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Report of the remuneration committee
for the year ended 30 June 2011
This report sets out the company’s remuneration philosophy and the implementation thereof.
The report and the recommendations of the Remuneration committee have been approved by the Board and will be submitted to shareholders for consideration at the AGM.
Remuneration committee
The remuneration committee, which meets at least twice a year, is chaired by an independent non-executive director and comprises only non-executive directors.
The committee is responsible for reviewing and recommending the remuneration of executive and non-executive directors. The remuneration committee bases its recommendations upon the Petmin Approved Remuneration Scheme as approved by shareholders at the Annual General Meeting held on 13 December 2010 (“Approved Scheme”).
For full details of the Approved Scheme, please refer to Annexure 1 of the Annual Financial Statements for the year ended 30 June 2010, which are available on the Petmin website, www.petmin.co.za.
The determination of the incentives earned are based on the approved formulas as outlined in the Approved Scheme and the committee takes into account the recommendations of the Chairman and CEO’s recommendations and the Key Performance Indicators (KPIs) of senior executives.
The Chairman and CEO attend the committee meetings by invitation and assist the committee with its deliberations, except when issues relating to their own compensation are discussed. No directors are involved in deciding their own remuneration.
The full terms of reference and mandate of the committee can be found in the full corporate governance framework on the Group’s website.
Remuneration strategy and policy
Petmin’s remuneration strategy aims to attract, motivate and retain competent entrepreneurs and leaders in its drive to create sustainable shareholder value. We aim to attract entrepreneurs to grow the value of Petmin and to recognise top performance.
Our policies and practices align the remuneration and incentives of executives and employees to the group’s long-term business strategy and we ensure that our Incentive Scheme is aligned with Shareholders.
Base pay of Executive Committee (“Exco”)
The base pay of the Exco is between R1 million and R1.3 million per annum for each member of the executive committee as outlined in the Approved Scheme. During the year ended 30 June 2011, the base pay for Jan du Preez was increased to R1 million per annum, previously Rnil.
Retirement and medical
Petmin does not have a retirement or medical scheme for its executives.
Incentive Scheme
The remuneration of the Executive Committee is predominantly performance-driven.
The table below summarises the roles, membership and frequency of meetings of the remuneration committee.
| Committee members | Role of committee | Number of meetings held in the year |
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Three |
The salient features of this Approved Scheme are as follows:
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Guaranteed remuneration between R1.0 million and R1.3 million per annum for each member of the Executive Committee; | ||||
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5% of pre-tax profits payable as an incentive on the condition that the headline earnings per share (after taking into account the 5% fee and the management fee) increases by at least 20% on a year-on-year basis; | ||||
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1.5% management fee on the net assets under management.
Should the net assets under management exceed
R1,005,424,000, the management fee will be the aggregate of:
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The remuneration scheme provides for a share option incentive. |
Other fringe benefits
No other material fringe benefits are granted to Executive directors.
Share option scheme
A share option scheme was approved as part of the Approved Scheme. The options allocated as outlined below are issued in terms of the share option scheme approved at the Petmin AGM held on 13 December 2010.
Options earned during the year.
Class A options
All 6,500,000 have been earned and were allocated as outlined below.
Class B options
Class B options earned in accordance with the formula in the Approved Scheme during the year ended 30 June 2011 amounted to 2,657,412 (2010: nil).
In terms of the agreement with Ian Cockerill, the first 2,500,000 options earned are allocated to him. Ian Cockerill proposed and the Remco agreed that although the 2.5 million has been earned (per the formula and his agreement), that 1.5 million options are allocated in the year ended June 2011 and that the additional 1 million are to be allocated in 2012.
The remaining options of 157,412 are earned, but are deferred for allocation in the year to June 2012.
Class C options
Subsequent to 30 June 2011, the Remuneration Committee allocated senior management 1,350,000 class C options.
Reconciliation of remaining options
| Class A | Class B | Class C | Total | ||||||
| Originally approved | 6,500,000 | 23,500,000 | 5,000,000 | 35,000,000 | |||||
| Allocated at the date of this report | (6,500,000) | (1,500,000) | (1,350,000) | (9,350,000) | |||||
| Available | 0 | 21,000,000 | 3,650,000 | 24,650,000 | |||||
| Move between categories | 0 | (5,333,333) | 5,333,333 | 0 | |||||
| Available for allocation June 2012 and 2013 | 0 | 15,666,667 | 8,983,333 | 24,650,000 |
Management Options with an exercise price of 250 cents per share.
