Remuneration report

Dear Shareholder

The board of Barloworld Limited and the remuneration committee have pleasure in submitting the remuneration report for the financial year ended 30 September 2012. This report explains the company's remuneration policy for non-executive directors, executive directors and prescribed officers. The information provided in this report has been approved by the board on the recommendation of the remuneration committee.

In driving the vision and strategic plan for 2015, in this past financial year a number of important strategic transactions were successfully executed. These included the acquisition of the Bucyrus distribution businesses in southern Africa and, post year end, Bucyrus Russia which provides the Equipment division with an expanded surface and underground product range to service its mining customer base in the region. Importantly, the Handling businesses in the US and UK were sold in separate transactions, generating a significant cash inflow for the group and facilitating redeployment of capital into higher returning opportunities.

Operationally the group continued to build on the positive momentum of the 2011 financial year, with operating profits up 31%, headline earnings per share increasing by 46% and net profit up 51% leading to a 2.7 percentage point increase in the group’s return on shareholders’ equity (ROE). This was achieved notwithstanding difficult economic conditions prevailing in Europe which adversely impacted our businesses operating in that region.

The company continues to focus on responsible remuneration that is driven by sound governance principles. In the past year we met with some of our largest shareholders to discuss remuneration practices in the group and, taking into account their views, made some changes to the weightings of performance conditions as well as specific financial targets for the purpose of the 2012 long-term incentive (LTI) awards. As a consequence of shareholder feedback, we also increased the weighting on the financial return metrics in the short-term incentive scheme (STI).

The issues covered by this remuneration report are:

A summary of the company's remuneration policy and philosophy;
The remuneration committee and its role;
Key remuneration decisions taken during the 2012 financial year;
Overview of the basis of remuneration and payments made to executive directors;
Funding of share plans and dilution;
Executive contracts and policies; and
Non-executive directors’ remuneration.

Steve Pfeiffer
Chairman of remuneration committee

19 November 2012

Remuneration philosophy and policy

Barloworld aims to provide a level of remuneration which attracts, retains and motivates executives of the highest calibre. Careful consideration is also given to internal equity within the group and to align the remuneration paid with shareholder interests and best practice.

The vision and strategic plan for 2015 which was approved in the previous financial year continues to be driven by the executive team in order to deliver profitable growth and enhance the level of financial returns throughout the various businesses. The remuneration philosophy and metrics incorporated into both the STI and LTI structures have been designed to support the achievement of this plan.

Barloworld has adopted a holistic approach to its remuneration philosophy for senior executives and general staff and has implemented a balanced design which consists of the following monetary and non-monetary components:

Executive remuneration is heavily weighted toward variable remuneration as is illustrated below. The on-target bonus entitlement for the chief executive (CEO) is slightly higher than other executives and will result in a heavier weighting towards variable pay. The mix between fixed and variable pay for the CEO, executive directors and prescribed officers (based on ontarget bonuses entitlement and the average indicative expected value, on grant date, of long-term incentives awards made during the year) is:

Chief executive


Executive directors and prescribed officers (other than the chief executive)

Chief executive   Executive directors and prescribed officers (other than the chief executive)

Barloworld’s overall remuneration philosophy is to ensure that executive directors and the senior executive team are fairly rewarded for their individual contribution to the company's operating and financial performance in line with its corporate objectives and strategy as explained above. As a result, Barloworld is committed to paying remuneration that is competitive relative to the target labour market in each country based on industry and market benchmarks reviewed by the company on an annual basis. This contributes to ensuring that Barloworld remains an employer of choice.

After consultation with some of the major shareholders, Barloworld made the following changes in the past year to its remuneration philosophy and practices in respect of senior employees and executive directors:

Financial metrics used for the STI remained the same as in the prior year, however the weighting towards operating profit was decreased from 35% to 30% and the weighting given towards return on equity (ROE) was increased from 15% up to 20%; and
The performance conditions used for the Forfeitable Share Plan were reviewed. Following this review, the ROE performance condition previously used was replaced with Return on Net Assets (RONA). Furthermore, the weighting given to each of the performance conditions (i.e. Total Shareholder Return, headline earnings per share (HEPS) and RONA) were also amended with an increased weighting being given to RONA in order to encourage greater focus on improving returns on capital over time. The weightings for the 2012 award were TSR (15%), HEPS (25%) and RONA (60%).

