations have been achieved and should be released to participants
 
Competitiveness of offer
  • PwC as advisers to the remuneration component offset potential earnings under the deferred bonus plan when determining the recommended awards under the performance share plan
     
Competitiveness of offer
  • Allocations determined every second year
Performance metrics
  Weighting
within allocation
      Performance condition       Target range
  40%       Improvement in HEPS       Straight-line vesting between entry of CPI + 8% to CPI + 24%
  30% Note 1       Cumulative improvement in total shareholder return (TSR) on an absolute basis       Straight-line vesting between entry of CPI + 8% to CPI + 24%
  30% Note 1       Return on net assets (RONA)       60% release for 11.5%
70% released for 12%
80% released for 12.5%
90% released for 13%
100% released for 13.5%

The proposed metrics for the allocations in the 2019 financial year are:

  Weighting
within allocation
      Performance condition       Target range
  40%       Improvement in HEPS       Straight-line vesting between entry of CPI + 30% to CPI + 15%
  30% Note 1       Cumulative improvement in (TSR) on an absolute basis       Straight-line vesting between entry of CPI + 3% to CPI + 15%
  30% Note 1       RONA       No change to previous targets

Note 1: The committee may adjust the targets in the event of strategic investment decisions or extraordinary share price volatility.

 
Remuneration principles
  • Executives and group executive committee members are able to use a percentage of after-tax STI earnings which are paid after achieving challenging performance conditions annually to purchase shares in Nampak Limited
  • Executives will receive a matching number of shares after three years provided they have remained in employment
  • No shares will vest for resignation or dismissal
  • Pro-rated shares will vest for good leavers such as retirees
     
Performance metrics
  • Threshold performance target of improvement in headline earnings per share of CPI + 6% over the three-year performance period
  • The proposed threshold performance target for 2019 is cumulative CPI growth over the three-year performance period
Maximum limits
        Set to deliver a percentage of
guaranteed package:
          Expected
value
      For superior performance
  CEO       80%       160%
  CFO and Group HRD       70%       140%
  GEC operations and support       60%       120%
 
Maximum limits
  Role       Maximum limit
of after-tax STI
  CEO       Up to 50%
  CFO and GHRD       Up to 45%
  Other group executives       Up to 40%
     
Maximum limits
  • The maximum allocations are recommended to the remuneration committee after taking into account individual contribution, skills and future career progression
Performance period
  • Share awards vest to the level of achievement of the performance conditions at the end of the three-year performance period and are released in three equal tranches at the end of the third year, fourth year and fifth year from the original award date
 
Performance period
  • Vesting and release of matching awards after three years
     
Performance period
  • Share allocations vest after three years if the performance condition is achieved. Participants have seven years from the allocation date to exercise their awards
Governance requirement
  • Governed in accordance with the share plan rules as approved by shareholders
  • Share awards are allocated annually usually in December to avoid allocations during closed periods
  • The extent of achievement against the performance targets is reviewed by PwC
 
Governance requirement
  • Governed in terms of the share plan rules as approved by shareholders
  • Eligible participants are provided with an option to purchase shares immediately after receipt of the STI payments and once the stock market has had sufficient time to adjust to the published results
     
Governance requirement
  • Governed in terms of the share plan rules as approved by shareholders
  • The extent of achievement against the performance targets is reviewed by PwC
Other employees
  • Certain senior managers may receive awards under the performance share plan after considering remuneration benchmarks provided by PwC
 
Other employees
  • Certain senior managers may use up to 35% of their after-tax STI to purchase shares
     
Other employees
  • Prior to 2017, executive directors and prescribed officers received share allocations in terms of the share appreciation plan. In order to simplify the LTI structure, it was agreed to remove these allocations in 2017. However, the share appreciation plan remains the preferred allocation vehicle for awards to reward and retain other managers

SECTION 3: IMPLEMENTATION REPORT

The implementation report details the outcomes of executing the remuneration policy for executive directors and group executive committee members in the current financial year. The remuneration committee has applied the King IVTM recommendation that companies must disclose a single figure of earnings received and receivable for the reporting period.

Deviations from policy

The remuneration committee monitored the implementation of the remuneration policy and is able to confirm that there are no deviations from policy to report.

Contractual terms and payments on termination of employment

There were no deviations from policy on the contractual terms. There were no terminations at executive director and group executive committee member level during the year.

