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| Remuneration | Page 1 2
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| The board and the remuneration committee present their remuneration report setting out
information applicable to executive remuneration, directors' fees, pension and other benefits,
short, medium and long term bonus incentive remuneration and share incentive plans. The
information provided in this report has been approved by the board on the recommendation
of the committee. |
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| REMUNERATION AND NOMINATION
COMMITTEE |
In the year under review, the remuneration committee
has, as in the past, been combined with the nomination
committee. With effect from 1 July 2009, the two functions
have been split into separate committees, but this report
has been prepared by the committee that operated in
the past financial year, and will be referred to hereafter
as the remuneration committee.
During the year, the committee comprised Messrs
DA Hawton (chairman), PL Campher, MP Egan, IN Matthews
and MV Moosa. All members, save for Mr Moosa, were
independent non-executive directors, and the committee
satisfied its responsibilities in compliance with its written
terms of reference in all material respects during the year.
The remuneration committee reviews the design and
structure of executive director and senior executive salary
packages and policies, incentive schemes and share
incentive programmes to ensure they motivate sustained
high performance throughout the group and retain the
key executives within the group. |
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| The committee has adopted written terms of
reference approved by the board, effectively from
1 July 2009, that require the committee, inter
alia, to: |
| • |
ensure that competitive reward strategies and
programmes are in place to facilitate the recruitment,
motivation and retention of high performance
executive directors and senior executives in support
of realising corporate objectives and in safeguarding
shareholder interests; |
| • |
develop and implement a philosophy of remuneration and disclosure to enable a reasonable assessment of reward practices and governance
processes to be made by stakeholders; |
| • |
recommend the level of non-executive directors’
and board committee fees to the board having
reviewed the evaluation of their performance by the
nomination committee and received the proposals/
recommendations of the executive directors, for
consideration and approval by shareholders; |
| • |
ensure consideration is given to executive
succession planning in the group; |
| • |
appraise the executive performance of the chief
executive and his direct reports annually as a prerequisite
for the review and determination of their
remuneration, subject to consideration of the
short and longer term components of their
remuneration and individual contributions and
performance; |
| • |
review compulsory group employee benefits and
costs relevant thereto, and ensure the proper
administration of the company’s share incentive
schemes; |
| • |
review the levels of authority of the chief executive;
and |
| • |
the evaluation of its own performance and
effectiveness every two years. |
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The chief executive and director of human resources
attend all meetings of the committee by invitation, unless
deemed inappropriate by the committee.
No executive director or senior executive is present at
meetings of the remuneration committee when his/
her own remuneration is discussed or considered. The
chairman of the remuneration committee, or in his
absence another member of the committee, is required
to attend the annual general meeting to answer
questions on the subject of remuneration.
The remuneration committee is required to meet formally at least twice a year. Five meetings were held during the 2009
financial year. Details of attendance by each member are as follows: |
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26 Aug
2008 |
31 Oct
2008 |
25 Feb
2009 |
27 May
2009 |
29 Jun
2009 |
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| DA Hawton* |
√ |
√ |
√ |
√ |
X |
| PL Campher |
√ |
X |
√ |
√ |
√ |
| MP Egan |
√ |
√ |
√ |
√ |
√ |
| IN Matthews |
√ |
√ |
√ |
√ |
√ |
| MV Moosa |
√ |
√ |
√ |
√ |
√ |
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| With effect from 1 July 2009, the remuneration committee
comprised Messrs IN Matthews (chairman), PL Campher,
MP Egan and MV Moosa. |
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| REMUNERATION PHILOSOPHY |
The Sun International remuneration strategy ensures the
creation of an appropriate competitive base to attract
and retain employees of the right calibre and skills,
rewarding employees fairly and equitably, and motivating
them to achieve the highest levels of performance in
alignment with Sun International's strategic objectives.
It is Sun International's philosophy to adopt best practice
and ensure that overall remuneration takes account
of current trends whilst at all times complying with prevailing legislation.
Sun International is committed to providing remuneration
that attracts, retains and motivates staff and assists in
developing a high performance culture and provides a
measure of flexibility within the package structure.
A comprehensive TCOE remuneration strategy for all
permanent full-time positions is adopted by all South
African operations, and where possible and practical
from a tax and regulatory standpoint, by the rest of
the group's operations. All increments are based on
guaranteed package (TCOE) taking into account
projected inflation, internal equity, the external market,
performance and affordability. Remuneration levels are
competitive compared to the market and the remuneration
process provides for equitable pay that is fair, consistent
and transparent, but differentiates between average and
excellent performers, thus remunerating people according
to their contribution. |
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| REMUNERATION STRUCTURE |
| Guaranteed remuneration |
Sun International's policy is to compensate executive
managers on a guaranteed package basis at market
median or better of the relevant remuneration market.