Divisional incentive plans are aligned such that divisional executives and management are incentivised on similar financial targets to executive directors, with total incentives benchmarked against market comparisons for equivalent levels of management.

Remuneration committee

Role of remuneration committee

The remuneration committee operates under terms of reference approved by the board and which are subject to review every year and are also in line with King III and the Companies Act.

In terms of its charter, the key responsibilities and role of the remuneration committee are summarised below:

Determining and agreeing the remuneration and overall compensation package for the CEO and other executive directors appointed to the board;
Determining any criteria necessary to measure the performance of executive directors in discharging their functions and responsibilities;
Reviewing the terms and conditions of the CEO and executive directors' service agreements, taking into account relevant market information and information from comparable companies where relevant, to ensure that they are fairly, but responsibly, appraised and rewarded for their individual contributions towards enhancing the company's performance;
Determining the company's overall policy on executive and senior management remuneration, as well as a remuneration philosophy;
Ensuring that competitive reward strategies and programmes are in place to facilitate the recruitment, motivation and retention of high-performance staff at all levels in support of realising corporate objectives and to safeguard stakeholder interests;
Determining and recommending to the board the level of non-executive director fees after receiving independent professional input;
Reviewing and recommending to the board the relevant criteria necessary to measure the performance of executives;
Considering other special benefits or arrangements of a substantive financial nature; and
Ensuring compliance with applicable laws and codes.

The remuneration committee chairman reports formally to the board on the proceedings of the remuneration committee after each meeting and, in line with King III, will attend the annual general meeting of Barloworld to respond to any questions from shareholders regarding the remuneration committee's areas of responsibility.

Members of remuneration committee

The remuneration committee comprised at least four independent non-executive directors throughout the period under review. In line with King III, the remuneration committee is chaired by an independent non-executive director.

The remuneration committee is constituted as follows:

SB Pfeiffer (Chairman) (independent non-executive) (appointed as chairman with effect from 24 January 2008);
DB Ntsebeza (independent non-executive and chairman of the company);
AGK Hamilton (independent non-executive);
SS Ntsaluba (independent non-executive) and
MJN Njeke (independent non-executive) (resigned with effect from 29 February 2012).

The CEO attends remuneration committee meetings by invitation. The company secretary, Mr B Ngwenya acts as secretary to the remuneration committee. External advisers are used to provide market information as and when required.

Meeting attendance

The remuneration committee had an active year and met six times during the 2012 financial year. Attendance at meetings is set out on page 49 of the AGM document.


During the 2012 financial year, the remuneration committee received advice and guidance from the following independent advisers:

PwC – standing adviser to the remuneration committee on all executive and non-executive remuneration matters including base compensation, short-term incentives, long-term incentives, non-executive directors' fees and general corporate governance standards; and
PE Corporate Services – executive salary benchmarking and job grading.

Key remuneration decisions taken in respect of the 2012 financial year

The remuneration committee discussed the following matters and took some key decisions:

The approval of the targets and weighting of the performance measures of the short-term incentive plan;
Approval of the long-term incentive awards, inclusive of the mix of instruments to be used and company performance conditions relating thereto;
Approval of executive salary increases;
Approval of the short-term incentive payments;
Review and approval of the company's remuneration report and policy;
Review and recommendation of non-executive director fees;
Review of King III principles and alignment of remuneration approach to best practice guidelines;
Review of the retention awards made to specific employees as part of the Bucyrus transaction; and
Reviewed the grading of directors for increased responsibility levels.

