Remuneration report

 

The total average remuneration sacrifice per the above actions is shown in the table below:

	TOTAL AVERAGE REMUNERATION SACRIFICE, INCLUDING SUSPENDED RETIREMENT FUND CONTRIBUTIONS %
Group executives	25%
Senior management	21%
Middle management	18%
Junior management/supervisors	14%

• Retention scheme payments were suspended.
• A moratorium on external appointments was implemented.
• Unavoidable group-wide restructuring processes were implemented.
• Non-executive directors' fees were reduced by 25% for a period of three months.

The subdued trading conditions further impacted the remuneration considerations for the year under review, which are summarised below and set out in detail under the Remco governance section:

• The salaries of executives and all other employees affected by the salary sacrifice plan and the suspension of contributions to retirement funds and retention awards effected in May 2020 was originally for a period of 12 months. However, after considering various factors such as the lifting of COVID-19 restrictions, the gradual resumption of economic activity in most operating regions and increased employee retention risks, Remco approved a proposal to reinstate salaries to normal, recommence pension fund contributions and resume retention scheme payments to current participants, from 1 December 2020.
• The short term incentive ("STI") scheme principles indicate that if at least one of the financial metrics are met, STIs are payable in proportion to that metric. The free cash flow metric was met by the Group in 2020, thus triggering a potential STI payment (refer to details included in the implementation section of the report). Although the economy was showing signs of recovery as outlined above, the Remco took a decision not to pay STIs to executives and eligible employees in southern Africa in light of the long term operating environment uncertainty that still remains in the region. However, STIs will be paid as per normal principles in Russia as the Russian operation was not as significantly affected by COVID-19 and did not have to implement the extent of austerity measures (such as restructuring as in the case of southern Africa).
• Annual salary increase processes for all employee levels, including executives, were suspended, i.e. no annual increases were effected in respect of the forthcoming year.
• Non-executive directors will not receive any fee increases for the forthcoming financial year.

In addition to the above measures, we also had to pay close attention to how we calibrate forward-looking performance conditions that will drive our strategy, be meaningful for our employees and create shareholder value during these difficult times. In this regard, targets for the 2021 STI financial metrics were designed with reference to the expected economic recovery, taking into account the 2021 approved budget as well as FY2019 pre-COVID-19 results. The targets for the 2021 long term incentive ("LTI") awards were also designed with reference to the uncertainty of the economic recovery post the COVID-19 pandemic and portfolio changes aligned to developments in the Group's strategy.

Full details on how our performance metrics link in with our strategy, including targets, are provided in more detail in section 2 of the report.

VOTING AND SHAREHOLDER ENGAGEMENT

We were pleased with the high levels of shareholder support received at our previous AGM in support of our new Conditional Share Plan (CSP) and amendments to our existing Forfeitable Share Plan (FSP) (98.59% and 98.51% approvals, respectively).

At the same time, we were disappointed with the remuneration voting outcomes in respect of our remuneration policy and implementation report (76.34% and 56.03% support, respectively). As a result of these voting outcomes, we engaged our shareholders in March 2020 and again during the first two weeks of October 2020. These sessions were attended by a broad range of shareholder representatives and/or proxy advisors.

The committee listened carefully to ideas and suggestions from shareholders and the main themes of this feedback have been used to continue the evolution of our remuneration system. The issues that were raised by shareholders or proxy advisors, together with our responses, are listed in the tables that follow.

 

SHAREHOLDER CONCERNS		OUR RESPONSES
REMUNERATION POLICY
Clarification of the link between remuneration and our strategy was requested		Despite the impact of COVID-19, we remain committed to achieving our growth ambition as stated in our strategy which is outlined in detail here in the integrated report. Accordingly, our remuneration approach remains geared towards incentivising outstanding performance in order for us to achieve our ambition of sustainably doubling intrinsic value for the benefit of all stakeholders. This ambition is underpinned by the following strategic objectives which we reference for our variable pay (STI and LTI) metrics as reflected in the table below: Deliver top quartile shareholder returns Drive profitable growth Instill a high-performance culture STI  LTI - (FSP and CSP) Deliver top quartile shareholder returns  Return on equity (ROE) √  Return on invested capital (ROIC) √  √  Headline earnings per share (HEPS) √  √  Drive profitable growth  Economic profit (EP) √  Free cash flow (FCF) √  √  Instil a high performance culture  Diversity and inclusion objectives  √  Internal audit and compliance objectives  √  Individual/personal scorecard objectives (aligned to team and business performance which include safety, customer service, leadership and other role-based metrics) √  While the above objectives have not changed as a result of COVID-19, the financial performance targets thereof have been designed with reference to the economic recovery uncertainty that remains as a result of the COVID-19 pandemic. This is also in line with the review of the company's growth strategy and budget. Full details on the metrics and targets are disclosed in more detail in section 2 of the report.
Further details on the use of economic profit ("EP") in the STI was requested		EP is fundamentally linked to ROIC (in fact, the underlying components of ROIC and EP are the same - being Net operating profit and Invested capital) and measures the value accretion or destruction of a business relative to its total cost of capital. We therefore believe that both EP and ROIC are better measures of value as they evaluate the economic value creation over time rather than accounting profits, and there is a positive correlation between economic profit and total shareholder returns. We appreciate that the various elements to this measure may make recalculation complex, and we have included more definitions of the respective elements thereof in our financial statements.
Details around targets for diversity and inclusion measures in the STI were requested		Diversity and inclusion (D&I) targets are based on the attainment of specific workforce targets (gender and race) which are set at Group and Divisional level in relation to South Africa's Economically Active Population (EAP) or with reference to Localisation targets in countries outside of South Africa. Targets are focused on improving diversity at middle, senior and executive levels (grade 11 and above). The targets set and the achievement against same are annually approved by the Sustainability, Ethics, and Transformation Committee (SETC). In line with our past practice, the outcomes against the targets set are disclosed in section 3 of this report. Shareholders are also referred to our Social and Ethics report, here for a detailed discussion on our D&I measures. The manner in which these aspects are used in the calculation of the STI is included in section 3 of the report.
In terms of the use of EAP in determining gender targets, a suggestion was made for Barloworld to consider using 50/50 as EAP puts females at a disadvantage, as women are generally not economically active		As explained above, EAP is used as reference for setting base D&I targets in South Africa. However, the company has more stringent targets for female representation for the Group and each of the Divisions e.g. for 2020, the gender representation target was focused on ensuring that 40% of all employees at middle management and above (grade 11 and above) are female. The 40% gender target was achieved in March 2020 when 41% of employees at this level were female. It is therefore pleasing to report that this achievement and our commitment to D&I was recognised at the 2020 8th Gender Mainstreaming Awards through the following awards: Investing in Young Women Women Empowerment in the Workplace (JSE-listed company as well as OVERALL winner in this category) Gender Mainstreaming Champions for 2020 For the years up to 2022, the company is targeting at least 50% female representation at grade 11 and above. In essence, there is a separate and more stringent target for females.
The use of RoIC, RoE and economic profit was questioned. The concern was whether these measures are driving suboptimal capital allocation decisions. Remco was requested to consider including terms that reward/penalise management if planned corporate transactions destroy value		The utilisation of economic profit within our incentive scheme design safeguards shareholder value through the utilisation of targets which require that any capital allocation decisions are accretive in nature. Please refer to the targets set out in section 2. The board is considering the ROIC calculation methodology in light of shareholder commentary raised, with a view to ensuring that the selected methodology reflects an accurate assessment of capital invested vs the current value of the asset base, and that it rewards management on the correct basis, for the correct behaviours.
Disclosure of the constituents used in total remuneration benchmarking was requested		The comparator list of companies used to benchmark both executive remuneration and non-executive director fees was shared with shareholders. The Remco also reviewed the list during the year under review in line with our policy to review same at least every two years. The revised comparator list of companies which we will reference going forward is disclosed in section 2 of this report.
Detail was asked on the remuneration impact of the B-BBEE deal on executives		The Khula Sizwe BBBEE scheme was established to enable black South Africans to own a stake in a significant property company. The financial details are disclosed in full in the company's financial statements (refer to note 39). Executives do not have any preferential treatment in terms of how they participate in the scheme as their participation allocations are proportionate relative to all other participants in the scheme.
Clarification was sought on how the board is managing the conversations when it comes to executive's vested interests, and the fact that property fundamentals have changed with rentals unlikely to even come close to the 8% rental escalation basis for the Khula Sizwe B-BBEE scheme. Specific reference was made on what criteria is used to manage the structure of the loan when executives leave and whether Barloworld would continue to provide security for the loan structure		The Khula Sizwe B-BBEE scheme has its own board and takes decisions independently of the Barloworld executives and board. An executive's termination of employment does not affect the loan as the loan is not made to individuals but to the scheme's Management Trust as a whole and Barloworld has guaranteed the payment of the lease premiums for the 10-year lease period.
Information regarding the company's view on pay gap disclosure in light of the pending company's Amendment Bill 2019 which will impact on pay gap disclosure requirements. The company was also encouraged to consider disclosing gender pay gaps		In line with our fair and responsible pay commitments, the Remco annually reviews the company's pay gaps in order to ensure that executive remuneration is managed appropriately in relation to the remuneration of general employees. We also monitor actions taken to ensure that any existing gaps are addressed. The company does not yet disclose its pay gaps as there is currently no consistent basis in the market for reporting same. The company is, however, willing to disclose pay gaps, including gender pay gaps, once a consistent method for doing so is available.
A suggestion was made that share schemes should ideally align with ultimate strategy delivery ambition as well as shareholder interests. Dividends should also vest at five years based on the delivery of agreed outcomes		The company's share schemes are designed to drive outperformance with more value created for the achievement of above target performance. Awards made in terms of the Conditional Share Plan (CSP) for executives, which was approved by shareholders at our last AGM vest in three years and have a further two-year lock-in/holding period to ensure longer term commitment towards the achievement of stringent strategic delivery outcomes. This results in a total lifespan of awards of five years, which is long compared to the South African market norm of three years. In addition to the above, executives are encouraged to build up and hold shares that vest in order to maintain the appropriate qualifying interest in terms of the company's Minimum Shareholding Requirements policy (refer to section 2 and 3 of the report for further information). This ensures longer term exposure to the share price, and thus,to the delivery of the strategic ambition.
IMPLEMENTATION REPORT
The attraction and retention award to the incoming Group Finance Director (FD) was questioned		Group FD Award explanation We appreciate that the disclosure in our 2019 report was not clear enough. We have since discussed this with shareholders and elaborated on the quantification of the award. We confirmed that the following corporate governance measures are in place in respect of the sign-on award (see definition below) made to the Group FD and for all other employees who participate in the scheme Performance requirements - The amount paid may be withdrawn and/or full award may be repayable if the participant does not meet the agreed performance standards that include delivery against financial and non-financial targets per the company's balanced scorecard-based performance management approach. Repayment liability - Should the GroupFD or any participant resign or be dismissed from Barloworld during the retention period, he/she will become liable for repayment of all milestone amounts paid. The amount to be repaid is equal to the gross amount/s paid, i.e. before the deduction of tax. Malus and Clawback - The entire award is subject to Malus and Clawback in line with our standard policy. Policy changes As a result of shareholder feedback, we decided to review our Attraction and Retention Policy and adopt a clearer Replacement policy (details in section 2), wherein we have clarified that: A sign-on award may be negotiated with a critical or scarce skilled new joiner as a replacement award, in certain limited circumstances where the candidate: stands to forfeit a bonus with the previous employer payable within six months; stands to forfeit shares/options with the previous employer which vest within three to six months; and/or has a cash buy-out for obligations they have to repay to their previous employer (e.g. bursary, lock-in, maternity). For senior and executive level employees of grade 15 and above, all replacement awards linked to bonuses or LTIs will be made in shares subject to performance conditions under the applicable LTI scheme and our Malus and Clawback policy. The Remco will apply a proportional approach to the replacement policy and will keep the cost to a minimum by ensuring that the realistic value of rewards forfeited by changing employer are not exceeded.