Remuneration scales are benchmarked and are generally
structured so that midpoints are between the median
and the upper quartile levels.
Remuneration is quoted on an annual basis, paid
monthly and split between benefits and cash. The cash
portion of the individual's guaranteed package will
vary according to the value of benefits utilised and
deductions.
Through the remuneration committee, Sun International
reviews its remuneration strategy on a regular basis and
benchmarks itself against companies of similar size as
well as the relevant markets to ensure that the overall
level of compensation of its senior executive management is competitive and structured to achieve the
optimum balance between guaranteed and variable
remuneration (see below). |
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| Retirement funding and healthcare benefits |
Executives also participate in the membership of a
company appointed retirement fund which is compulsory
for all permanent employees. In South Africa, they
participate as members of a restricted membership inhouse
defined contribution provident fund offering both
retirement funding and insured benefits. A small number
of executives remain members of a closed defined
benefit pension fund.
Membership of a company appointed medical aid is
compulsory and in South Africa executives belong to a
restricted membership scheme offering a variety of plans. |
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| Variable remuneration |
In addition to paying market related guaranteed packages, the remuneration strategy at the executive and
senior management level also comprises variable remuneration in the form of bonus incentive schemes and
share incentive plans.
The primary bonus incentive scheme comprises participation in the executive bonus scheme (EBS), comprising
'EVA®' (economic value added) and 'EBITDA' target
components.
Additionally, and where appropriate, executives also
participate in share incentive plans in the form of share
plans which are subject to pre-determined performance
criteria, as applicable. |
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| Executive Bonus Scheme |
The EBS is a target based scheme that defines the required
performance criteria in terms of maximising long term
growth and return on investment (EVA®) as well as short
term cash flow (EBITDA), with amounts payable at varying
levels of achievement against criteria determined by the
committee prior to the commencement of the financial
year. This scheme aligns shareholder and management
objectives by providing participants with fair and equitable
short term incentives, reinforcing and derived from unit,
divisional and group objectives, dependent on where the
participant is employed.
Participants of the EBS are primarily senior managers and
executives. Uniform parameters are used to determine
eligibility and participation levels and individual bonuses
are calculated as a percentage of guaranteed pay.
70% of the EBS bonus is derived from EVA performance
and 30% from EBITDA achievement. The EBS also incorporates a bonus bank mechanism as one third of bonuses
in excess of target are paid to participants and two thirds
are deferred to a bonus bank for payment up to the target
percentages in years when targets are not met. The bonus
bank attracts interest and serves as a retention mechanism
as it is forfeited upon resignation or dismissal. |
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| SHARE INCENTIVE PLANS |
| Share option scheme |
| Due to changes in the regulatory environment and best
practice, awards under the existing share option scheme
have been discontinued and accordingly no further
options have been granted under this scheme since
30 June 2006. The share option scheme nevertheless
remains in place for options already granted under the
scheme, until such time as these options are exercised
or lapse. |
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| Share options held by executive directors in terms of their participation in the Sun International
Limited Employee Share Incentive Scheme as at 30 June 2009 |
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Date of
grant |
Exercise
price
R |
Number of
options
held
30 June
2008 |
Options
exercised
during
year
ended
30 June
2009 |
Number of
options
held
30 June
2009 |
Lapse
date |
Number of
options
exercisable
30 June
2009 |
| RP Becker |
30.06.2005 |
61.825 |
200 000 |
– |
200 000 |
30.06.2015 |
200 000 |
| DC Coutts–Trotter |
01.08.2003 |
31.555 |
58 750 |
– |
58 750 |
01.08.2013 |
58 750 |
|
12.09.2003 |
32.950 |
37 500 |
– |
37 500 |
12.09.2013 |
37 500 |
|
25.11.2003 |
39.005 |
56 250 |
– |
56 250 |
25.11.2013 |
56 250 |
|
01.09.2004 |
40.950 |
46 875 |
– |
46 875 |
01.09.2014 |
46 875 |
|
30.06.2005 |
61.825 |
46 875 |
– |
46 875 |
30.06.2015 |
46 875 |
|
|
|
246 250 |
– |
246 250 |
|
246 250 |
| |
|
|
446 250 |
– |
446 250 |
|
446 250 |
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| Share plans |
In line with latest practice and with the prior approval of
shareholders, the group has adopted four share plans,
based on equity settled EGP, a CSP, a DBP, and an RSP
which support the principle of alignment of management
and shareholder interests, with performance conditions
and/or periods governing the vesting of the plan
instruments.