| Name | Management Options as at 30 June 2011 |
Management Options as at 30 June 2010 |
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| ID Cockerill | 1,500,000 | – | |||
| JC du Preez | 1,500,000 | – | |||
| L Mogotsi | 1,500,000 | – | |||
| B Doig | 1,500,000 | – | |||
| B Tanner | 1,500,000 | – | |||
| Allocated to Group employees | 500,000 | – | |||
| To be allocated subsequent to 30 June 2011 | 1,157,412 | – | |||
| Sub-total earned – June 2011 | 9,157,412 | – | |||
| Class C options allocated to Group employees after 30 June 2011 | 192,588 | – | |||
| Total options allocated at the date of this report | 9,350,000 | – |
Report on remuneration and benefits awarded during 2011
Joining shares
In terms of Ian Cockerill’s agreement and as approved as part of the Approved Scheme, one third of the 5.4 million joining shares have been earned and are no longer subject to trading restrictions.
Directors’ emoluments
In compliance with the disclosure requirements of the listing requirements of the JSE, the aggregate remuneration paid to the directors of Petmin for the year ended 30 June 2011 is set out below. All remuneration was payable by Petmin and no remuneration was payable to the directors from Group subsidiary or associate companies.
Certain remuneration earned by the Executive Committee is capitalised to property, plant and equipment, mine development and exploration expenditure where applicable.
| Directors of Petmin Limited |
I Cockerill |
L Mogotsi |
J du Preez |
B Doig |
B Tanner |
#M Arnold |
Earned but unallocated |
Total | |||||||||
| R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | ||||||||||
| 2010 Total | |||||||||||||||||
| emoluments | 3,160 | 4,500 | 6,350 | 7,454 | 3,600 | – | (2,981) | 23,145 | |||||||||
| 2011 Emoluments | |||||||||||||||||
| a) Director’s fees | – | – | – | – | – | 15 | – | 990 | |||||||||
| b) Salary | 1,000 | 1,000 | 1,000 | 1,000 | 1,331 | – | – | 5,331 | |||||||||
| c) Incentive fee* | 4,250 | 3,250 | 4,250 | 3,750 | 2,669 | – | – | 18,169 | |||||||||
| d) Incentive fee earned | |||||||||||||||||
| but unallocated/ | |||||||||||||||||
| (allocated) from | |||||||||||||||||
| current and prior | |||||||||||||||||
| years* | – | – | – | – | – | – | (369) | (369) | |||||||||
| e) Consulting fee | – | – | – | – | – | – | – | 1,118 | |||||||||
| f) Share-based | |||||||||||||||||
| payment** | 5,112 | – | – | – | – | – | – | 5,112 | |||||||||
| g) Share options | 417 | 417 | 417 | 417 | 417 | – | 461 | 2,546 | |||||||||
| Sub-total | 10,779 | 4,667 | 5,667 | 5,167 | 4,417 | 15 | 92 | 32,897 | |||||||||
| Less: | |||||||||||||||||
| Amount capitalised | |||||||||||||||||
| to capital projects | 16,540 | ||||||||||||||||
| Total | 16,357 |
| Directors of Petmin Limited |
#E Greyling |
#K Kalyan |
#A Martin |
#P Nel |
#J Taylor |
#J Strijdom |
Earned but un-allocated |
Total | |||||||||
| R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | R’000 | ||||||||||
| 2010 Total | |||||||||||||||||
| emoluments | 140 | – | 140 | 557 | 60 | 165 | (2,981) | 23,145 | |||||||||
| 2011 Emoluments | |||||||||||||||||
| a) Director’s fees | 260 | 15 | 205 | 160 | 85 | 250 | – | 990 | |||||||||
| b) Salary | – | – | – | – | – | – | – | 5,331 | |||||||||
| c) Incentive fee* | – | – | – | – | – | – | – | 18,169 | |||||||||
| d) Incentive fee earned | |||||||||||||||||
| but unallocated/ | |||||||||||||||||
| (allocated) from | |||||||||||||||||
| current and prior | |||||||||||||||||
| years* | – | – | – | – | – | – | (369) | (369) | |||||||||
| e) Consulting fee | – | – | – | 1,118 | – | – | – | 1,118 | |||||||||
| f) Share-based | |||||||||||||||||
| payment** | – | – | – | – | – | – | – | 5,112 | |||||||||
| g) Share options | – | – | – | – | – | – | 461 | 2,546 | |||||||||
| Sub-total | 260 | 15 | 205 | 1,278 | 85 | 250 | 92 | 32,897 | |||||||||
| Less: | |||||||||||||||||
| Amount capitalised | |||||||||||||||||
| to capital projects | 16,540 | ||||||||||||||||
| Total | 16,357 |
| # | Non-executive director |
| * | The executive management of the company earn management fees based on a) a percentage of the average net assets under management in the year and b) should the sustainable earnings per share increase by more than 20% in the year, the executive management will earn an additional bonus of a minimum of 5% profit before tax. |
| ** | As previously announced, at the AGM held on 13 December 2010, shareholders approved the terms of the new Executive Share Option Scheme, the Executive Incentive Scheme and the subscription for 5.4 million shares at R2.84 per share to Ian Cockerill. Trading restrictions over one third of the shares are released annually. |
Market comparison of Executives’ total remuneration
The table across is a comparison of the Industry remuneration as reported in the comprehensive remuneration review of all listed JSE companies as published during 2011 by PriceWaterhouse on trends for Executive Remuneration and Non-executive Remuneration.