Remco governance and planned future actions

ACTIVITIES OF THE REMCO IN 2020

The Remco has, during the year under review and since the year-end, complied with its obligations as reflected in its Terms of Reference, a copy of which can be found on our website at www.barloworld.com. The Remco also complied with the provisions of King IV guide on remuneration governance and JSE Listings Requirements.

The Remco met on five occasions during the financial year under review, i.e. 2020 (4 December 2019, 11 February 2020, 17 April 2020, 13 May 2020 and 22 September 2020) and once (11 November 2020) in the 2021 financial year. Below is a summary highlighting the committee's key considerations at these meetings.

EXECUTIVE REMUNERATION The outcome of the annual review of the remuneration policy and system was considered and the updated policy was approved. The principles under the following headings of the policy were either clarified, enhanced or added in line with feedback received from shareholders:   • Fair and responsible pay   • Benchmarking   • Replacement and retention awards   • Remuneration management and oversight   • Minimum Shareholding Requirements   • Malus and Clawback The cost-saving measures referred to above, were approved. The Remco approved a proposal to reinstate salaries of affected employees, including executives, to normal, recommence pension fund contributions and resume retention scheme payments to current participants, with effect from 1 December 2020 as opposed to 1 May 2021. Executive director remuneration benchmarks conducted with reference to the company's Willis Towers Watson grading system and to the revised comparator group which indicated a general alignment of executive pay to the market, were noted. In line with the company's cost containment strategy, no general annual increases were awarded.

SHORT-TERM INCENTIVES (STIs) The report on the STI mechanics for middle management and below (grades 14 and below) employees was noted. The Remco noted that no changes were made to the STI scheme principles for senior management (grade 15 and above), including executives. There was no restatement of the 2020 STI metrics and targets despite the impact of COVID-19. As outlined above, the Remco considered the STI outcomes for the year under review and decided not to award STI payments for employees, including executives, in southern Africa. The STI scheme's targets for 2021 were approved. The targets were designed with due consideration of the 2021 budget which took the impact of COVID-19 into account as well as FY2019 pre-COVID-19 results.

LONG-TERM INCENTIVES (LTIs) The performance conditions for the 2018 FSP and SAR awards were reviewed. These resulted in a zero-percentage vesting for these awards. The 2020 awards of FSP and CSPs were approved and awarded as normal in March 2020 i.e. before the impact of COVID-19. The Remco normally approves LTI awards at its February meeting. However, the 2021 award values of FSP and CSPs were approved at the November 2020 meeting. Although considered during the company's closed period, the approved award values were settled with no changes after the closed period. This date change, which shall apply for all future awards, was necessary to address the administration challenges experienced when awards are approved close to the March half-year period as settlement thereof is done through normal market purchase after Remco's approval.

NED FEES As indicated above, a decision to reduce non-executive director fees by 25% for a period of three months from May 2021 was taken. In light of the continued focus on cost containment and to align non-executive directors to executives, no increase in non-executive director fees was approved for the 2021 financial year. Non-executive director remuneration, which had been benchmarked against the revised comparator list was noted. Barloworld is in the process of reviewing its non-executive director fee policy. The draft policy sets out the principles and rules governing the responsibilities, fees and reimbursements paid to the company's non-executive directors for executing their duties and responsibilities as members of the board and its various committees. The draft policy was noted and will be considered further at the next meeting. The combination of the risk and audit committees into one committee necessitated a new fee structure for the combined committee members and chairperson. This will be presented for shareholder approval at the forthcoming AGM. The recommendation to pay per project ad hoc fee to members of any new sub-committee established as a result of exceptional circumstances was agreed and will be presented to shareholders at the forthcoming AGM. This is considered necessary as from time to time the board may, in exceptional circumstances, be required to establish a separate ad hoc sub-committee of the board to meet formally on projects requiring additional attention. The chairperson and members of the ad hoc committee will qualify for the ad hoc retainer fee per project. The fee is per project,irrespective of the duration of the project. Further details are disclosed in the Notice of AGM.

