Remuneration report

INTRODUCTION

Imperial is sensitive to the worldwide outrage around executive compensation, where its relationship with performance is too often tenuous and coincidental, and the degree of inequality between the highest and lowest paid employees in many organisations is impossible to defend.

At the same time the biggest and most pressing threat facing South Africa today is the shortage of skills – we simply have too few competent managers, leaders, professionals and technicians to meet our national needs.

Throughout the group, we attempt to compensate individuals fairly for the job at hand, with due regard for their skills and performance.

At lower levels, although the compensation of most of our unionised employees is determined by industry bargaining councils or sectoral determinations, we are sensitive to worker needs and will not allow their rights and desires to bargain collectively to usurp or undermine our day-to-day working relationship with them – they would not be union members if they were not employees first.

KEY FOCUS AREAS

During the year, significant time was spent on the search for a new CEO and addressing general issues of succession.

The remuneration committee also conducted an extensive benchmarking of executive remuneration packages with the assistance of an external audit firm.

In addition, the committee considered and approved:

ROLE OF THE COMMITTEE

Imperial had a combined committee responsible for remuneration and nomination matters. Subsequent to the year-end, a decision was taken to fully align with the principles of King III by forming separate committees. A remuneration committee will be chaired by RJA Sparks and a nomination committee will be chaired by the group chairperson, TS Gcabashe.

This report outlines the mandate of the combined committee during the year.

The committee furnished the board with advice and guidance regarding:

MEMBERSHIP OF THE COMMITTEE

The members of the remuneration and nomination committee during the year were RJA Sparks (chairperson), SL Botha, TS Gcabashe, P Langeni and A Tugendhaft. All are non-executive directors. Mrs SL Botha resigned from the board and as a member of the committee with effect from 5 September 2013.

The group chief executive officer (CEO) and chief financial officer (CFO) attend committee meetings and assist the committee in its deliberations, except when issues relating to their own remuneration and performance are discussed. No director is able to decide his or her own remuneration.

During the year, for the duration of the search for a new CEO, two additional members were nominated to the committee, MJ Leeming and MV Moosa. The board chairperson also temporarily assumed the role of chairperson of the committee in light of the recommendation in King III that the nomination committee should be chaired by the board chairperson. Mr Sparks resumed his duties as chairperson after the appointment of the new CEO was concluded.

The CEO search process required significant additional meetings and interviews. For this reason, a special search fee will be proposed for approval by shareholders in addition to the normal committee members’ fee. The committee met nine times during the year.

Meeting attendance

REMUNERATION POLICY

Our remuneration policy was approved by shareholders at the annual general meeting (AGM) on 7 November 2013. The policy was not amended during the year and is again submitted to shareholders for approval by non-binding advisory vote at the AGM on 4 November 2014.

Determination of performance incentives

Imperial has a variety of formal and informal frameworks for performance management that are directly linked to either increases in total cost to company (TCTC) or annual short term incentive bonuses. Performance management and assessment sessions take place regularly throughout the group, and address company performance, personal achievement of key performance indicators (KPIs), as well as delivery on key strategic imperatives.

FOR MORE INFORMATION Refer to page 121 and 127 to 135 for an indication of management’s KPIs.

Remuneration breakdown

All employees

	Cost to company		Short term incentive bonuses		Long term incentives		Other benefits
	Salaried employees are employed in all divisions		The percentage of employees receiving a guaranteed 13th cheque differ by division		Only salaried employees at senior managerial level qualify for long term incentives		Pension fund, provident fund and medical aid
	The majority of hourly-paid employees are employed by the Logistics Africa division		At industry level through collective bargaining and agreements between the industry and trade unions. However, the group pays over and above the minimum wage level				Pension fund, provident fund and medical aid Some hourly paid employees belong to bargaining council medical schemes and pension funds

Cost to company

All employees

Employee management is a material issue for the group as employees are major determinants of our success. Employee remuneration, particularly guaranteed pay, is a significant component of total operating costs for the group. The group’s remuneration policy is designed to ensure attraction and retention of quality employees at all levels. We aim to structure competitive remuneration packages that are relevant in the context of the markets in which the group operates.