Fair and responsible remuneration

The average increases to guaranteed packages for the executive directors and group executive committee members relative to other staff groupings are set out below:

Grouping       Increase percentage 2018       Increase percentage 2017
Executive directors       5.8       6.7
Group executive committee members       5.3       5.9
Managers       7.0       9.6
Other employees       9.5

This is in line with our approach to fair and responsible remuneration where we aim to realise:

  • Higher merit increases for staff than those granted to executive management (other than promotion and market alignment)
  • Total levels of executive remuneration that are not excessive in comparison to market benchmarks and other staff and that other staff are paid competitively against benchmarks

This analysis pertains to South Africa where most of our employees are located.

STI

The committee's assessment of performance against targets set for the various elements of the STI are as follows:

The group exceeded the improvement in headline earnings per share target.

There were varying levels of achievement against the divisional financial targets, with some divisions not achieving the required threshold and others achieving 100%.

There were varying levels of achievement by executive directors and group executive committee members against their individual key deliverables which covered the following broad categories:

  Strategic objectives       Strategic drivers       Key performance indicator     Performance
  Actively manage our portfolio               Disposals of Glass, plastic crates and drums per agreed timelines      
          Financial capital       Improved group liquidity      
                  Restructured group funding arrangements      
                  Consistent management and de-risking activities in respect of defined benefit liabilities      
                  Commercial contract negotiation      
          Human capital       Plans implemented to improve B-BBEE performance      
  Manage costs stringently*               Group organisation design reviewed and staff establishments implemented        
                  Reduction in cash fixed costs        
  Improve business by buying better, making better and selling better*       Manufactured capital       Operating efficiency improvements and implementation of reduced operational footprint requirements        
          Governance and legal compliance       General legal and company secretarial advice and governance      
                  Governance and regulatory training      
  Good progress made   Some progress, more to come   Disappointing performance

* Reflects differing levels of operational performance.

STI achievement (as a % of guaranteed package)

The results of applying the financial and non-financial performance achievements are reflected graphically below against target and stretch levels. A discount was applied for the non-achievement of employment equity targets.

CEO

CFO

Group HRD


GEC – Operations

GEC – Support


LTI AWARDS

The annual LTI awards for the executive directors and group executive committee members awarded in December 2017 are reflected in the table below:

      Performance share plan
Note 1
    Deferred bonus plan
Note 2
 
      Number of
conditional
awards
    Value     % of
guaranteed
package
    Number of
conditional
matching
awards
    Value     % of
guaranteed
package
 
Executive directors                                      
AM de Ruyter     752 000     6 331 768     82%     122 563     1 748 994     23%  
GR Fullerton     441 000     3 713 178     72%     45 961     655 871     13%  
MMF Seleoane     260 000     2 189 175     72%     9 192     131 171     4%  
Group executive committee members                        
C Burmeister     220 000     1 852 379     62%     16 399     234 016     8%  
M Khutama     210 000     1 768 180     61%            
LD Kidd     209 000     1 759 760     62%            
RG Morris     269 000     2 264 954     62%     12 808     182 772     5%  
EE Smuts     283 000     2 382 833     62%     42 714     609 536     16%  
IH van Lochem     184 000     1 549 262     62%     3 064     43 724     2%  

Note 1: Share awards will vest in December 2020 to the extent that the performance conditions are achieved.

Note 2: Participants receive conditional matching awards in December 2020 provided the participant remains in employment and is still the owner of the purchased shares.

The performance targets are set in the Elements of remuneration and policy table of this report.

For further information relating to the implementation of LTIs please refer to the full remuneration report available on the website at http://www.nampak.com/Content/Documents/About/remuneration-report-2018.pdf.

 

2018 LTI performance assessment

Performance share plan

The performance conditions linked to the performance share plan awards in December 2015 were tested and were not achieved. Therefore, no awards will be released in December 2018 in respect of these awards. The performance conditions for the three-year period were:

  • 40% based on a growth in HEPS measured on a straight-line basis between threshold of CPI + 9% and target of CPI + 24%
  • 30% based on the cumulative growth in TSR on a straight-line basis between threshold of CPI + 9% to target of CPI + 24%
  • 30% based on return on equity (RoE) targets where 60% of shares vest for a RoE of 15.5%, 70% for 16%, 80% for 16.5%, 90% for 17% and 100% for 17.5%
HEPS performance

The chart displays the HEPS which was required for the threshold and stretch achievement levels of this performance condition against the actual achievement. Actual HEPS achieved was 168.7 which was significantly below the threshold HEPS of 262.3 cents and the stretch HEPS of 293.5 cents.