SUCCESSION PLANNING There were no executive director or prescribed officer movements during the year under review. The Remco noted management's commitment to ensure that succession plans were reviewed and managed continuously to ensure a strong bench of potential successors for senior management and executive roles.

ADDITIONAL MATTERS The new CSP approved by shareholders at the last annual general meeting was implemented. A pay gap analysis report and management's initiatives to correct these were noted. The Remco will continue to monitor the effectiveness of the corrective actions presented. A Minimum Shareholding Requirements policy was adopted and implemented. An update to the Malus and Clawback policy was approved. A job evaluation and grading policy was considered and approved for implementation across the Group. The Attraction and Retention policy was replaced by a clearer policy on Replacement awards.

REPORTING TO SHAREHOLDERS Outcomes of shareholder engagements and feedback were shared as above. The remuneration report which forms part of the company's integrated report was approved.

FUTURE FOCUS AREAS

As far as future actions are concerned, we will continue to monitor the effectiveness of the remuneration policy and system with particular focus on:

• Containing fixed remuneration costs.
• Ensuring that there is an appropriate mix between short and long term variable pay. This will include reviewing any retention based aspects of the company's long term schemes to ensure alignment to market practice.
• Monitoring progress against variable pay performance conditions to ensure that any potential windfall gains due to targets designed in light of COVID-19 are managed, including by applying Remco's discretion to adjust payouts downwards at the end of the performance period, if required.
• Monitoring progress against actions taken to close pay gaps.
• Reviewing succession plans to mitigate talent risks.

REMCO ADVISORS

PricewaterhouseCoopers (PwC) are the independent advisors to the Remco and attend meetings in an advisory capacity.

PE Corporate Services (now Willis Towers Watson) also assisted management and Remco with remuneration benchmarking matters.

The Remco is satisfied that in rendering their services, the advisors were at all times independent and objective. The advisors attended relevant Remco meetings during the year under review.

I would like to thank the board, the Remco members, Remco advisors and Management for their support and efforts during the year and we are looking forward to your support at the upcoming AGM.

Michael D. Lynch-Bell

Chairman: Remuneration committee

14 December 2020

14        

SECTION 2: REMUNERATION POLICY

The company's remuneration policy is provided below:

REMCO TERMS OF REFERENCE

The Remco assists the board in discharging its remuneration-related oversight responsibilities and operates in line with its Terms of Reference which should be read in conjunction with this Policy.

SHAREHOLDER ENGAGEMENT

Active shareholder engagement is viewed as a critically important aspect. As a result, the Remco engages regularly with shareholders to obtain feedback on the remuneration report and their views on the company's remuneration policy and practices as part of its efforts to ensure transparent, fair and responsible remuneration.

The Remco is responsible for the annual review and approval of the remuneration policy and the implementation report which form part of the company's annual integrated report. The remuneration policy and implementation report are put to separate non-binding advisory votes at the company's AGM. In the event that either the policy and/or implementation report is voted against by 25% or more of the voting rights exercised, the Remco will actively engage with shareholders and report back on the outcomes thereof and on any corrective measures taken.

FAIR AND RESPONSIBLE REMUNERATION

The company takes proactive steps to realise the principle of fair and responsible remuneration. A key principle of the remuneration policy is that all employees should receive remuneration that enables effective participation in the economy. The Remco also considers executive remuneration against the remuneration of all employees across the company to ensure fair and responsible pay. Pay gaps are tracked and managed through relevant measures of income dispersion. Such measures are interpreted in context by considering factors such as the Group or each Division's industry, business models, organisational maturity etc. The Remco oversees the effectiveness of actions taken to, reduce historic inequality and improve the living standards of the lowest-level employees.

The company strives to ensure compliance with legislation governing equal pay for work of equal value. In South Africa, annual pay audits are conducted in terms of the Code of Good Practice on Equal Pay for Work of Equal Value under the Employment Equity Act 1998. Outcomes are used as reference for corrective actions as outlined above.

In addition to the above, the remuneration policy framework aligns with the company's efforts to build a diverse and inclusive workforce that achieves sustainable business outcomes. As a responsible corporate citizen, proud of its history and commitment to diversity and inclusion, the company devotes the necessary focus towards ensuring gender equity and has made great progress, especially at senior management levels.

AUTHORITY LEVELS

The Remco acts under delegated authority of the board to determine and set remuneration levels, except for the fees payable to non-executive directors, which are subject to the approval of shareholders at the AGM. The authority levels are set out below:

	CEO	REMUNERATION  COMMITTEE	BOARD	SHAREHOLDERS
Remuneration policy including incentive plans and provisions applicable to group-wide employees	Proposal	Approval
Executive director remuneration (excluding Group CEO)	Proposal	Recommendation	Approval
Group CEO		Proposal	Approval
Prescribed officer remuneration	Proposal	Approval	Noting
Other Group executives' remuneration (excluding Group CEO)	Proposal	Approval	Noting
Performance target setting and assessment	Proposal	Approval	Noting
Remuneration report	Proposal	Approval	Recommendation	Endorsement
Non-executive director remuneration	Proposal		Recommendation	Approval

REMUNERATION PHILOSOPHY AND APPROACH AND LINK TO STRATEGY

Barloworld's remuneration philosophy is informed by its belief that people perform at their best within an environment that encourages continuous improvement, acknowledges ethical behaviours and great results. The company is therefore committed to creating a safe and enabling environment that empowers employees to delight customers and inspire a world of difference as they develop and grow their careers. The company's holistic approach to remuneration reflects its commitment as shown in the figure below:

 

 

In addition to the above, pay for performance principles apply per the company's performance management processes to encourage the high performance necessary for the achievement of our ambition of sustainably doubling the intrinsic value created. This ambition is underpinned by the following strategic objectives which are particularly used as reference for the variable pay metrics reflected in the table below:

• Deliver top quartile shareholder returns
• Drive profitable growth
• Instill a high-performance culture

	STI	LTI - (FSP and CSP)
Drive profitable growth
Return on equity (ROE)	√
Return on invested capital (ROIC)	√	√
Headline earnings per share (HEPS)	√	√
Drive profitable growth
Economic profit	√
Free cash flow	√	√
Instil a high performance culture
Diversity and inclusion objectives	√
Internal audit and compliance objectives	√
Individual/personal scorecard objectives (aligned to team and business performance which include safety, customer service, leadership and other role-based metrics)	√

Objectives

The remuneration policy contributes towards the achievement of Barloworld's ambition through:

• Defining competitive remuneration parameters for attracting, motivating, and retaining top talent in line with the company's performance imperatives, affordability and long term strategy.
• Rewarding for value created in a way that ensures alignment to the interests of all stakeholders.
• Ensuring adherence to all applicable regulatory requirements and corporate governance guidelines.
• Enabling Remco to execute its mandate.