| Large Cap | Medium Cap | Small Cap | Petmin | Petmin | |||||||
| Market Cap | (1 to 39) | (40 to 60) | (above 60) | “ALL”* | “EXC”** | ||||||
| 2010/11 guaranteed | 4,868 | 4,192 | 3,394 | 1,066 | 1,066 | ||||||
| 2010/11 bonus and other | 3,003 | 935 | 1,273 | 5,090 | 3,496 | ||||||
| Total | 7,871 | 5,127 | 4,667 | 6,156 | 4,563 | ||||||
| 2009/10 guaranteed income | 4,717 | 4,053 | 3,209 | 1,066 | 1,066 | ||||||
| 2009/10 bonus and other | 5,796 | 10,229 | 2,569 | 4,884 | 4,046 | ||||||
| Total | 10,513 | 14,282 | 5,778 | 5,950 | 5,113 | ||||||
| 2008/09 total | 9,552 | 5,083 | 2,774 | 5,820 | 5,820 | ||||||
| % increase 2009/10 to 2010/11 | (33.57%) | (178.56%) | (23.81%) | 3.35% | (12.05%) |
| * | The column “Petmin All” is the average of the Petmin Executives total remuneration. |
| ** | The “Petmin EXC” is the average of all Petmin executives excluding Ian Cockerill’s remuneration as it includes cost of the 5.4 million shares issued on his recruitment amounting to R5.112 million. |
This report reviewed all listed companies on the JSE and considered all public information to 30 April 2011. Also note the industry averages as outlined in the PwC document (guaranteed income and bonuses for mining companies as compared to Petmin).
From the above it is evident that Petmin’s average remuneration of R4.563 million is below the small cap average of R4.667 million and is 12% below the medium cap average of R5.127 million. Petmin’s guaranteed remuneration is only 23% of the total remuneration in comparison to 73% for small cap companies and 82% for medium cap companies.
The Petmin Executives, together with the Anchor BEE Consortium, control in excess of 200 million shares and thus their main incentive remains the capital growth (including dividends) of the Petmin share.
Non-executive directors’ fees
In respect of non-executive directors, the Remuneration committee proposes fees to be paid for the membership of the Board and Board committees. Such fees are market related, commensurate with the time required to undertake their duties and are approved by the Board and shareholders. Approved fees are set for the year and a portion of the fee is subject to attendance of meetings.
Remuneration is not linked to the performance of the Group or its share performance. Specifically, non-executive directors do not receive performance-related bonuses and are not granted share options. The fees payable during the year ended 30 June 2011 and the proposed fees for 2012 will be submitted to shareholders for approval at the AGM to be held on 25 November 2011.
| Proposed 2012 |
Current 2011 |
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| Fees payable to non-executive directors for holding office (per meeting held by the board or sub-committee) | |||||
| All non-executive directors | R5,000 | R5,000 | |||
| Fees payable to non-executive directors for holding office (annual fee payable in addition to the fee payable per meeting) | |||||
| Chairman of the Audit and Risk Committee | R50,000 | – | |||
| Chairman of the Remuneration Committee | R25,000 | – | |||
| Chairman of any other board sub-committee | R15,000 | – | |||
| Fee for attendance of a board or sub-committee meeting (payable in addition to the fee for holding office) | |||||
| All non-executive directors | R20,000 | R10,000 | |||
| Lead independent non-executive | R25,000 | R10,000 | |||
| Chairman of the Audit and Risk Committee (per audit and risk committee meeting) | R20,000 | R15,000 | |||
| Chairman of the Remuneration Committee (per Remuneration Committee meeting) | R20,000 | R15,000 |
E Greyling
Remuneration Committee Chairman
27 October 2011