Divisions review their remuneration policies regularly to ensure relevance and packages are in line with the market.

Salaried employees

The total cost to company (TCTC) of employees is monitored and benchmarked on an ongoing basis.

Remuneration levels are set by taking into account industries from which skills are acquired or to which skills are likely to be lost, as well as the general market and the market in which each business operates.

The structure of employee remuneration in unionise environments, such as in the Logistics Africa division, is driven by collective bargaining and sectoral determinations. The mix of fixed and variable pay is therefore designed to meet each business’ operational needs and strategic objectives, based on targets that are stretching, verifiable and relevant.

General adjustments to guaranteed pay levels are effective from 1 July each year. However, in unionised environments, this is impacted by collective bargaining arrangements which may come into operation at other agreed times.

Annual increase parameters are set using guidance from group budgeting processes, market movements, individual performance, the performance of the division and/or company and other relevant factors.

Increases are dependent on divisional or departmental and personal performance.

Hourly-paid employees

Annual increases in remuneration and bonuses for hourly-paid employees are generally determined at industry level through collective bargaining and negotiations between the industry and trade unions.

Where appropriate, employees of the group receive ongoing training and promotions, with the aligned rate increase for that particular trade or occupation. These promotions are discussed and authorised by both the supervisors and the managers who work directly with these employees.

Short term incentive bonuses

Salaried employees

Divisions pay short term bonuses which are aligned to industry best practice and in some cases include a guaranteed annual bonus equal to one month’s salary. However, in the majority of cases bonuses are discretionary and depend on the performance of the individual and business in which they are employed.

Hourly-paid employees

In the case of hourly paid employees, bonuses are determined annually in line with the agreements signed with the various unions. Where appropriate, certain individuals are awarded additional bonuses in line with their individual performance. These bonuses are reviewed and approved by divisional management.

Long term incentives

Salaried employees

Only salaried employees at senior managerial level qualify for long term incentives. Divisions have various long term incentive arrangements in place for senior management in addition to the group share incentive schemes.

Other benefits

The group has a pension and provident fund for employees and a medical aid scheme. Pension fund membership is compulsory for all employees. Although all employees are eligible for membership of the group’s medical scheme, membership is only compulsory for employees earning above a certain salary threshold. The medical scheme offers both regular and budget options, in line with the group’s philosophy to provide as many employees as possible with access to healthcare.

EXECUTIVE DIRECTORS AND PRESCRIBED OFFICERS

Policy

Executives have the responsibility to lead others and to take significant decisions about the short and long term operation of the business, its assets, funders and employees. They require specific skills and experience and are held to a higher level of accountability.

The group’s remuneration policy also aims to align the entrepreneurial ethos and long term interests of senior managers and executives with those of shareholders.

Imperial’s remuneration policy is formulated to attract and retain high-calibre executives and motivate them to develop and implement the group’s strategy to optimise long term shareholder value. It is the intention that this policy should conform to best practice. It is structured around the following key principles:

Elements of executive remuneration

Executives’ remuneration comprises the following key elements:

Base salary

Annual incentive bonus

Long term incentive and retention schemes, both share- and cash- based

Other benefits Executives are entitled to a car allowance or a fully maintained car, pension or provident fund contributions, medical insurance, death and disability insurance

The remuneration committee seeks to ensure an appropriate balance between the fixed and performance-related elements of executive remuneration and between those aspects of the package linked to short term performance and those linked to longer term shareholder value creation.

The general philosophy adopted by the group is that the performance-based pay of executive directors and senior managers should form a significant portion of their expected total compensation. There should also be an appropriate balance between rewarding operational performance (through annual incentive bonuses) and rewarding long term sustainable performance (through long term and/or share-based incentives).

	Base salary Base salary is the total cost to company before short term incentives. The fixed remuneration of each executive is compared to roles in similar companies, which are comparable in terms of size, market sector, business complexity and international scope. When determining annual base salaries, factors taken into account include inflation and salary trends, group performance, individual performance and changes in responsibilities.
	Annual incentive bonus All executives are eligible to receive a performance-related annual bonus. The bonus is non-contractual and not pensionable. The committee reviews bonuses annually and determines the level of each bonus based on performance criteria set at the start of the performance period. Bonuses are capped at 100% of the base salary of each executive. The criteria differ depending on the position of each executive and the division in which they operate. Criteria include:

FOR MORE INFORMATION Refer to pages 127 to 135 for a breakdown of executive remuneration.