KEY REMUNERATION ELEMENTS

Barloworld's remuneration comprises:

Guaranteed pay
ELEMENT	POLICY PRINCIPLES
TOTAL GUARANTEED PACKAGE (TGP)	The total guaranteed pay (TGP) comprises basic salary and benefits which may include all types of leave, retirement schemes, medical benefits, car allowances, risk benefits etc. The company's defined market position for TGP is at the 50th percentile or median of the South African national market or the regional markets in which it operates. Benchmarks are conducted annually as a reference for salary review budgets and adjustments. In the case of executives, salary reviews are informed by affordability, inflation, compa-ratio and performance. Remco approves salary review outcomes for all Group executive employees.
Benefits
Benefits	Subject to local competitive practice and legislation, the company provides additional elements of compensation that include retirement and medical aid benefits. In addition to the above, the company provides life assurance, accidental death and dismemberment cover and disability and income protection insurance. Employee benefits are subject to each local country of operation's tax and employment legislation. Retirement schemes The basic annual pensionable earnings (on which contributions to certain benefit funds are based) is calculated as a percentage of TGP. The overall tax-deductible limit that applies to all retirement schemes that an employee contributes to is as per the legislation of that country. Employee and employer contributions vary depending on the fund to which employees belong. Some of the retirement schemes also include risk benefits cover such as death and disability. Medical benefits The medical aid funds vary depending on jurisdiction, divisional company and legislation. Other The multiples of salary for life assurance, accidental death, disability and income protection insurance vary. Relocation allowances Allowances are only paid if contractually agreed. Post-retirement benefits It is not Barloworld policy or practice to provide post-retirement benefits.
Variable pay – Short Term Incentives (STI)
ELEMENT	POLICY PRINCIPLES
STI PLAN	The STI rewards short term performance through an annual incentive calculated as a percentage of basic salary. STI metrics and targets are approved annually by the Remco. STI for senior management and executives (grade 15 and above) The STI is performance-based and measured against pre-determined objectives aligned to the grade and specific role of each participant. STIs are paid annually subject to performance and after sign-off by external audit of the financial results of the company as well as Remco's approval. STI balanced scorecard categories and weightings The performance scorecard categories and weighting guidelines for executive participants for the 2021 year are as follows: STI WEIGHTING FOR DIVISIONAL CEOS %  STI WEIGHTING FOR GROUP/EXECUTIVES %  Individual/Personal Scorecard  20  35  Internal audit and compliance  10  -  Diversity and Inclusion ("D&I") 20  10  Divisional financials  20  -  Group financials  30  55  Total  100  100  Financial metrics: The Group and divisional STI financial metrics and weightings are as follows: GROUP  FINANCIALS  (%)  DIVISIONAL  FINANCIALS  (%)  Economic Profit (EP) 30  35  Free Cash Flow after interest (FCF) 30  35  Return on Equity (ROE) 25  –  Return on Invested Capital (ROIC) –  30  Headline Earnings per Share (HEPS) 15  –  Total  100  100  Financial multiplier: At least one financial metric must achieve threshold before the STI pays. This prerequisite, which is in the form of a financial multiplier curve, escalates at an increasing rate between threshold and target and at a higher rate between target and outperformance. This ensures that the STI remains self-funding. Non-financial metrics: The STI non-financial metrics are as follows: Diversity and inclusion objectives are based on the attainment of specific workforce diversity and inclusion targets (gender and race). In South Africa targets are set in relation to the country's EAP at Group and divisional level while localisation is referenced for countries outside South Africa. Targets are approved and delivery against same monitored by the sustainability, ethics, transformation committee (SETC) and Remco. Internal audit and compliance objectives are based on the attainment of specific internal control and compliance that are approved by the audit committee. Individual/personal scorecard metrics are aligned to team and business performance and include Barloworld Business Systems (BBS), safety, customer service, leadership, and other role-based non-financial elements. STI targets: Targets for the year under review and achievements for the financial and non-financial metrics are detailed in the implementation section.
ELEMENT	POLICY PRINCIPLES
STI PLAN	STI Cap and formula: The STI is capped at 200% of annual basic salary for the Group chief executive officer and 175% for other executives (including executive directors and prescribed officers). The full STI calculation formula is included in the implementation section. STI earning levels: The percentage of basic salary paid relative to achievement against targets (threshold, target and outperformance) is as follows: For the Group CEO: SCORECARD ELEMENTS  THRESHOLD  %   TARGET  %   OUTPER-  FORMANCE  %   % of STI based on financial targets (Group) -  27.5  55  % of STI based on personal scorecard objectives  -  17.5  35  % of STI based on diversity objectives  -  5.0  10  Sub-total  -  50.0  100  Financial multiplier  -  105  100  STI Cap   200  200  200  Total STI%  -  105.0  200  For the Group FD: SCORECARD ELEMENTS  THRESHOLD  %   TARGET  %  OUTPER-  FORMANCE  %   % of STI based on financial targets (Group) -  27.5  55  % of STI based on personal scorecard objectives  -  17.5  35  % of STI based on diversity objectives  -  5.0  10  Sub-total  -  50  100  Financial multiplier  -  105  100  STI Cap  175.0  175  175  Total bonus  -  91.9  175  For the Prescribed Officers: SCORECARD ELEMENTS  THRESHOLD  %   TARGET  %   OUTPER-  FORMANCE  %   % of STI based on Group financial targets   -  15.0  30.0  % of STI based on Divisional financial targets   -  10.0  20.0  % of STI based on personal scorecard objectives (including safety) -  10.0  20.0  % of STI based on Internal audit and compliance objectives  -  5.0  10.0  % of STI based on diversity objectives  -  10  20.0  Sub-total  -  50  100  Financial multiplier  -  105  100  STI Cap  175.0  175  175  Total bonus  -  91.9  175  Malus and Clawback: STIs are subject to a Malus and Clawback policy.
ELEMENT	POLICY PRINCIPLES
STI PLAN	STIs for middle management and below (grade 14 and below) Due to the diversified nature of the business, each of the divisions have their own bonus or 13th cheque scheme for employees at grade 14 and below (middle management and below in operational levels). These details are in the Remuneration and Reward policies of the respective divisions. The payment of Divisional bonus plans is subject to the same business financial performance conditions at all levels. Participation in the Divisional bonus or 13th cheque scheme for grade 14 and below employees is at the relevant division's Remco's discretion (or as per formal agreements with bargaining councils and/or unions for unionised staff).

2021 STI targets

The 2021 financial objectives were designed with reference to the expected economic recovery taking into account the 2021 approved budget as well as FY2019 pre-COVID-19 results. The company's 2021 targets are as follows:

Metric (Pre-IFRS 16) Threshold  Target  Outperform  Economic Profit (million)       Equipment southern Africa  (R943) (R365) R33  Equipment Russia  $2.3  $6.4  $9.4  Equipment Mongolia  ($10.9) ($10.5) ($10.2) Automotive & Logistics  (R1 097) (R544) (R149) Logistics  (R206) (R124) (R41) Ingrain  (R288) (R258) (R227) Group  (R2 897) (R1 636) (R428) HEPS (cents)       Group  (96) 536  1 167  Free cash flow to firm after        Equipment southern Africa  R618  R940  R1 330  Equipment Russia  $24.4  $31.5  $39.1  Equipment Mongolia  $7.9  $9.9  $11.9  Automotive & Logistics  R773  R1 138  R1 571  Logistics  R78  R127  R188  Ingrain  R342  R428  R513  Group  R1 623  R2 708  R4 064  ROE (%)       Group  (1.9) 4.2  10.7  ROIC (%)       Equipment southern Africa  3.4  9.2  14.1  Equipment Russia  14.3  16.3  18.1  Equipment Mongolia  5.0  5.9  6.6  Automotive & Logistics  1.4  6.7  11.8  Logistics  0.4  5.4  10.3  Ingrain  7.8  8.4  9.1  Group  0.7  6.8  12.0