(cents)

TSR performance

The chart displays the cumulative TSR which was required for the threshold and stretch achievement levels of this performance condition against the actual achievement. Actual cumulative TSR achieved was -34.3% which was significantly below the threshold cumulative TSR and the stretch cumulative TSR.

(%)

Return on equity performance (RoE)

The chart displays the RoE which was required for threshold and stretch achievement levels of the performance condition against the actual achievement.

Actual RoE achieved was 11% which was significantly below the stretch RoE of 17.5% and the threshold RoE of 15.5%. For this performance condition, 60% of the shares would vest for an RoE achievement of 15.5%, 70% for a RoE achievement of 16%, 80% for a RoE achievement of 90% and stretch for an RoE achievement of 17.5%

(%)

Share appreciation plan

The performance condition linked to the share appreciation plan allocations in December 2015 will not be achieved and therefore no awards will be released in December 2018 in respect of these allocations.

HEPS performance

The chart displays the HEPS which was required for on target achievement of this performance condition against the actual achievement. Actual HEPS achieved was 168.7 which was significantly below the target HEPS of 209.2 cents.

(%)

The single total figure of remuneration

The following table sets out the total remuneration received and receivable by executive directors and group executive committee members for 2018:

Executive director remuneration 2018
      Guaranteed pay     Other                    
      Basic
salary
(rand)
    Company
contribution
to retirement
(rand)
    Guaranteed
package
(rand)
    Value
of other
benefits1
(rand)
    Retention/
termination
(rand)
    STI2
(rand)
    LTI3
(rand)
    Total
single
figure
remuneration
(rand)
 
Executive directors                                                  
AM de Ruyter 7 574 103 7 677 21 8 846 1 749 18 293  
GR Fullerton 5 049 98 5 147 14 5 305 656 11 122  
MMF Seleoane 2 916 119 3 035 8 2 406 131 5 580  
15 539 320 15 859 43 16 557 2 536 34 995  
Group executive
committee members
                   
C Burmeister 2 887 120 3 007 8 1 708 234 4 957  
M Khutama 2 794 94 2 888 8 784 3 680  
LD Kidd 2 730 118 2 848 8 2 220 5 076  
RG Morris 3 566 96 3 662 10 1 987 183 5 842  
EE Smuts 3 767 92 3 859 10 3 666 610 8 145  
IH van Lochem 2 400 110 2 510 7 1 956 44 4 517  
18 144 630 18 774 51 12 321 1 071 32 217  

Notes

1 Other benefits refer to Group Personal Accident cover.
2 STI disclosed is based on performance during the 2018 financial year, but actual STI payments will only be made in December 2018.
3 LTI disclosed is the award of matching shares under the DBP scheme in December 2017. Values are calculated using market value at purchase date. The performance conditions aligned to the PSP and SAP were not achieved. None of the December 2015 awards will vest.

The following table sets out the total remuneration received and receivable by executive directors and group executive committee members for 2017.

Executive director remuneration 2017
      Guaranteed pay     Other                    
      Basic
salary
(rand)
    Company
contribution
to retirement
(rand)
    Guaranteed
package
(rand)
    Value
of other
benefits1
(rand)
    Retention/
termination
(rand)
    STI2
(rand)
    LTI9
(rand)
    Total
single
figure
remuneration
(rand)
 
Executive directors                                                  
AM de Ruyter 7 028 249 7 277 22 8 165 15 464  
GR Fullerton 4 545 334 4 879 15 5 046 234 10 174  
MMF Seleoane3 876 74 950 3 902 1 855  
FV Tshiqi4 2 121 178 2 299 7 961 2 086 5 353  
14 570 835 15 405 47 961 16 199 234 32 846  
Group executive
committee members
                         
C Burmeister 2 655 236 2 891 9 1 194 368 4 462  
M Khutama 2 531 241 2 772 8 1 466 94 4 340  
LD Kidd5 2 341 228 2 569 8 1 673 548 4 798  
RG Morris 3 297 231 3 528 11 1 900 403 5 842  
NP O'Brien6 2 334 211 2 545 7 1 042 2 030 5 624  
EE Smuts7 3 314 194 3 508 11 3 508 3 168 219 10 414  
IH van Lochem8 1 525 149 1 674 5 529 2 208  
17 997 1 490 19 487 59 4 550 11 960 1 632 37 688  