Annual short term incentive bonus (STI)

The committee sets the minimum performance levels required for any annual incentive bonus to be paid. The on-target annual incentive bonus is payable on achieving agreed targets. Refer to page 121.

			Long term incentive and retention schemes, both share- and cash-based Participation in the schemes by executives is based on criteria, such as seniority, performance during the year and retention drivers. Any senior employee with significant managerial or other responsibility, including any director holding salaried employment or office in the group, is eligible to participate in the long term incentive schemes. Non-executive directors may not be awarded rights in any of the incentive schemes. The group has:
			Share appreciation rights (SARs) scheme Selected participants receive annual grants of SARs, which are conditional rights to receive Imperial shares equal to the difference between the exercise price and the grant price. Vesting of rights is subject to performance conditions being met and the participant remaining employed with the group for the vesting period. The performance conditions and the performance period are determined by the board on an annual basis in respect of each new grant of rights. The SARs vest after three years and lapse four years from vesting. The current performance targets employed in the SARs are the achievement of specified targets set by the committee. These include:   Percentage of SAR awards Growth in core earnings per share (core EPS), relative to the growth in core EPS or headline earnings per share (HEPS) of a selected peer group of 20 JSE-listed companies 50% Return on invested capital (ROIC) compared to weighted average cost of capital (WACC), over a three-year performance period 50% The extent to which each performance condition has been met is determined on the vesting date as follows: CORE EPS If the core EPS of the company is below the lower quartile of the selected peer group 0% of the SARs will vest If the core EPS of the company is equal to the lower quartile of the selected peer group 30% of the SARs will vest If the core EPS of the company is equal to or above the upper quartile of the selected peer group 100% of the SARs will vest Linear vesting occurs between 30% and 100%, depending on the company’s performance relative to the peer group if the company falls in the second or third quartile. The minimum EPS and ROIC target thresholds are set at a level which takes into account performance of the group, but also the important objective of retention of key employees during times when business conditions are challenging. ROIC If the average ROIC for the company over the performance period is lower than the average WACC of the company over the performance period 0% of the SARs will vest If the average ROIC over the performance period is equal to the average WACC over the performance period 30% of the SARs will vest If the average ROIC over the performance period is equal to or above a pre-determined target percentage 100% of the SARs will vest Linear vesting occurs between 30% and 100%, depending on the company’s performance if ROIC is between WACC and the target percentage. The minimum EPS and ROIC target thresholds are set at a level which takes into account performance of the group, but also the important objective of retention of key employees during times when business conditions are challenging.
			The targets and measures relating to each issue are detailed in a letter of grant. After vesting, the rights may be exercised by a participant within four years after vesting. Upon exercise by a participant, the difference between the exercise price and the grant price is paid by:
			Delivering Imperial shares that will be purchased on the open market, or As a fall-back provision only, by the issue of new shares, or By settling the value in cash
			Deferred bonus plan (DBP) Qualifying senior employees are required to purchase Imperial shares (bonus shares) which are held in escrow by the company. On the condition that the participant remains in the employ of the group and retains the bonus shares over a three-year period, a matching award of Imperial shares is made on vesting. A participant remains the owner of the bonus shares for the duration of the three-year period and enjoys all shareholder rights in respect of the bonus shares. Although bonus shares can be sold by the participant at any stage, the matching award is forfeited in line with the level of sales of the bonus shares.
			SAR and DBP Allocations of SAR and DBP are made annually based on the following criteria: Performance of the participant   The job grading of the participant   Key retention considerations regarding participants   The quantum of allocations of SAR and DBP is calculated using a model developed by PriceWaterhouseCoopers and is determined on the expected value of an allocation expressed as a percentage of total cost to company (fixed remuneration). The percentage allocated is determined based on retention considerations and the job grading of the participant, which also determines whether a participant receives a SAR and DBP or only SAR or only DBP. Benchmark awards for SAR and DBP :   Expected values as % of total guaranteed package Executive directors 100% Senior management 44% – 54% First-line operational management 14% – 28% The long term share-based incentives is determined in the financial year of allocation using the Black Scholes methodology. This is based on a number of assumptions, which include the original award price, the expected rate of share price growth and the expected fulfilment of related performance conditions. The eventual gains from long term share-based incentives will vary from year to year depending on vesting and exercise patterns, as well as the impact on share price performance and external factors, such as market sentiment, interest rates, commodity prices and exchange rates.
			Conditional share plan (CSP) The CSP is utilised in exceptional circumstances only. Employees receive grants of conditional awards and the vesting is subject to performance conditions. The performance conditions for the CSP will be based on individual targets set by the board. If the performance conditions are satisfied, the conditional awards will vest. If the performance conditions are not met, the conditional awards will lapse. No allocations were made in terms of this scheme during the financial year. The CEO received an allocation post year-end. Limited CSP allocations to key executives are planned in the coming year. In particular, the new group CEO’s sole compensation for the 12 months to June 2015 will be participation in the CSP. These will vest on 1 September 2017, subject to the achievement of profit growth, return on invested capital and qualitative objectives, as determined by the remuneration committee.
			Cash retention plan (CRP) Selected participants receive grants of CRP rights, which are conditional rights to receive a cash payment. Vesting of rights is subject to performance conditions being met. The performance conditions and performance period are determined by the board in respect of each new grant of rights. These are specifically tailored to drive divisional profitability and strategy. The performance targets set for the CRP issued in 2011 and 2012 were the achievement of specified divisional and group targets relating to growth in profit before interest and tax (PBIT), relative to a performance period target and return on invested capital (ROIC) of the participant’s division compared to its weighted average cost of capital of the particular business over a three-year performance period. For each CRP grant:   50% of the awards are subject to the achievement of the PBIT performance condition 50% of the awards are subject to the achievement of the ROIC performance condition The extent to which each performance condition has been met is determined on the vesting date. Linear vesting takes place between 0% and 100%. The targets and measures relating to each issue are detailed in a letter of grant and are independently verified prior to vesting. CRP allocation   vesting date 2011   Septtember 2014 2012   Septtember 2015 No allocations were made under the CRP this year. Other benefits Executive directors are entitled to a car allowance or a fully maintained car, pension or provident fund contributions, medical insurance and death and disability insurance. The provision of these benefits is considered to be market competitive for executive positions.