Sales incentive schemes
ELEMENT	POLICY PRINCIPLES
SALES INCENTIVE SCHEMES	Barloworld runs commission structure schemes for employees in sales roles. The details of each scheme are outlined in the respective Divisional Remuneration policies.
Variable pay – Long Term Incentives (LTI)
ELEMENT	POLICY PRINCIPLES
LTI PLAN	LTIs drive the alignment of management and shareholder interests through long term plans that have both performance and retention conditions. LTI performance metrics and targets are approved annually by the Remco. In countries where local conditions do not support the granting of share-based awards, the LTI scheme is replaced with a deferred bonus scheme. Instruments LTIs for executives (grade 19 and above): Executives participate in two share plans, namely the Conditional Share Plan (CSP) and the Forfeitable Share Plan (FSP): The CSP is structured as conditional rights to shares which will vest and be settled after the satisfaction of employment and performance conditions. Dividend equivalents in the form of shares will be settled at the end of the CSP vesting period - meaning participants will get an additional number of shares, based on the value of dividends over the three-year vesting period for the number of vested shares. The purpose of the CSP is to drive out-performance over the long term and stretching performance conditions with commensurately larger vesting levels therefore apply. The FSP is structured as restricted shares and employees are therefore the owners of the shares and will get all shareholder rights from award date onwards. Performance and retention awards are made under the FSP. The LTI opportunity is made up of 70% CSP awards and 30% FSP, which in turn comprises 25% retention awards and 75% performance awards. The LTI is therefore heavily weighted towards performance (92.5% of the total award). LTIs for senior management below executive level (grade 15 to 18): These employees participate in the FSP only and receive an equal mix of performance (50%) and retention awards (50%). Award levels The Remco annually approves the quantum of awards to be made, the performance targets and the mix of instruments to be granted to eligible participants. Award levels are based on the participant's job grade.During 2020, the award methodology changed from awarding on expected value to awarding on face value in line with market practice. The maximum award for any financial year is capped at a competitive percentage of total guaranteed pay, with maximums as follows for Group executives: GRADE  CSP  FSP  PERFORMANCE  FSP  RETENTION  TOTAL FACE  VALUE AS A  % OF TGP  Group CEO   23  93%  30%  6%  129%  Group FD and Prescribed officers  20  70%  22.5%  4.5%  97%  Other Group executives  19  58%  19%  4%  81%  Performance measures, targets, and vesting levels Each metric has a target that is tested separately (see table overleaf). This means that the awards with performance conditions only vest to the extent that the performance conditions have been met. If the relevant target is not achieved, the awards do not vest on the vesting date and lapse. Where an award or a portion thereof lapses, the employee loses all entitlement and rights to those shares.
	Target setting The targets for the 2021 long-term incentive awards were designed with reference to the uncertainty of the economic recovery post the COVID-19 pandemic and portfolio changes aligned to developments in the Group's strategy. FSP In line with the above, the 2021 performance targets for the performance-based FSP are as follows: METRIC  WEIGHTING  THRESHOLD  TARGET  STRETCH  FSP  HEPS  25%  CPI growth rate per annum  CPI + 2% growth rate per annum    FCF  35%  EBITDA FCF conversion - 40%  EBITDA FCF conversion - 50%  N/A ROIC  40%  10%  13%    Linear vesting levels apply METRIC  WEIGHTING  BELOW THRESHOLD  THRESHOLD  TARGET  STRETCH  Total FSP retention  25% of the awards will vest provided that the participant is still employed by Barloworld at time of vesting    FSP performance  Total  0%  22.5%  75%      HEPS  25%  0%  5.6%  18.8%    FSP performance metrics  FCF  35%  0%  7.9%  26.2%  N/A    ROIC  40%  0%  9%  30%      Total  25%  47.5%  100%    CSP To ensure alignment at all participant levels, similar performance metrics are applicable to the CSP whose 2021 targets are reflected in the table below. Unlike the FSP, the CSP includes stretched targets commensurate with the potential maximum vesting of 250%. Value will accrue in a linear manner from above threshold up to the maximum potential vesting. METRIC  WEIGHTING  THRESHOLD  TARGET  STRETCH    HEPS  25%  CPI growth rate per annum  CPI + 2% growth rate per annum  CPI + 4% growth rate per annum  CSP  FCF  35%  EBITDA FCF conversion - 40%  EBITDA FCF conversion - 50%  EBITDA FCF conversion - 60%    ROIC  40%  10%  13%  16%
	At threshold performance, there will be no vesting of CSP awards. However, above this level of performance, value will accrue in a linear fashion, up to the maximum potential vesting of 250% of the allocation quantum, for stretch performance. PERFORMANCE CONDITION  WEIGHTING  THRESHOLD  TARGET  STRETCH  ROIC  40%  0%  12.0%  100.0%  FCF  35%  0%  10.5%  87.5%  HEPS  25%  0%  7.5%  62.5%  Total  0%  30.0%  250.0%  Vesting periods FSP and CSP awards vest after a three-year period. Furthermore, in the case of the CSP, a two-year post-vesting holding period in which trading will be prohibited, applies. This will contribute to the satisfaction of Minimum Shareholding Requirements ("MSR"). Dilution limit Awards are settled by market purchase. The limit is 5% (up to FY19 the limit was 10%) of issued share capital between the CSP and FSP. The individual limit is 1% of issued shares between the CSP and FSP. Malus and Clawback Malus will be applied throughout the vesting and holding period for the CSP (i.e. throughout the five-year period), and throughout the three-year vesting period of the FSP. Clawback will be applied for three years after the holding period of the CSP (i.e. years six to eight), and for three years after the vesting date of the FSP. PREVIOUSLY USED LTI Share Appreciation Right Scheme (SAR) The introduction of the CSP resulted in the discontinuation of the SAR. The final tranche of the awards made under the SAR scheme in February 2019 will therefore vest in tranches, with the last tranche vesting in March 2024. Full details of outstanding awards are disclosed in section 3.
Replacement and Retention Scheme
ELEMENT	POLICY PRINCIPLES
REPLACEMENT AND RETENTION SCHEME	As a result of shareholder feedback, the previous Attraction and Retention policy has been replaced with a clearer Replacement and Retention policy. Purpose of the policy The policy sets out fair and consistent parameters for the limited use of the company's Replacement and Retention Scheme to attract and retain individuals with the strategic, critical and scarce skills required for the creation and maximisation of shareholder value. Award types The company believes its regular incentives are compelling enough to attract the right talent to the business. In line with this, a replacement award is only offered in instances where a new joiner stands to forfeit incentives from a previous employer. Therefore, a sign-on cash award may be negotiated with a new joiner as a replacement award, in certain limited circumstances where the candidate: stands to forfeit a bonus with the previous employer payable within six months stands to forfeit shares/options with the previous employer which vest within three to six months has a cash buy-out for obligations the candidate has to repay to his/her previous employer (e.g. bursary, lock-in, maternity) possesses scarce competencies which are required by the business. The Remco applies a proportional approach to the replacement policy to keep the cost thereof to a minimum by ensuring that the realistic value of awards forfeited by changing employer are not exceeded. For senior and executive level employees (grade 15 and above), replacement awards linked to bonuses or LTIs will be made in shares subject to performance conditions under the applicable LTI scheme and our Malus and Clawback policy. A retention award is an award to retain the services of an employee over the long term, either awarded as shares under the FSP as above and subject to our Malus and Clawback policy (preferred and routine approach) or cash (only in exceptional circumstances). Conditions Awards are generally made in shares in terms of the company's existing share plans. Awards are subject to work-back and/or recovery agreements if set performance milestones are not achieved, and if employment is terminated. All awards are further subject to the company's normal Malus And Clawback policy. Retention period for both replacement and retention awards A maximum retention period of 36 months applies.

JOB GRADING

Barloworld uses the Willis Towers Watson Global Grading methodology and structure to represent the level of compensation paid for similar positions thus ensuring internal equity and external competitiveness. Using this method, the company or executive grade is determined with reference to the following key elements:

• Business size - sales turnover
• Organisational size - employment numbers
• Type of customers and regional operations

BENCHMARKING

Reputable surveys used provide industry differentials compared to the overall market. Macroeconomic factors are also taken into consideration when compared to market and survey information is always adjusted to take both the assumed movement in salaries and the time elapsed between the date of the survey and the date of analysis (i.e. the data is appropriately "aged" in line with macroeconomic patterns).

MARKET REFERENCE FOR EXECUTIVE DIRECTORS, PRESCRIBED OFFICERS AND NON-EXECUTIVE DIRECTORS

For executive directors and prescribed officers, remuneration is benchmarked using PE Corporate Services using the Willis Towers Watson grading system where a Global Grade for the Group and for each of its divisions is determined against companies in the national market (South Africa).

In addition to the above, PwC assists Barloworld with the determination of the comparator group that is used for the purposes of performing remuneration benchmarks for both executives and no-executive directors. The comparator group is assessed for appropriateness every two to three years. During the 2020 financial year, the 2018 comparator group was assessed and a new comparator group was determined. The 2020 comparator group, which was determined with reference to comparable factors such as company size, performance, nature of business and operating regions, comprises of the following JSE listed and international companies.