Notes

1 Other benefits refer to Group Personal Accident cover.
2 STI disclosed is based on performance during the 2017 financial year, but actual STI payments were only made in December 2017.
3 MMF Seleoane was appointed with effect from 1 June 2017.
4 FV Tshiqi retired with effect from 30 June 2017. Termination pay comprises a gratuity of R500 000, leave pay of R453 948 and a farewell gift to the value of R7 500.
5 LD Kidd was appointed to the group executive committee with effect from 1 September 2017. Remuneration disclosed is for the full financial year.
6 NP O'Brien retired with effect from 31 August 2017. Termination pay comprises a gratuity of R500 000, leave pay of R533 918 and a farewell gift to the value of R7 500.
7 Cash retention award paid to the group executive – Bevcan in the 2018 financial year in recognition of the performance and contribution made in the 2017 financial year and secures retention.
8 IH van Lochem was appointed to the group executive committee with effect from 1 September 2017. Remuneration disclosed is for the full financial year.
9 LTI disclosed is the award of matching shares under the DBP scheme in December 2016. Values are calculated using market value at purchase date. The performance conditions aligned to the PSP and SAP were not achieved. None of the December 2015 awards will vest.

Remuneration mix

Remuneration implementation

The achievement against target for the remuneration components is set out in the graphs below.

Chief executive officer (R’000)

Chief financial officer (R’000)

Group HRD (R’000)


GEC – Operations (R’000)

GEC – Support (R’000)


The share disclosure tables

Disclosure on the quantum and value of awards outstanding at the beginning of the reporting period, as well as new awards made during the reporting period have been provided in the separate and detailed remuneration report available at http://www.nampak.com/Content/Documents/About/remuneration-report-2018.pdf

SECTION 4: NON-EXECUTIVE DIRECTOR REMUNERATION

Policy

Non-executive directors receive a base fee for their services as well as a meeting fee based on their participation in board meetings and other committees. The non-executive directors do not receive incentive bonus payments nor do they participate in any of the executive share plans. Non-executive directors are appointed by rotation in terms of our memorandum of incorporation.

The remuneration committee of the board recommends the non-executive fee structures other than for the remuneration committee after obtaining benchmarks from the Deloitte non-executive director report 2018 and specific guidance from PwC regarding market movements and current pay practices. Published non-executive directors' fees and committee fees of companies in manufacturing and companies with similar market capitalisation are also benchmarked. Consideration is given to any changes in the level of complexity of the roles when assessing the fee recommendations. These recommendations are then considered by the remuneration committee (excluding recommendations of their own fees) and the board before being submitted to shareholders for approval in terms of the Companies Act requirements.

Implementation

Non-executive directors' remuneration 2018/2017

The non-executive directors' remuneration paid during the year under review (as approved previously by shareholders) and the total comparative figures are disclosed below.

      Directors’
fees
(rand)
    Audit
committee
total fees
(rand)
    Remuneration
committee
total fees
(rand)
    Nomination
committee
total fees
(rand)
    Investments
committee
total fees
(rand)
    Risk and
sustainability
committee
total fees
(rand)
    Social,
ethics and
transformation
committee
total fees
(rand)
    Total
2018
(rand)
    Total
2017
(rand)
RC Andersen2 320 100 277 933 110 400 73 500 91 800 36 800 910 533 905 526
E Ikazoboh 300 700 91 800 392 500 352 500
J John2 281 300 278 567 64 300 624 167 179 386
RJ Khoza 300 700 73 500 374 200 310 550
NV Lila 320 100 171 700 198 300 690 100 632 350
PM Madi 320 100 91 800 91 800 198 300 702 000 608 400
TT Mboweni1 1 870 000 1 870 000 1 767 450
IN Mkhari 261 900 171 700 182 300 101 100 717 000 703 230
DC Moephuli 138 085
CWN Molope 296 424
PM Surgey 320 100 214 300 73 500 101 100 101 100 810 100 765 250
4 295 000 899 900 324 700 220 500 457 700 492 300 400 500 7 090 600 6 659 151

Directors' fees are shown excluding VAT where applicable. (2017 including VAT where applicable).

1 Fee includes participation in board meetings and sub-committee meetings.
2 J John took over the chairman role of the audit committee from RC Andersen with effect 2 February 2018 and replaced RC Andersen as ex officio member of the risk and sustainability committee. RC Andersen remained a member of the audit committee.
Proposed fees for 2019

The proposed fees for 2019 are set out in the Notice of annual general meeting. After considering recommendations from management, the board has proposed a 6% increase to non-executive director fees and committee fees. No increase has been proposed for the chairman's fee for 2019.