TERMINATION OF EMPLOYMENT

Resignation or dismissal

If a participant’s employment terminates due to resignation or dismissal on grounds of misconduct, poor performance or proven dishonest or fraudulent conduct (whether such cessation occurs as a result of notice given by the employee or otherwise or if he/she resigns to avoid dismissal on grounds of misconduct, poor performance or proven dishonest or fraudulent conduct) before the vesting date, all share appreciation rights, conditional awards and all matching awards will lapse, unless the board determines otherwise.

Retirement

If any portion of a participant’s share appreciation rights remains unexercised or a conditional award or matching award remains unvested and a participant retires, the participant will be entitled to the same rights and be subject to the same conditions under the SAR, CSP or the DBP as if he/she had continued to be a participant, unless the board determines otherwise.

Retrenchment, death, ill health, disability or other reasons for cessation of employment

If a participant ceases to be an employee due to retrenchment, death, ill health, disability or other reasons for cessation of employment other than resignation or dismissal or retirement, the board shall by written notice to the participant or the executor of the deceased estate permit a pro rata portion of the unvested share appreciation rights and/or unvested conditional award and/or matching awards to vest on the date of cessation of employment.

The pro rata portion of the share appreciation rights and conditional awards that vest will, unless the board determines otherwise, reflect the number of months served since the date of grant and the extent to which the performance conditions have been satisfied. In the case of matching awards, the allocation will be based on the number of bonus shares held and the DBP period at the time of cessation of employment, unless the board determines otherwise. The balance of the unvested share appreciation rights not permitted to be exercised or unvested conditional awards or matching awards that do not vest will lapse.