Executive directors and selected senior employees of
SIML participate in certain or all of these plans. Awards
under the EGP, CSP and DBP have been made since
30 June 2006, and under the RSP, during 2009. |
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| Equity Growth Plan |
The purpose of the EGP is to provide senior executives
with the opportunity to acquire shares in the company
through the grant of conditional EGP rights, which are
rights to receive shares equal in value to the appreciation
of the company's share price between the date on which
the conditional EGP rights are granted and the date on
which they are exercised, subject to the fulfilment of predetermined
performance conditions over a three-year
performance period. These performance conditions are
determined by the remuneration committee in respect
of each annual grant. Grants under this plan were made
in 2006, 2007, 2008 and 2009 and the performance
conditions applied in each year were that adjusted
headline earnings per share should increase by 2% per
annum above CPI over the three-year performance
period, calculated from the date of each grant. The
performance condition is tested three years from the
date of grant and if the condition is met, the EGP rights
granted under the specific grant become exercisable. If
this performance test fails, re-testing of the performance
condition is permitted on the fourth and fifth anniversaries
of the date of grant at a further increase of 2% per annum above CPI and should re-testing fail at this point,
all EGPs granted under the particular grant will lapse.
The performance condition relating to the EGP grant
made in 2006 was tested in 2009. The performance
condition was met, and all EGP rights granted under that
specific grant have become exercisable. |
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| Conditional Share Plan |
The purpose of the CSP is to provide senior executives
with the opportunity to acquire shares in the company,
by way of conditional awards which are subject to the
fulfilment of predetermined performance conditions on the
expiry of a three-year performance period. The performance
conditions are determined by the remuneration committee
in respect of each annual grant.
The conditional shares will vest after the three-year
performance period if, and to the extent that, the performance conditions have been satisfied, and provided
the executive is still in the employment of the group.
The performance condition imposed with regard to the
2006, 2007, 2008 and 2009 grants related to company
total shareholder return (TSR) over a three-year period,
relative to the TSR of constituents in the INDI 25 index
and gambling/hotels sub-sectors of the travel and leisure
sector that have a market capitalisation of greater than
R1 billion (2006) or 10% of Sun International's market
capitalisation (2007, 2008 and 2009).
The conditional awards are subject to vesting conditions
as follows:
If the TSR over the performance period ranks: |
| • |
within the upper quartile of the comparator group,
then the whole conditional award, which is subject to the TSR condition, will become unconditional and
will vest; |
| • |
at the median TSR of the comparator group, then
30% (thirty percent) of the conditional award will
become unconditional and will vest. The remainder
of the conditional award subject to the TSR condition,
will lapse and will be of no further force or effect; |
| • |
less than the upper quartile rank of the comparator
group and ranks greater than the median of the
comparator group, then the percentage of the
conditional award, subject to the TSR condition,
which becomes unconditional and will vest, will be
linearly apportioned between 30% and 100% as the
ranking of the TSR increases from the median to
the upper quartile of the comparator group. The
remainder of the conditional award, subject to the
TSR condition will lapse and will be of no further
force or effect; and |
| • |
less than the median TSR of the comparator group
then the whole of the conditional award, subject to
the TSR condition will lapse and will be of no force or
effect whatsoever. |
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| The conditional shares granted in 2006 did not meet the
TSR performance condition imposed over the three-year
performance period, as the TSR over the performance
period ranked less than the median TSR of the respective
comparator group. Accordingly, the 2006 conditional
awards have lapsed in their entirety. |
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| Deferred Bonus Plan |
The purpose of the DBP is to encourage senior executives
to use part of any after tax annual bonus (EBS) awarded
to acquire shares in the company in exchange for an
uplift in the number of shares received. The plan also has
a retention effect and encourages share ownership in the
company. Awards under the DBP have been made in
2006, 2007, 2008 and in 2009, subsequent to the
financial year end.
The remuneration committee simultaneously invites participation in a conditional matching award. The matching
award entitles the executive to an equal number of free
shares matching the number of DBP shares still held on
the vesting date. The matching award is conditional on
continued employment until the vesting date, which is
for a three-year period, and the DBP shares remaining in
a separate controlled account for the duration. The
executive remains the full owner of the DBP shares for
the duration of the period and enjoys all shareholder
rights. DBP shares may be withdrawn from the controlled
account at any time, but the matching award will not be
made on DBP shares withdrawn. The vesting of the
matching award is not subject to any performance
conditions.
All conditional matching awards granted relative to the
DBP shares acquired in 2006 were delivered to participants subsequent to the year end in 2009. |
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