Overview of remuneration

Remuneration structure

Barloworld operates the Towers Watson global grading methodology and structure. This assesses an executive's remuneration against an independently determined grade which is based on a number of factors including the "size" of the job (as measured by revenue and number of employees) as well as its "complexity" (incorporating aspects such as whether it is a domestic, international or global business).

Remuneration of divisional executives and senior management below executive director level is also benchmarked to independent market information based on the Towers Watson global grading system. The CEO approves the salary increases and incentives for executives on the divisional management boards.

The total remuneration package

The table below summarises the composition of the total remuneration package for executive directors and prescribed officers during the 2012 financial year, as well as proposed changes to the total remuneration package for the 2013 financial year:

Element Fixed/
Objective Policy Proposed
for 2013
  Fixed   Reflects scope and nature of role, performance and experience   In most cases, benchmarked around the median of the market   None
  Fixed   Providing employees with contractually agreed basic benefits such as medical aid, retirement funding and a company car or car allowance as per the human resource policy   The percentage company contribution to benefits varies by country. In South Africa, a 14% company contribution to retirement funds applies   None
  Variable   Rewards and motivates achievement of agreed group, divisional and individual performance objectives   The bonus percentages and the performance metrics remain unchanged from 2011, however, a reduced weighting was applied to operating profit and an increased weighting to improvement in ROE   No material changes to structure envisaged.
  Variable   Creates loyalty and ownership among employees and acts as a retention mechanism. Also aligns with shareholder interests and long-term value creation   Approximately 25% of the overall long-term incentive award comprises a retention award and the remainder of the award has performance conditions attached.   No material changes to structure envisaged.

Guaranteed package


The executive directors' base salary and guaranteed package are reviewed annually. The current levels are benchmarked, in most cases, around the median of the relevant Towers Watson grade and/or group of comparator companies, which is made up of large international and local South African companies. Variations around the median may be influenced by factors such as the nature of the assignment, level of experience of the executive, changes in responsibilities, performance track record, and strategic importance of the role. Given the independent benchmarking done, as well as the comparator companies used, this level is considered to be competitive in the appropriate labour market where the executive operates.

Process and benchmarking

A benchmarking of Barloworld's executive directors' guaranteed pay is conducted against Towers Watson remuneration information based on equivalent positions on an annual basis; and
Barloworld uses independent consultants, namely PE Corporate Services, to conduct the exercise. The results are also discussed with PwC, the standing advisers to the remuneration committee.

Role of the remuneration committee

The role of the remuneration committee is to assess the market competitiveness of the guaranteed pay against the result of the benchmarking and the role, responsibility and contribution of each executive director.


Details of the basic salary and guaranteed packages (basic salary plus benefits) paid to each of the executive directors and prescribed officers during 2012 are set out on page 62 below. King III has recently been amended to align itself with the Companies Act which requires the disclosure of the remuneration of prescribed officers. As such, the disclosure of remuneration of the top three earners is no longer required. The company has considered its organisational structure and has identified three prescribed officers, the remuneration of whom are disclosed together with executive directors’.

The increases applicable to the guaranteed packages which are generally effective from 1 October 2012 were in the range of 4% to 7% for overseas executives and in the range of 7% to 7.5% for South African executives, except where there have been changes in responsibilities. In certain cases the rand value of the increases will fluctuate based on currency movements in the year ahead.

Increases for the remainder of the employees in South Africa generally ranged between 7% and 9% on average, with higher increases being applicable to the lower paid workers. The company will continue to review the pay differential between the highest and lowest paid employees.

Short-term incentives


Short-term incentives (annual bonuses) are paid in cash and are based on achievement against 12-month targets aimed at increasing shareholder value.

The criteria for earning a bonus consist of two elements, namely personal objectives (incorporating non-financial measures) and financial performance targets. Threshold, target and stretch performance targets are set by the remuneration committee annually in advance.

Role of the remuneration committee

The remuneration committee determines the financial measures, the weighting and vesting levels on an annual basis. In addition, the remuneration committee reviews the actual performance of the executives against the targets set at the beginning of the relevant year. The ultimate bonus payment is at the discretion of the remuneration committee.