Total allocations

A total of 10 925 436 share appreciation rights remain unexercised in terms of the SAR scheme at an average price of R176,38 per share. A total of 305 495 DBP rights have been taken up and remain unvested and a further 308 230 have been allocated this year and remain unexercised.

Hedge

The group hedges its exposure to deliver shares in terms of share-based long term incentive schemes by taking out hedges or buying back shares to avoid dilution associated with the issue of shares. All SARs awards have been fully hedged through the purchase of call options.

RETIREMENT SCHEMES

Executives participate in contributory retirement schemes which include pension and provident funds established by the group. Executive retirement is governed by their retirement scheme rules, subject to the ability of the company to enter into fixed-term contracts to extend the services of any executive within certain prescribed limits.

SUCCESSION POLICY AND PLANS

The committee considers succession plans for executives and regularly reviews identified successors for key positions in the group. This process includes:

In the closing months of the 2014 year, a start was made to the implementation of processes required for the measurement and development of the executive talent pool, comprising the 100 most senior executives and others of high potential.

EXTERNAL APPOINTMENTS

Executives are not permitted to hold external directorships or offices, other than those of a personal nature, without the approval of the board.

DIRECTORS’ SERVICE CONTRACTS

Directors’ contracts can all be terminated with between one and three months’ notice, with the exception of that of GW Riemann who is employed on fixed-term contract that terminates on 31 December 2014. Any contract can be immediately terminated in the event of misconduct. Mr Riemann will be retiring at the end of the year, with his successor taking over in January 2015. Mr Riemann will work with his successor for three months to ensure a smooth handover.

Non-executive directors’ appointments are made in terms of the company’s memorandum of incorporation and are initially confirmed at the first annual general meeting of shareholders following their appointment, and thereafter by rotation.

EXECUTIVE REMUNERATION

MJ (Mark) Lamberti – Group CEO (from 1 March 2014)

Fixed compensation and benefits

MJ (Mark) Lamberti has elected not to be paid the fixed remuneration portion of his compensation or receive any other benefits as CEO of Imperial. His compensation will therefore comprise only the performance-related portion of compensation normally due to the CEO.

Mark’s total and only compensation for the four months to June 2014 was participation in the Imperial Deferred Bonus Plan (DBP). This was one of the terms of his employment, which required him to commit 60 787 Imperial shares to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares.

At Mark’s suggestion, the company will make funds available on an annual basis, in line with the fixed remuneration that would otherwise have been payable to the CEO of Imperial, for the provision of university education from the second year onwards to the direct descendants of individuals who earn less than R600 000 per annum and have been employed by Imperial for more than five years.

Annual incentive bonus

In lieu of an annual bonus, Mark has requested that the following short term incentive performance criteria and weightings, as determined by the board, be used as a basis for the allocation of Conditional Share Plan (CSP) rights, the quantum of which will be 1.5 times the unpaid maximum short term incentive.

		2014 weighting
	Group core EPS growth	30%
	Group achievement of ROIC target over WACC	30%
	Group BBBEE improvement	20%
	Discretionary	20%

Long term incentive and retention payments

On 9 September 2014, Mark was awarded 67 064 shares as part of the CSP. These shares will vest on 15 September 2017 subject to the achievement of targeted core earnings per share growth; return on invested capital greater than the weighted average cost of capital; and specific qualitative objectives which have been determined by the board. The degree of achievement will be disclosed when the shares vest. If all performance objectives are fully met, the expected value of this award is R12 816 000.

Participation in this long term performance-based incentive scheme will be his only compensation for the 12 months to June 2015.

HR (Hubert) Brody – Group CEO to 28 February 2014*

Fixed compensation and benefits

Based on remuneration benchmarking against peers, Hubert’s fixed compensation and benefits increased 10% to R7 457 000 (2013: R6 730 000).

Annual incentive bonus

Hubert received a bonus equal to his annual salary in recognition of his service as CEO over seven years, totalling R7 457 000 (compared to R5 315 000 in 2013).

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010 and a pro rata vesting of DBPs on his resignation.

Hubert did not receive any long term incentive award during the year in light of his retirement as CEO.

* Although he resigned as CEO on 28 February 2014, he remained in the company’s employ as an executive director until 30 April 2014.