Aggreko Plc	Northam Platinum Ltd
AVI Ltd	Sibanye Stillwater Ltd
Bidvest Ltd	Sime Darby Berhad
Finning international Inc.	Super Group Ltd
Grafton Group Plc	Textainer Group Holdings Ltd
Grindrod Ltd	Tiger Brands Ltd
Impala Platinum Holdings Ltd	Tongaat Hulett Ltd
Kap Industrial Holdings Ltd	Trencor Ltd

REMUNERATION MIX

The remuneration mix is reviewed annually as part of the benchmarking to ensure continued alignment with market practice. The tables and graphs below set out the executive directors and prescribed officers potential pay mix with incentives at below threshold, at target and at stretch or outperformance:

EXECUTIVE CONTRACTS

The main terms of the service contracts applicable to executive directors and prescribed officers are summarised in the table below:

SECTION	PROVISION
CONTRACT TERM	Indefinite - or until normal retirement age in the relevant jurisdiction.
NOTICE PERIOD	Nine months for the Group CEO. Six months for other Group executives.
CHANGE OF CONTROL PAYMENTS	Change of control provisions are covered by LTI (FSP, CSP and SAR) rules and allow for time based proportionate vesting of awards subject to applicable performance and retention conditions. 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.
TERMINATION OF EMPLOYMENT GUIDELINES	Voluntary resignation and dismissal STIs are forfeited, any deferred bonuses/retention scheme payments lapse, and amounts paid are recovered, vested, unvested and unexercised LTIs lapse. Normal retirement Remco has discretion to pro rata STI for period worked during the financial year. Pro rata deferred bonuses/retention payments are recovered based on date of allocation/employment duration. No recovery of amounts paid for retrenched, permanently disabled and death. Pro rata unvested retention FSPs based on the length of employment from date of award. Vesting is accelerated to date of termination of employment for normal retirement and on normal vesting date for early retirement. Pro rata unvested performance FSP, CSP and SAR based on the length of employment from date of award. Performance conditions tested over the full performance period and vest at normal vesting dates. (In case of death, performance conditions are tested to the latest company results and immediate vesting is applied). Mutual separation All elements are subject to the Remco's considered review and approval in line with the rules of the respective schemes
RESTRAINT OF TRADE	Applicable to some executives per their employment contracts.
GARDEN LEAVE	During any period after notice of termination of employment has been given by either party, the company may place the executive on garden leave.
OTHER BENEFITS	Certain executives may be employed in terms of expatriate contracts which include typical expatriate benefits in addition to the standard benefits.

 

MINIMUM SHAREHOLDING REQUIREMENTS

In line with global best practice and shareholder expectations, the company has adopted a MSR policy. The aim of the policy is to encourage all executive directors, prescribed officers and members of the Group executive committee to acquire and hold shares in the company as a means of reinforcing the alignment of interest between executives and shareholders. The executives are expected to build up and maintain a targeted qualifying interest in shares in the company over a period of five years from the date that the company approved the policy (September 2020) or when the executive is appointed in their role. The targeted qualifying interest is determined as a multiple of their Total Guaranteed Pay ("TGP") as follows:

• Group CEO: 200% of TGP
• Group FD: 150% of TGP
• Prescribed officers and executive committee members: 100% of TGP

Executives must achieve the Target Minimum Shareholding by the end of the five-year period and progress towards achieving the Target Minimum Shareholding will be evaluated annually as outlined in the policy.

In the event that the Remco is not satisfied that the executive has met the MSR or is not on track to meet the MSR, the Remco will invite the executive to provide an explanation to justify the lack of compliance with the MSR policy and also consider methods that can be adopted by the executive to ensure compliance.

MALUS AND CLAWBACK

To further align the interests of executives with those of shareholders, all variable remuneration as well as replacement and retention awards are subject to a Malus and Clawback Policy applicable to all executives and senior management employees (grade 15 and above). The right to invoke Clawback survives the cessation of an executive's employment in such capacity for a period of three years.

The Malus and Clawback Policy gives the company, through its Remco, the discretion to recoup settled and/or paid incentives (also referred to a "Clawback") and forfeit, reduce or cancel any unpaid, unvested, unexercised and unsettled incentives (also referred to as "Malus") when trigger event(s) occur. Examples of instances where this may apply includes but is not limited to:

• gross misconduct
• loss to the company due to a breach of the Barloworld Anti-Bribery and Corruption Policy ("the ABC policy")
• where misleading financial information has been used and has influenced the incentive amount awarded and/or paid
• a material restatement of the financial statements
• a significant failure of risk management and/or controls
• a significant deterioration in the financial health
• a scenario or event which causes material reputational damage to the company

The company has the right to recover the incentive remuneration amount from the executive for a period of three years from the trigger event.

NON-EXECUTIVE DIRECTORS' REMUNERATION POLICY

None of the non-executive directors have a contract of employment with the company. Their appointments are made in terms of the company's memorandum of incorporation (MoI) and are confirmed initially at the first AGM of shareholders following their appointment, and thereafter retire by rotation in accordance with the company's memorandum of incorporation (MoI). Non-executive directors are appointed subject to the provisions set out in a letter covering the terms of appointment, duties and responsibilities, fees and other payments, and provisions related to termination of services.

Board and committee fees are benchmarked at the market median and against a comparator group comprising JSE-listed companies, using the same comparator group used for executive directors as disclosed above.

The company's non-executive directors and board chairperson are paid based on their roles and the policy is applied using the following principles:

• A board retainer fee is paid to board members for all board meetings held during the year
• Committee retainer fees are paid to committee members for all committee meetings held during the year
• No additional fees are payable for additional meetings (in excess of scheduled meetings)
• Each director's fee is paid in arrears
• Fees are reviewed annually, and increases are implemented following approval by shareholders at the AGM. When fees are reviewed, the following is taken into consideration:
  • The level of effort required;
  • The company's affordability; and
  • The results from the annual benchmark exercise.
• The non-executive directors are not eligible to receive any STIs or LTIs
• Fees are exclusive of any value added tax (VAT) that might be applicable, depending on the individual/personal registration circumstances of a
  particular director
• Non-executive directors are reimbursed for travel expenses on official business, where necessary, as well as other direct business-related expenses
• With effect from 2021, a project-based fee for ad hoc committee work will be paid, full details are disclosed in the Notice of AGM

NON-BINDING ADVISORY VOTE

Shareholders are requested to cast a non-binding advisory vote on the remuneration policy part of this report.

SECTION 3: IMPLEMENTATION REPORT

This section reflects the implementation of the remuneration policy and provides details of the remuneration paid to executives, prescribed officers and non-executive directors for the period ended 30 September 2020.

Annual Salary Adjustments

Executive director remuneration benchmarks were conducted with reference to the company's Willis Towers Watson grading system as well as with reference to the revised comparator group reflected in section 2 of this report.

Salaries were not adjusted owing to the cost containment measures that the company had to implement to sustain the business in light of the economic impact of the COVID-19 pandemic. Cost containment initiatives taken included a remuneration sacrifice plan which was implemented for employees at executive, senior, middle and junior supervisory levels using a sliding scale. Executives took the highest total guaranteed pay (basic salary plus benefits) reduction. These measures were implemented with effect from 1 May 2020. The total average remuneration sacrifice is shown in the table below:

	Total average remuneration sacrifice, including suspended retirement fund contributions %
Group executives	25%
Senior management	21%
Middle management	18%
Junior management/supervisors	14%

• As mentioned in the background statement, the salaries of employees affected by the salary sacrifice plan and the suspension of contributions to retirement funds effected in May 2020 was originally for a period of 12 months. However, after considering various factors such as the lifting of COVID-19 restrictions, the gradual resumption of economic activity in most operating regions and increased employee retention risks, Remco approved a proposal to re-instate salaries to normal and recommence pension fund contributions, effective from 1 December 2020.

STI Outcomes

STI WEIGHTINGS

In line with the company's performance management principles which enable the company to drive the achievement of key business imperatives throughappropriate scorecard weightings, the 2020 scorecard weightings (see table below) were designed to ensure effective achievement of measurable metrics in the respective elements of the balanced scorecard. The individual section was particularly enhanced to accommodate additional metrics relating to the implementation of the company's Barloworld Business Systems (BBS).