Potential bonus levels

In respect of the 2012 financial year, the percentage of basic salary eligible to be paid as a bonus based on relative achievement against targets (threshold, target and stretch) were:


Performance metric   Threshold
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Operating profit   7.5   22.5   36  
Cash flow   3.8   11.3   18  
ROE   5   15   24  
HEPS   8.8   26.3   42  
Bonus based on financial targets   25   75   120  
Bonus based on personal scorecard objectives   15   22.5   30  
Total potential bonus   40   97.5   150  

Executive directors and prescribed officers

Performance metric   Threshold
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Operating profit   7.5   18   28.5  
Cash flow   3.8   9   14.3  
ROE   5   12   19  
HEPS   8.8   21   33.3  
Bonus based on financial targets   25   60   95  
Bonus based on personal scorecard objectives   15   22.5   30  
Total potential bonus   40   82.5   125  

Performance targets

Group targets apply in the case of the CEO, the financial director, the executive director: human resources, strategy and sustainability and the group general manager: finance. Divisional targets apply for the rest of the executive directors and prescribed officers, with the exception of HEPS which is measured for all on a group basis in recognition of the collective responsibility they bear for the performance of the group as a whole.

The targets set take into account the current trading conditions and challenges being faced by the company or relevant division and incorporate a meaningful level of stretch to motivate and retain senior employees. The threshold targets are set at a level which represents the minimum level of acceptable performance for the business. In line with the group's objectives, the weighting towards operating profit has been decreased and the weighting towards ROE has been increased.

In respect of personal scorecard objectives these would typically include aspects such as safety performance, market share targets, people development and training, sustainable development KPIs, empowerment and transformation objectives, customer loyalty and growth, relationships with principals, aftermarket growth targets, acquisitions, disposals and special projects.

The following targets are set for achievement against personal scorecard objectives and the linkage to bonus payout:

Personal objectives Scorecard
  Bonus as a
of salary
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Threshold 70   15  
Target 85   22.5  
Stretch 100   30  

Therefore, a bonus of up to 30% of annual basic salary can be earned where 100% of personal scorecard objectives are achieved. The threshold target is 70% achievement of personal objectives in which case 15% of annual basic salary can be earned as a bonus, with zero payable below 70% achievement. The personal objectives component of the scheme is the same for the CEO and executive directors.


Annual bonus payments are paid in cash following finalisation of the company's audited financial results for the year in question and are not deferred.

Bonus payments made to executive directors and prescribed officers in 2012 are disclosed on page 62 of this report.

The actual performance against targets agreed by the Remuneration committee at the beginning of the year for assessment of the financial component of short-term incentives is as follows:

Group executives

Group financial targets for operating profit, ROE, HEPS and cash flow apply to the CEO, the financial director, the executive director: human resources, strategy and sustainability and the group general manager: finance. Group operating profit for the year ended 30 September 2012 increased by 31%, ROE rose by 2.7 percentage points and HEPS increased by 46%, while the cash outflow for the year was R2 037 million. This performance exceeded stretch targets approved by the remuneration committee in respect of operating profit, ROE and HEPS. However, the Threshold for cash flow was not met resulting in no incentive accruing in respect of this component.

Divisional executives

Specific divisional financial targets for operating profit, ROE, HEPS and cash flow are approved by the remuneration committee for the divisional executive directors and prescribed officers. However, group HEPS is also used as one of their targets in view of their group wide responsibility as members of the group executive committee.

The Equipment southern Africa and Russia businesses and the Automotive and Logistics division exceeded stretch targets for operating profit and ROE. In respect of the cash flow component, the equipment businesses did not achieve Threshold while Automotive and Logistics exceeded Target. Equipment Iberia did not meet Threshold with respect to operating profit or ROE but achieved the stretch target for cash flow. In the Handling division, threshold was not achieved in any of the three divisional financial components.