OS (Osman) Arbee – Group CFO (with additional responsibility for the Aftermarket Parts business during 2014)

Fixed compensation and benefits

Pursuant to his appointment as CFO on 1 July 2013 and his additional line responsibility for the Aftermarket Parts business during 2014, Osman’s fixed compensation and benefits increased 25% to R5 714 000 (2013: R4 585 000).

Annual incentive bonus

With reference to the criteria below, Osman received an incentive bonus of R4 200 000 compared to R4 200 000 in 2013.

		2014 weighting
	Group core EPS growth	25%
	Group achievement of ROIC target over WACC	25%
	Divisional BBBEE improvement	20%
	Divisional PBIT growth	5%
	Divisional achievement of ROIC target over WACC	5%
	Discretionary	5%

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from DBPs issued in June 2010.

On 30 June 2014, Osman was awarded and committed 30 965 shares as part of the DBP. These shares are to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares. The expected value of this award is R6 000 000.

M (Mohammed) Akoojee – Director: Group Strategy, Mergers and Acquisitions and Investor Relations

Fixed compensation and benefits

Pursuant to his appointment as head of strategy, mergers, acquisitions and investor relations and his appointment as a director to the board in October 2013, Mohammed’s fixed compensation and benefits increased by 15% to R2 932 000 (2013: R2 550 000).

Annual incentive bonus

With reference to the criteria below and the successful finalisation of the EcoHealth transaction, Mohammed received an incentive bonus of R2 310 000, compared to R2 300 000 in 2013.

		2014 weighting
	Group core EPS growth	30%
	Group achievement of ROIC target over WACC	30%
	Group BBBEE improvement	20%
	Discretionary	20%

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010.

On 30 June 2014, Mohammed was awarded and committed 18 579 shares as part of the DBP. These shares are to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares. The expected value of this award is R3 600 000.

M (Marius) Swanepoel – CEO: Logistics Africa

Fixed compensation and benefits

Marius’ fixed compensation and benefits increased by 7% to R4 906 000 (2013: R4 585 000).

Annual incentive bonus

With reference to the criteria below and the successful implementation of the African expansion strategy, Marius received an incentive bonus of R3 700 000 compared to R3 500 000 in 2013.

		2014 weighting
	Group core EPS growth	15%
	Group achievement of ROIC target over WACC	15%
	Divisional BBBEE improvement	20%
	Divisional PBIT growth	15%
	Divisional achievement of ROIC target over WACC	15%
	Discretionary	20%

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010.

On 30 June 2014, Marius was awarded and committed 27 352 shares as part of the DBP. These shares are to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares. The expected value of this award is R5 300 000.

GW (Gerhard) Riemann – CEO: Logistics International

GW (Gerhard) Riemann is based in Germany and paid in Euros.

Fixed compensation and benefits

Gerhard’s fixed compensation and benefits increased by 23% to R10 425 000 (2013: R8 462 000) in Rand terms due to the deterioration in the Rand exchange rate. It did not increase in Euro terms.

Annual incentive bonus

With reference to the criteria below, Gerhard received an incentive bonus of R13 511 000 compared to R12 450 000 in 2013.

		2014 weighting
	Divisional EBIT	50%
	Divisional ROE	50%

Long term incentive and retention payments

Gerhard does not participate in the group long term incentive and retention plans, which is reflected in his annual incentive bonus.

MP (Manny) de Canha – CEO: Vehicle Import, Distribution and Dealerships

Fixed compensation and benefits

Manny’s fixed compensation and benefits increased by 5% to R5 243 000 (2013: R4 900 000).

Annual incentive bonus

With reference to the criteria below, Manny received an incentive bonus of R3 400 000 compared to R4 900 000 in 2013. This is a reflection of the performance of his division, which was significantly impacted by rapid movements in the Rand exchange rate.

		2014 weighting
	Group core EPS growth	15%
	Group achievement of ROIC target over WACC	15%
	Divisional BBBEE improvement	20%
	Divisional PBIT growth	15%
	Divisional achievement of ROIC target over WACC	15%
	Discretionary	20%

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010.

On 30 June 2014, Manny was awarded and committed 28 384 shares in the DBP. These shares are to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares. The expected value of this award is R5 500 000.