	STI weighting for Divisional CEOs	STI weighting for Group/BCO Executives
Individual/Personal Scorecard	20%	35%
Internal audit & compliance	10%	0%
Diversity and inclusion (“D&I”)	20%	10%
Divisional financials	20%	0%
Group financials	30%	55%
Total	100%	100%

PERFORMANCE AGAINST FINANCIAL TARGETS

The performance against the financial targets for FY2020 was as follows:

Metric	Threshold	Target	Outperform	Actual	% STI vesting  outcome
Economic Profit (million)
Equipment southern Africa	R52	R265	R573	(1 017)	0.0%
Equipment Russia	$12	$15	$19	0.3	0.0%
Automotive & Logistics	R55	R133	R322	(644)	0.0%
Logistics	(R10)	R0	R10	(358)	0.0%
Group	(R145)	(R37)	R254	(3 133)	0.0%
HEPS (cents)
Group	1 100	1 182	1 265	(510)	0.0%
Free cash flow to firm after interest (million)
Equipment southern Africa	R1 599	R1 999	R2 498	3 315	100.0%
Equipment Russia	$25	$31	$44	46.0	100.0%
Automotive & Logistics	R1 785	R2 695	R3 653	1 518	0.0%
Logistics	R295	R369	R461	(248)	0.0%
Group	R1 933	R2 417	R3 021	3 075	100.0%
ROE (%)
Group	10.1	11.5	13.0	(0.9)	0.0%
ROIC (%)
Equipment southern Africa	12.9	15.5	18.2	3.4	0.0%
Equipment Russia	17.7	18.8	19.8	13.8	0.0%
Automotive & Logistics	13.1	14.4	16.1	(0.9)	0.0%
Logistics	12.4	13.2	14.0	(13.4)	0.0%
Group	11.9	13.1	14.2	0.7	0.0%

PERFORMANCE AGAINST NON-FINANCIAL TARGETS

Depending on the role, the targets for non-financial elements of the personal/individual scorecards were evaluated and rated in line with their respective weightings. The metrics used were in the following areas:

Personal/individual scorecard, which includes metrics in areas such as:

• Safety metrics which include Lost-Time Injury Frequency Rates (LTFIR)
• Innovative Customer Solutions metrics which include Customer Net Promoter (NPS)
• Execution of Barloworld Business Systems (BBS) initiatives which include metrics related to the number of continuous improvements implemented
• Strategic Projects which include metrics related to delivery against project objectives, budgets and timelines
• Integrated Talent Management (grade 15 and above) including depth of succession bench for executive and other business critical roles
• Leadership metrics including compliance to BBS Leader Standard Work
• Sustainable Development (Compliance, Ethics, Governance and Risk, Social and Environmental)

Diversity and Inclusion, which includes metrics in areas such as:

• Representative demographics (targets based on achieving EAP) in South Africa and per localisation requirements in regions outside of South Africa
• Female representation targeted at 40% for middle/supervisory, senior and executive levels (grade 11 and above)

STI CALCULATION

The STI is calculated based on the following formula which incorporates six variables derived from the end of year performance evaluation scores:

[A + B + C + D + E] x F x G x Annual basic cash salary where:

• Personal scorecard score, [A] counting for up to 35% for Group executives and 20% for Divisional executives of the Total Bonus percentage depending on role
• Internal audit and compliance [B] counting for up to 0% for Group executives and 10% for Divisional executives of the Total Bonus percentage depending on role
• Diversity and inclusionscore [C] counting for up to 10% for Group executives and 20% for Divisional executive of the Total Bonus percentage depending on role
• Group financial performance objectives [D], counting for up to 55% for Group executives and 30% for divisional executive of the Total Bonus percentage depending on role
• Divisional financial performancescore [E], counting for up to 20%, is only applicable for executives with divisional responsibility
• Financial Multiplier [F] is a calculated based on Group financial performance [C]:
  

  a.	If Group financial performance % [C] < 50%: Financial Multiplier = Group financial performance %/50% x 105%
  b.	If Group financial performance % [C] > 50%: Financial Multiplier = (Group financial performance % - 50%)/50% x (1 - 105%) +105%
  	Illustrative effect of the above:
  	If Group financial performance%  Financial multiplier  0%  0%  25%  52.5%   50%   105%  75%  102.5%  100%  100%

• STI Cap [G] is multiplied by the annual basic cash salary

Although no STI was paid for the year ended 30 September 2020 per Remco decision, the table below indicates the targets and outcomes for executive directors and prescribed officers, in line with our normal disclosure practices which promote transparency.

LTI Awards

LTI AWARDS VESTING DURING THE YEAR

The vesting profile for awards made on 30 January 2018 with a performance period that commenced on 1 October 2017 and ending 30 September 2020, vesting during January 2021 are as follows:

PERFORMANCE CONDITIONS OUTCOMES FOR 2018 FSP AWARD	HEPS	RONOA	TSR
Weighting	30%	40%	30%
Threshold	% change in CPI + 0% real growth	Achieving 15%	Achieving medium TSR performance
Target	% change in CPI + 6% real growth	Achieving 20%	Achieving upper quartile TSR performance
Actual	(106.9) cents per share	9.7%	(18%)
Related vesting percentage	0%	0%	0%

PERFORMANCE CONDITIONS OUTCOMES FOR 2018 SAR AWARD	HEPS
Threshold	% change in CPI + 0% real growth	25% vest
Target	% change in CPI + 2% real growth	100% vest
Actual	(106.9) cents per share
Related vesting percentage	0%

AWARDS MADE TO EXECUTIVE DIRECTORS AND PRESCRIBED OFFICERS DURING THE YEAR

In line with the company's policy, executive directors and prescribed officers received a combination of awards under the CSP and FSP in March 2020,
i.e. prior the impact of the COVID-19 pandemic. The mix between CSP and FSP awards, together with the percentage it represents of TGP is depicted below, as well as details of the applicable performance conditions and targets.

• FSP and CSP awarded and quantum

The face values of the instruments granted per executive director and prescribed officer are provided on the table below. Please refer to table of unvested and settled awards for the number of awards granted.

		CSP	PERFORMANCE FSP	RETENTION FSP	TOTAL
The mix between the CSPs and FSPs at grant date is split based on the face value of the instruments.	All executive directors and prescribed officers	70%	30%		100%
The FSP mix is determined based on the number of FSPs allocated (75% are performance FSPs and 25% retention FSPs).	DM Sewela	93%	30%	6%	129%
	N Lila	70%	22.5%	4.5%	97%
	E Leeka	70%	22.5%	4.5%	97%
	K Mmutlana	70%	22.5%	4.5%	97%

• FSP targets

The following targets were set for the respective performance conditions and are considered to be appropriate in the context of the company's business strategy and the market conditions at the time. Linear vesting applies between threshold and target performance.