Based on the above, bonuses as a percentage of basic salary for the year ended 30 September 2012, were calculated as follows:

  Financial metric component   Actual
as %
of salary#
bonus as a %
of salary
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      Operating profit   ROE   Cash flow   HEPS          
CB Thomson 23.2%   36.0%   24.0%   0%   42.0%   125.2%   150%  
Executive directors                            
PJ Blackbeard 24.2%   0%   0%   0%   33.3%   57.5%*   125%  
PJ Bulterman 24.5%   28.5%   19.0%   0%   33.3%   105.3%   125%  
M Laubscher 23.3%   28.5%   19.0%   11.2%   33.3%   115.3%   125%  
OI Shongwe 21.5%   28.5%   19.0%   0%   33.3%   102.3%   125%  
DG Wilson 23.5%   28.5%   19.0%   0%   33.3%   104.3%   125%  
Prescribed officers                            
D Sewela 24.5%   28.5%   19.0%   0%   33.3%   105.3%   125%  
V Salzmann 18.0%   0%   0%   14.2%   33.3%   65.5%   125%  
IG Stevens 23.5%   28.5%   19.0%   0%   33.3%   104.3%   125%  

# The actual short-term incentive rand amount expressed as a percentage of the basic salary may differ slightly with the above percentages owing to exchange rate fluctuations during the year on offshore salaries, where applicable.
* Given the strategic decision taken during the year to dispose of Handling US and UK the executive responsible for the division, PJ Blackbeard, was tasked with an overriding primary responsibility for executing on these transactions. He was awarded a special bonus of GBP50 000 (R666 200) for successfully concluding these disposals and securing the receipt of the cash proceeds of R1 091 million prior to financial year-end. This increased his total bonus as a percentage of basic salary from 57.5% reflected above to 76.5%

The directors’ and prescribed officers’ remuneration for the year ended 30 September 2012 was as follows:

2012 Salary
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Executive directors                            
PJ Blackbeard 3 323   426   183   852   4 784   2 671   7 455  
PJ Bulterman 3 671   605   231   21   4 528   3 848   8 376  
M Laubscher 4 640   935   248   6   5 829   5 335   11 164  
OI Shongwe 2 656   493   228   4   3 381   2 707   6 088  
CB Thomson 6 323   1 073   266   24   7 686   7 871   15 557  
DG Wilson 3 164   717   246   10   4 137   3 277   7 414  
Total executive directors 23 777   4 249   1 402   917   30 345   25 709   56 054  
Prescribed officers                            
V Salzmann 2 722   170   115   606   3 613   1 867   5 480  
DM Sewela 2 600   442   240   36   3 318   2 736   6 054  
IG Stevens 1 945   332   286   4   2 567   2 027   4 594  
Total prescribed officers 7 267   944   641   646   9 498   6 630   16 128  
Grand total 31 044   5 193   2 043   1 563   39 843   32 339   72 182  

Further details relating to past periods are provided on pages 90 and 91 of the consolidated annual financial statements on the AGM document CD.

Long-term incentives


The company operates the following long-term incentive plans:

The Forfeitable Share Plan (FSP);
Share Appreciation Right (SAR) Scheme; and
the Share Option Scheme (SOS), no longer in use, but with outstanding awards.

It is essential for the group to retain skills over the longer term and to motivate and incentivise executive directors and other senior employees to drive sustainable value creation over multiple reporting periods and to be shareholders of the company. This is achieved through long-term incentive plans and annual awards using the FSP and SAR Scheme. In the case of the executive directors and prescribed officers, the FSP is 25% retention driven and 75% performance driven and the SAR Scheme is 100% performance driven.

Awards made to executive directors and prescribed officers during the 2012 financial year, details of vesting/exercise, and a summary of holdings are disclosed on pages 93 to 95 of the consolidated annual financial statements on the AGM document CD.

Role of the remuneration committee

On an annual basis, the remuneration committee determines the quantum of awards to be made, the performance targets and mix of instruments to be granted to eligible employees.

