RCL Foods : 2022 Remuneration Report (0.17mb)

RCL FOODS LIMITED

REMUNERATION REPORT

FOR THE YEAR ENDED JUNE

2022

REMUNERATION REPORT

REMUNERATION REPORT

CONTENTS

This report sets out RCL FOODS' Remuneration Policy and implementation thereof for the 2022 financial year and, aligned to the King Report on Corporate Governance (King IV) recommended practice and the JSE Listings Requirements, is presented in three parts:

PART 1 A STATEMENT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE (COMMITTEE)

PART 2 RCL FOODS' REMUNERATION PHILOSOPHY, POLICY AND FRAMEWORK FOR THE 2023 FINANCIAL YEAR

PART 3 IMPLEMENTATION REPORT FOR THE 2022 FINANCIAL YEAR

PART 1: STATEMENT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE

Dear Shareholder,

On behalf of the Board of RCL FOODS I am pleased to present the Remuneration Report for the year ended June 2022.

The year under review was characterised by a tough operating environment. We were faced with several local socio-political crises as well as by the effects of the crises emanating from strained global supply chains together with those posed by the COVID-19 pandemic, its aftermath and our emergence into a new world of work.

Within this volatile and fast-changing environment, we have had to appropriately respond to the challenge of attracting and retaining scarce skills and key talent, while being cognisant of market dynamics and ensuring that the business remains competitive.

Overall, I am very encouraged by the extent to which we were able to support, sustain and reward our employees throughout this difficult period.

Notwithstanding these challenges, we made significant progress in executing the previously announced managed separation of the value-add branded food business, (Groceries and Baking supported by RCL FOODS group platform services) and Sugar (which continues to be fully managed within the foods operating model and has been de-prioritised in respect of the managed separation exercise) from the poultry (Rainbow) and logistics (Vector Logistics) businesses, with a view to preparing them to operate in a more pureplay environment, and to scale the former business through sharper strategic focus and active investment to drive growth.

This separation has enabled the tailored setting and execution of strategy, the tracking of business performance and sustainable value creation, and the appropriate alignment of incentives for each individual business component.

As a result, separate short-term incentive (STI) targets and earnings opportunities were agreed for each business, aligned to their respective priorities and circumstances. Incentives were set to reward achievement of targeted results that ensured fair and equitable outcomes for the relevant stakeholder groups.

As RCL FOODS is committed to fair and responsible remuneration, we continuously review our remuneration policies and practices to ensure that they remain market competitive, fit for purpose and are aligned to the delivery of our strategic agenda.

KEY AREAS OF FOCUS DURING 2022

During the period under review the key activities and decisions taken by the Committee have included:

• Approval of the management STI profit share scheme targets for the 2023 financial year and outcomes for the 2022 financial year;
• Review and finalisation of the new management Value Creation Plan (VCP) long-term incentive (LTI) scheme, which replaces the RCL FOODS Share Appreciation Rights Scheme (SARS) as the Company's preferred LTI plan, with market guidance from PricewaterhouseCoopers Inc. (PwC);
• Approval of awards and vesting outcomes pursuant to the SARS;
• Review of directors', prescribed officers' and senior executives' packages, and ensuring their alignment to market;
• Approval of non-executive directors' fees for recommendation to shareholders;
• Approval of the appointment of the new RCL FOODS Chief Executive Officer (CEO), Chief Growth Officer (CGO) and Chief Human Resources Officer (CHRO); and
• Review and approval of the Board Diversity Policy.

RCL FOODS LIMITED CORPORATE GOVERNANCE REPORT 2022

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REMUNERATION REPORT

PART 1 CONTINUED

AREAS OF FOCUS FOR 2023			SHAREHOLDER ENGAGEMENT
The Committee will continue to ensure the implementation	This report aims to provide shareholders with sufficient
of the Remuneration Policy as outlined in this report. It	information to understand and assess RCL FOODS'
is expected that the following items will be tabled at the	remuneration policies in order to make an informed
Committee for consideration:				decision when voting on the remuneration-related
• Confirmation of the new management LTI scheme (and	resolutions, which will be proposed at the next Annual
General Meeting (AGM), that is, the resolutions tables in
application thereof per the respective business entities)
Parts 2 and 3 of this report (RCL FOODS' Remuneration
and approval of the performance conditions for the first
Policy and	a	report on	its implementation	during the
allocation in the 2022 calendar year;
			reporting period) respectively. If either Part 2 or 3 receive
• Monitoring	market relevance	and governance
dissenting votes in excess of 25%, the Committee will, in
frameworks	associated with	senior	executive
line with King IV:
remuneration;
				• Embark	on	formal	engagements with	dissenting
• Review and approval of senior executive remuneration
	shareholders regarding their votes;
and LTI proposals;
			•	Address legitimate and reasonable objections raised;
• Relevant support to the business through the ongoing
	and
managed separation of the various entities;
		•	If required, amend the Remuneration Policy, or clarify
• Review of the Remuneration Policy; and
			and/or adjust the remuneration governance, processes,
• Setting, per the respective business entities, STI targets
	or disclosure.
in line with the agreed shareholder return glidepaths.
I am pleased to advise that at our 2022 AGM, our
					shareholders voted in favour of our Remuneration Policy
					and Implementation Report, well above the required
					levels.
					Whilst sufficient votes were received that engagement
					with our shareholders was not mandated, the following
					specific concerns were raised by shareholders, which we
					address below:
CONCERN RAISED			RCL FOODS' RESPONSE/ACTION TAKEN
The vesting of the awards under the Share		The granting of awards under the Share Appreciation Rights Scheme
Appreciation Rights Scheme does not		is conditional on participating individuals' performance as assessed
require the satisfaction of pre-determined		annually. Thereafter, the vesting of awards is conditional upon tenure
performance conditions.			(three to five years before vesting), which in turn requires participants
				to consistently perform in line with expectations as governed by the
				Company's performance management policy and process. The value
				of shares that vest is directly linked to the Company's share price and
				performance, and in turn individual performance.
There is no disclosure on the performance		The granting of awards is approved by the Remuneration Committee
conditions that apply to the awards under		wherein performance conditions are applied to both the awarding
the Conditional Share Plan and Management		and the vesting of the Conditional Share Plan.
LTI Scheme.