METRIC	THRESHOLD (30% VESTING)	TARGET (100% VESTING)
ROIC (40%)	13%	16%
FCF (35%)	EBITDA FCF conversion = 50%	EBITDA FCF conversion = 60%
HEPS (25%)	CPI growth rate per annum	CPI + 6% growth rate per annum

• CSP targets

The following performance targets were applicable to the CSPs awarded and are tested over a three-year performance period. Linear vesting on a sliding scale will be applied between threshold and stretch performance:

METRIC	THRESHOLD (0% VESTING)	TARGET (30% VESTING)	STRETCH (250% VESTING)
ROIC (40%)	13%	16%	20%
FCF (35%)	EBITDA FCF conversion = 50%	EBITDA FCF conversion = 60%	EBITDA FCF conversion = 80%
HEPS (25%)	CPI growth rate per annum	CPI + 6% growth rate per annum	CPI + 10% growth rate per annum

VESTED AND UNSETTLED AWARDS

In line with the new reporting requirements of King IVTM, the number of unvested and settled LTIs are disclosed below:

1.	The estimated fair value of SAR's which has vested but remains unexercised and which is within 12 months from vesting after year end was determined using the year end 30 day VWAP of R113.89 (2019) and R61.27 (2020) less the strike price and adjusted by the likelihood of performance conditions being met as at each year end. The fair value of SAR's which are more than 12 months from vesting after year end was determined on a similar basis except that an indicative valuation was performed to determine the value of an instrument. The following vesting percentages were used for the 2019 fair value calculations: 100% for the 2016, 2017 and 2018 allocations. 2020 fair value calculations were based on the following estimated vesting percentages: 0% for the 2018 and 2019 allocations.
2.	As of 2019, the SAR plan has been discontinued and replaced by the CSP. Therefore, in 2020 there were no awards allocated under the SAR plan.
3.	The estimated fair value of FSP's with performance conditions was determined using the year end 30 day VWAP of R113.89 (2019) and R61.27 (2020) adjusted by the estimated likelihood of performance conditions being met as at each year end. The following vesting percentages were used for the 2019 fair value calculations: 96.1% (2017 allocation), 100% (2018 allocation) and 100% (2019 allocation). For the 2020 financial year, fair value calculations were based on the following estimated vesting percentages: 0% (2018 allocation), 0% (2019 allocation) and 29.1% (2020 allocation).
4.	The estimated fair value for the FSP's without performance conditions was determined based on the year end 30 day VWAP of R113.89 and R61.27 for 2019 and 2020, respectively.
5.	The retention bonuses are not subject to performance conditions and are paid out in equal tranches over a 3 year period. For the purposes of the table of unvested and settled awards, we have assumed that R1 represents 1 unit.
6.	In FY2019 DG Wilson retired from Barloworld, the outstanding SARs relate to the unexercised SARs.
7.	K Mmutlana was appointed as a prescribed officer on 1 June 2019, therefore the 29 March 2017 and 1 Jan 2018 awards represent opening balances for the 2019 financial year.
8.	100% of the SARs allocated on 30 March 2016 and 29 March 2017 vested to participants.
9.	The FSP's with performance conditions allocated on 30 March 2016 and 29 March 2017 vested on 29 March 2019 and 28 March 2020. The vesting percentages for the allocations are and 100% and 92.7%, respectively.
10.	The FSP's with no performance conditions allocated on 30 March 2016 and 29 March 2017 vested on 29 March 2019 and 28 March 2020, respectively.
11.	The company was trading under cautionary notice from 1 February 2018. This resulted in a prohibited period which restricted the company from making any equity-settled awards. Therefore, cash settled notional FSPs were allocated to participants.
12.	Represents the value of shares vested during the year and dividends received on FSP's.

The valuation methodology applied for each award in the "table of unvested and settled awards" is outlined below:

TYPE OF AWARD	AWARD DATE	VALUATION METHODOLOGY
		MARKET VALUE ESTIMATION USING A MARKET VALUATION METHOD	INTRINSIC VALUE
SARs	29 March 2017	√ (Tranche 3)	√ (Tranche 1 & 2)
SARs	31 January 2018	√
SARs	27 February 2019	√
Performance FSPs	31 January 2018		√
Performance FSPs	27 February 2019	√
Performance FSP	9 March 2020	√
Retention FSPs	31 January 2018		√
Retention FSPs	27 February 2019	√
Retention FSPs	9 March 2020	√
Performance CSPs	9 March 2020	√

HISTORIC AND OUTSTANDING AWARDS

The table below provides an overview of the actual vesting and likelihood of vesting of historic and outstanding awards made under the SAR, FSP and CSP.

AWARD	SAR	FSP	CSP
2016	100% (A)	100%(A)
2017	100% (A)	92.7%(A)
2018	0% (L)	0%(L)
2019	0% (L)	0%(L)
2020		29.1% (L)	4.1% (L)

(A) = Actual; (L) = proportion likely to vest

Minimum Shareholding Requirements (MSR)

The company has adopted a formal MSR policy effective 1 October 2020, as outlined in the policy section of this report. The current shareholding of the executive directors and prescribed officers is as set out below:

Executive	Role	Total shareholding]	Value of total shareholding as at 30 Sep 2020 [B = A x 30 day VWAP]	2020 TGP (before salary sacrifice) [C]	Total shareholding as a % of TGP [D = B / C]
D Sewela	Group CEO	170 287	R10 433 484	R11 205 485	93%
N Lila	Group FD		R0	R5 433 938	0%
E Leeka	Divisional CEO: Equipment SnA	51 235	R3 139 168	R5 931 763	53%
K Mmutlana	Divisional CEO: Automotive & Logistics	23 658	R1 449 526	R5 485 781	26%

ATTRACTION AND RETENTION SCHEME AWARDS AND RE-PAYMENTS

During the 2020 financial year, payments to employees who were previously nominated and are therefore current participants of the scheme were suspended effective 1 May 2020 due to the company's cost containment efforts. However, at its November 2020 meeting, as indicated above and after due consideration, the Remco approved a proposal to reinstate these effective 1 December 2020.

Total remuneration outcomes

The graphs and tables below provide an overview of the composition of total remuneration and the mix between fixed and variable elements for the review period:

The table below summarises the executive directors and prescribed officers' total remuneration outcomes for the review period.

13.	The remuneration disclosed for the 2020 financial year relates to the remuneration paid to the incumbents after taking into consideration the impact of the salary sacrifices.
14.	Bonuses relate to the performance in 2019 and 2020 financial years. Bonuses are not payable for the 2020 financial year.
15.	Dividends paid in relation to FSP performance shares not yet included in the single figure in prior years.
16.	The 2019 LTI reflected includes the value of the SARS and FSP's (with performance conditions) awards made on 29 March 2017 with a performance period ending on 30 September 2019, FSPs without performance conditions (retention awards) that were granted on 27 February 2019 and retention awards made under the Attraction and Retention Scheme.
17.	The 2020 LTI reflected includes the value of the SARS and FSP's (with performance conditions) awards made on 31 January 2018 with a performance period ending on 30 September 2020 and FSPs without performance conditions (retention awards) that were granted on 20 March 2020.
18.	Included in the basic pay of these directors are the non-executive director fees that are payable to them in Pounds for being part of the Barloworld Holdings Limited board.
19.	D Wilson was Acting CFO for 10 months of the 2019 financial year.
20.	N Lila was appointed as the Group CFO on 1 August 2019, as such, the remuneration disclosed in the 2019 single figure table represents her remuneration for a period of two months.
21.	K Rankin resigned from the company on 30 May 2019. His other benefits include R398 for leave pay, unemployment insurance fund, funeral cover and car insurance.
22.	K Mmutlana was appointed as a prescribed officer on 1 June 2019 and his remuneration for 2019 is therefore reflected for four-month period.

Non-executive directors' fees

Fees for NEDs during the current financial year are set out in the consolidated annual financial statements, as approved by the Remco and by the board, on authority granted by shareholders at the AGM held in February 2020.

	CHAIRPERSON	MEMBER
Board of directors (resident)	R1 575 000	R412 905
Non-resident non-executive director	n/a	£66 864
Audit committee (resident)	R348 845	R167 456
Non-resident member of the audit committee	n/a	£7 143
Risk and sustainability committee (resident)	R235 302	R112 038
Remuneration committee (resident)	R259 505	R112 038
Non-resident chairperson of the remuneration committee	£20 000
Nominations committee (resident)	R181 963	R112 038
Social, ethics and transformation committee (resident)	R201 468	R112 038
Strategy and Investment (resident)	R158 229	R112 038
Non-resident member of each of the board committees other than the audit committee	n/a	£4 991

The amounts provided above are exclusive of VAT.

PROPOSED NON-EXECUTIVE DIRECTOR FEES FOR 2021

Refer to the special resolution section set out in the notice of AGM for approval by shareholders in terms of section 66 of the Companies Act in the AGM booklet.

NON-BINDING ADVISORY VOTE

Shareholders are requested to cast a non-binding advisory vote on the implementation report part of this report.

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