Forfeitable share plan (FSP)

Barloworld uses the FSP as both an incentive tool for long-term value creation as well as for retention purposes. In the case of executive directors, approximately 25% of FSP awards are allocated for retention purposes. The purpose of the FSP is to provide senior executives with the opportunity to acquire shares in Barloworld and to ensure that key skills are retained and to align the interest of participants with shareholder interests. Non-executive directors are not eligible to participate in the FSP.

Awards are structured as forfeitable share awards. This means that participants receive shares (including dividend and voting rights) on the date of award but those shares are subject to restrictions and a risk of forfeiture during a three-year vesting period. In addition, in respect of executive directors, the vesting of the majority of the forfeitable share award is subject to the satisfaction of performance targets. To the extent that the performance targets are not achieved, those shares subject to the targets will be forfeited and there will be no re-testing of the performance targets. The performance targets are measured over a three-year period.

Awards were granted under the FSP on 30 March 2012 and the vesting period will expire on 29 March 2015. The performance period commenced on 1 October 2011 and will expire on 30 September 2014. Details of the award are disclosed on page 81 of the consolidated annual financial statements on the AGM document CD.

Performance targets

Following consultation with certain large shareholders, various changes were made to the FSP’s performance targets in 2012. ROE previously used was replaced by RONA and the weightings used for performance targets were amended to place greater emphasis on improving return on capital as is illustrated in the table below.

In respect of awards granted under the FSP on 30 March 2012, the following performance conditions, weighting and performance periods were applicable to the number of shares awarded. Linear vesting on a sliding scale will be applied between threshold and target performance:

Condition Below
(vesting %)
(vesting %)
(vesting %)
  Weighting of
conditions (%)
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Continued employment condition 25   25   25       Applies until the vesting date  
Performance conditions:                 1 October 2011 to
30 September 2014
– TSR 0   3.4   11.3   15      
– HEPS 0   5.6   18.8   25      
– RONA 0   13.5   45   60      
Maximum vesting 25   47.5   100   100      

The following Targets were set for the respective performance conditions and below Threshold there is zero vesting:

Condition Threshold   Target  
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TSR Median of peer group   Upper quartile of peer group  
HEPS 0% real growth   50% real growth  
RONA 13%   18%  

The remuneration committee considers the Target performance levels for TSR, HEPS and RONA to be stretching in the context of the company's business strategy and the market conditions.

In respect of awards to be granted during the 2013 financial year, it is envisaged that similarly structured performance targets will be set. The exact targets will be determined by the remuneration committee at the time of award.

The following comparator group was used in the TSR condition:

Bidvest Group Limited
Imperial Holdings Limited
Eqstra Holding Limited
Remgro Limited
Bell Equipment Limited
Aveng Limited
Murray and Roberts Holdings Limited
Steinhoff International Holdings
Nampak Limited
Reunert Limited

The first awards under the FSP were made in 2010 and progress to date indicates that the 2010 performance targets in respect of HEPS and ROE are likely to be achieved. The 2010 TSR performance is likely to lie between the threshold and target.

Share appreciation rights (SAR)

The SAR has been developed with the object and purpose of providing employees with an opportunity to benefit from growth in the value of the ordinary shares of Barloworld. The SARs are subject to a three, four and five-year vesting period. All SARs will lapse if not exercised within six years from date of grant. The first four awards (2006 to 2009) were cash-settled.

As from 2011, awards made under the SAR will be equity-settled. From 2007, the entire SAR award was subject to a performance target.

Awards were granted under the SAR on 30 March 2012 and the vesting will occur in equal tranches of 1/3rd on 29 March 2015, 29 March 2016 and 29 March 2017. The performance period commenced on 1 October 2011 and will expire on 30 September 2014. All SARs must be exercised by 29 March 2018.

Performance targets

In the case of the SAR there is an inherent performance condition in that they are granted at a strike price equal to the current share price at date of issue and recipients therefore only benefit to the extent of future appreciation in the share price. They are also subject to an additional minimum performance condition as set out in the table below.