The aggregate share usage limit for the two share incentive schemes exceeds the recommended limit.

In terms of the shareholder-approved rules for the Share Appreciation Rights Scheme (SARS) and Conditional Share Plan (CSP), the Company could reach a utilisation of 3.1% of issued share capital (ISC) under the SARS and 5% of ISC under the CSP, giving a total of 8.1% of ISC. However, the Committee has set a more conservative limit of 5% in aggregate for both plans. Currently the SARS sits at 0.29% of ISC and CSP at 0.16%. Collectively both SARS and CSP are at 0.45% of ISC, well below the limit of 5%.

RCL FOODS LIMITED CORPORATE GOVERNANCE REPORT 2022

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REMUNERATION REPORT

PART 1 CONTINUED

CONSULTANTS

During the reporting period, RCL FOODS engaged the services of PwC and Deloitte as remuneration consultants. These firms were selected based on the relevance of their market data and professional reputations.

During the financial year, the Company participated in remuneration surveys facilitated by Remchannel and Deloitte. PwC was engaged to provide consulting services regarding adjustments to the management STI and LTI schemes. These services included a general market review, benchmarking of RCL FOODS' schemes against the market and recommended changes or enhancements to the current schemes.

The Committee is satisfied that the remuneration consultants engaged were independent and remained objective in providing the services.

ACHIEVEMENT OF POLICY OBJECTIVES

The Committee is satisfied that the RCL FOODS Remuneration Policy is appropriate and applicable to the Company's objectives and realises its intention to attract, retain and motivate employees. Remuneration disclosures presented in this report have been made in compliance with the policy as approved by shareholders. No known deviations from policy have been made in the current financial year.

COMPLIANCE

We observe King IV and endeavor to ensure that its governance principles are implemented and sustained. The principles of fairness and transparency resonate fully with the mandate of the Committee, and as such are a key component of the role we play in guiding and advising

RCL FOODS.

Mr NP Mageza

Chairman, Remuneration Committee

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REMUNERATION REPORT

PART 2: OUR REMUNERATION POLICY AND STRATEGY

INTRODUCTION

We believe that our employees are the foundation of our business and that engaged, empowered and motivated employees ensure that our business is resilient and profitable.

GOVERNANCE

The RCL FOODS Remuneration and Nominations Committee operates under the delegated authority of the Board and is well-established. It is made up of individuals who have the skills to bring sound business and ethical governance principles to discussions. The Committee fulfills the important functions of ensuring that remuneration is responsible and fair across the Group, and that disclosures are accurate, complete and transparent.

The Committee is made up of five non-executive members and two permanent invitees (who are excluded from discussions pertaining to their own remuneration).

During the 2022 financial year, the following changes to the incumbent members of the Committee came into effect:

• Mr PD Cruickshank was appointed as CEO, succeeding Mr M Dally, who retired in November 2021.
• As per last year's report, Mr WS Hoare, CHRO, resigned from RCL FOODS in September 2020. Succeeding Mr WS Hoare as CHRO is Mr DC Scott who was appointed on 1 December 2021.

Mr NP Mageza	Mr GM Steyn
Non-executive Chairman,	Non-executive Chairman,
Remuneration	Nominations
Dr PM Moumakwa	Mr DTV Msibi
Non-executive director	Non-executive director
Mr JJ Durand	Mr PJ Neethling
Alternate
Non-executive director
non-executive director
Mr PD Cruickshank	Mr DC Scott
Chief Human
Chief Executive Officer
Resources Officer

Our Remuneration and Nominations Committee is responsible for:

• Assessing and approving the Company's remuneration strategy;
• Reviewing and approving the STI and LTI pay structures for executives and managers;
• Agreeing the positioning of executive pay levels and ensuring that they are comparable to market benchmarks;
• Approving the overall cost of remuneration increases awarded;
• Approving awards pursuant to the RCL FOODS LTI schemes;
• Approving the profit share (STI) targets for the forthcoming financial year;
• Reviewing the executive succession plan; and
• Reviewing the talent and performance management practices within the Company.

Our Committee meets at least four times a year, and member attendance is reflected in the table below:

MEMBERS	ATTENDANCE
NP Mageza	5/5
DTV Msibi	5/5
JJ Durand1	5/5
PM Moumakwa	5/5
GM Steyn	5/5
PJ Neethling (Alternate)	5/5

1 One meeting attended by alternate director on his behalf

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