PB (Philip) Michaux – CEO: Vehicle Retail, Rental and Aftermarket Parts

Fixed compensation and benefits

Pursuant to the increase in his responsibilities to include the Car Rental division and his appointment as an executive director to the board in October 2013, Philip’s fixed compensation and benefits increased 31% to R4 116 000 (2013: R3 151 000).

Annual incentive bonus

With reference to the criteria below, Philip received an incentive bonus of R2 800 000 compared to R3 015 000 in 2013.

		2014 weighting
	Group core EPS growth	15%
	Group achievement of ROIC target over WACC	15%
	Divisional BBBEE improvement	20%
	Divisional PBIT growth	15%
	Divisional achievement of ROIC target over WACC	15%
	Discretionary	20%

Long term incentive and retention payments

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010.

On 30 June 2014, Philip was awarded and committed 24 256 shares in the DBP. These shares are to be held in escrow until 15 September 2017 when he will receive a matching award of the same number of shares. The expected value of this award is R4 700 000.

Jurie Strydom – CEO: Insurance

Fixed compensation and benefits

Pursuant to his appointment as a director to the board in October 2013 and the improved sustainable performance in Insurance, Jurie’s fixed compensation and benefits increased by 20% to R3 612 000 (2013: R3 010 000).

Annual incentive bonus

With reference to the criteria below, Jurie received an incentive bonus of R2 650 000 compared to R2 500 000 in 2013.

		2014 weighting
	Group core EPS growth	15%
	Group achievement of ROIC target over WACC	15%
	Divisional BBBEE improvement	20%
	Divisional PBIT growth (normalised equity returns)	15%
	Divisional achievement of return on embedded value over cost of equity	15%
	Discretionary	20%

LONG TERM INCENTIVE AND RETENTION PAYMENTS

The gains on the exercise of the long term incentive award arose from SARs and DBPs issued in June 2010.

On 30 June 2014, Jurie was awarded and committed 21 159 shares in the DBP. These shares are to be held in escrow until 15 September 2017, when he will receive a matching award of the same number of shares. The expected value of this award is R4 100 000.

HIGHEST PAID EMPLOYEE REMUNERATION

King III recommends that the remuneration of the top three earners who are not directors should be disclosed. Remuneration during the year was as follows:

PRESCRIBED OFFICERS’ REMUNERATION

The group had no prescribed officers as defined in terms of the Companies Act, 2008 for the financial year other than PB Michaux and JJ Strydom who were appointed as directors during the year and whose remuneration is disclosed as directors. Prescribed officers are persons, not being directors, who either alone or with others exercise executive control and management of the whole or a significant portion of the business of the company.

NON-EXECUTIVE DIRECTORS’ FEES

Fees payable to non-executive directors are reviewed by the committee and recommended to the board. They in turn make recommendations to shareholders after consideration of the fees paid by comparable companies, responsibilities of the non-executive directors and considerations relating to the retention and attraction of high-calibre individuals. The group has decided to maintain a structure where directors’ fees are not split between membership and attendance fees, as the group has not had significant instances of non-attendance of meetings.

Fees for 2014

The table below provides an analysis of the emoluments paid to non-executive directors for the year ended 30 June 2014.

Fees for 2015 and 2016

At the annual general meeting to be held on 4 November 2014, shareholders will be requested to approve the following increases in non-executive directors’ remuneration by special resolution in terms of section 66(9) of the Companies Act, granting authority to pay fees for services as directors, which will be valid with effect from 1 July 2014 until 30 June 2016 as follows:

Shareholders will also be requested to approve once-off fees payable to members and ad hoc members of the remuneration and nomination committee for additional work related to the search for a new CEO as follows:

Chairperson: R60 000
Member: R30 000

In arriving at the proposed fees, cognisance was taken of market trends and the additional responsibilities of non-executive directors in terms of increased legal and governance requirements.

Non-executive directors also receive fees for services on divisional boards and financial and risk review committees.

Executive directors receive no director or committee fees for their services as directors in addition to their normal remuneration as employees.

APPROVAL

This remuneration report has been approved by the board of directors of Imperial.