The exercise (strike) price for the SAR award to directors and employees in March 2012 was R96.48. Based on the year-end share price of R71.90, these awards currently do not have any intrinsic value.

Details of the award are disclosed on page 82 of the consolidated annual financial statements on the AGM document CD.

The performance vesting conditions and period pertaining to the 2012 SAR award are:

Target performance condition Below
(vesting %)
(vesting %)
(vesting %)
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HEPS plus CPI plus 6% over a three-year performance period 0%   25%   100%   Linear vesting applies between the threshold and target   1 October 2011 to
30 September 2014

The performance target in respect of the 2009 award was achieved in November 2012 and the remuneration committee will meet before the vesting date to formally approve the number of SARs which vest and those which are exercisable from the vesting date.

Share option scheme (SOS)

The majority of the share options issued under this plan have matured and the remaining options to be exercised constitute a small portion of the current incentives in operation. The scheme is no longer in operation, no share options have been granted since 2004 and all remaining unexercised share options have vested.

283 172 share options remain outstanding under the SOS with the last share options expiring in 2013. Unexercised options held by directors total 6 667.

Overall reward mix

The graph below shows the mix between guaranteed packages, STI (paid during the year) and LTIs (estimated expected value on award date, of awards made during the year) for executive directors and prescribed officers.

Overall mix

This is deemed to provide an appropriate balance between fair guaranteed pay for the responsibilities assumed in the role, a variable short-term incentive based on targets achieved in the current financial year and a long-term incentive which aligns with shareholder value creation over a period of time.

The detailed breakdown by director and prescribed officer of the guaranteed pay, STI and LTI elements of remuneration are provided in note 35 on pages 90 to 95 of consolidated annual financial statements on the AGM document CD.

Share plan dilution

A maximum of 22 744 049 shares may be allocated under the FSP, SAR and SOS. The maximum number of unvested FSP awards which may be made to any one participant is 568 601 and the maximum number of unvested SARs granted to any one participant may not exceed 1% of the issued ordinary share capital of the company.

Executive contracts and policies

Executive directors are subject to indefinite term service contracts to normal retirement age with a notice period of nine months in the case of the group executive and six months in the case of the other executive directors. The main terms of the service contracts applicable to executive directors can be summarised as follows:

Provision Policy
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Contract term   Indefinite (or until normal retirement age in the relevant jurisdiction) subject to specified notice periods by the executive and company
Notice period   Nine months for the group CEO and six months for executive directors
Remuneration   Salary
Car benefit
Retirement fund
Medical aid
Eligible to participate in annual short-term incentive plan (subject to rules of plan)
Eligible to participate in the FSP and SAR (subject to rules of plan)
Termination of employment and change of control payments and/or automatic vesting of long-term incentives   Change of control clauses are covered by FSP and SAR rules and allow for proportionate vesting of awards. Change of control clauses in employment contracts provide for redundancy terms, based on established guidelines, in the event of termination of employment within six months of change of control
Restraint of trade
Other benefits
  Not applicable
Certain executives may be employed in terms of expatriate contracts which include typical expatriate benefits in addition to the standard benefits

Non-executive directors

The appointment of non-executive directors (NEDs) is governed by a letter of appointment that sets out, among other things, the term of appointment, duties and responsibilities, fees and other payments, and termination of services.

NEDs receive a standard fee for their services on the board and board committees, instead of a base fee and an attendance fee per meeting as recommended by King III. The remuneration committee reviews the level of fees and makes recommendations to the board for consideration. A benchmarking exercise was conducted in November 2010 by the company's outside independent remuneration advisor, and NED fees were benchmarked against nine peer group companies in the industrials and associated sector. In terms of Barloworld's memorandum of incorporation, fees payable to NEDs must be approved by shareholders in general meeting. The current level of fees payable to non-executive directors was approved by Barloworld's shareholders at the annual general meeting held on 25 January 2012.

Fees for NEDs during the current financial year and proposed fees for the 2013 financial year are set out in the notice to the annual general meeting on page 5 of this document.


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