REMUNERATION COMMITTEE REPORT

Overview and background

The Board mandates the Group's Remuneration Committee (the Committee) to assist in exercising its responsibilities by overseeing all aspects of remuneration presenting feedback on all Committee decisions to the Board. These duties are carried out in accordance with the approved terms of reference that are reviewed and approved annually.

As in previous years, the Committee aligns pay to performance, while ensuring that we attract and retain the employees critical to our strategy. The Committee believes that our pay outcomes for 2018 reflect overall Group performance and significant achievements such as maintaining a Level 2 B-BBEE rating, membership and Group growth through the Hosmed take-on, COMMED amalgamation including lowering healthcare costs within our control, e.g. claim containment projects on behalf of clients which resulted in positive financial returns for clients.

Focus areas

During the 2018 financial year, the Committee focused on a number of issues, and, where required, amended the remuneration and related policies as disclosed in the table below.

As a focus for 2019 financial year, the Committee will continue to ensure that our reward and remuneration strategies supports the Group's strategic efforts of going the extra mile for our clients, reducing healthcare spend, promoting leadership accountability while supporting talent and succession strategies.

In summary, the Committee:

• Approved the Long-Term Incentive Plan for implementation in the 2018 financial year
• Completed peer survey for Non-executive Directors' remuneration with particular focus on the Chairman and Deputy Chairman roles
• Reviewed and finalised Executive Directors' and Company Secretary remuneration for 2018
• Set strategic incentive targets for 2018 and approved incentive payments in respect of the 2017 financial year
• Approved long-term incentives to eligible management-level employees
• Approved Executive Directors' and Company Secretary appointments
• Adopted King IV remuneration principles
• Approved the Remuneration Charter for 2017

Changes to the remuneration and related policies for the 2018 financial year

The Committee reviewed the Group remuneration policy as well as other related policies for the 2018 financial year. The following changes were effected and implemented during the 2018 financial year.

	Remuneration element			Change			Reason or need for change
	Differentiated pay models			Pay percentile in respect of IT employees was amended			Attracting and retaining IT skills within the organisation is challenging Greater need for IT skills in line with the Group’s IT and digital strategy
	Long-Term Incentive (LTI) Plan			Committee review of the Group’s remuneration mix during the 2017 financial year identified the need for an LTI scheme The scheme was designed and rules approved by means of a majority shareholder vote			The Group’s remuneration mix was not aligned to market benchmark and best practices Challenges in respect of attracting and retaining skills
	Retention bonuses			Policy guideline implemented in respect of retention bonuses			Need for retention bonuses to be paid to scarce, critical and key employees within the Group not eligible for participation in other LTI scheme
	Succession planning and talent management			Succession management process developed and implemented			Necessary to ensure business continuity and sustainability Drive employee engagement and retention and targeted employee development and learning with particular focus on designated groups
	Annual increases for general managers and senior managers			Annual increases in respect of general and senior managers will be subject to the financial year-end review and will be reviewed by the Committee			General and senior managers have a direct impact on the financial performance of the Group. Therefore, individual performance scores in relation to financial targets directly link to the Group’s achievement against those financial targets and budget practices
	Management strategic incentive			Amended the on-target STI percentage in respect of divisional CEO			Closer alignment to similar roles in comparator peers
	Revised management performance bonus scheme			Designed and implemented a more sustainable management performance bonus scheme			The previous scheme was not sustainable in the long-term, and an alternative scheme that achieves similar objectives had to be developed
	Non-pensionable allowances			The principle with regards to an event when an employee will receive a non-pensionable allowance was amended			The principle differs between members of bargaining unit and management teams to drive internal parity objectives

Independent external advice

As in previous years, the Committee actively sought independent external advice on remuneration trends and market benchmarks. This year, PricewaterhouseCoopers (PwC) provided market practice advisory in terms of Board Chairman and Executive Director roles in stakeholder engagements, governance considerations, remuneration structuring and bench-marking on fees, while Synntech designed and developed the LTI model and plan. The Committee is satisfied that these advisors are independent and objective.

King IV application

The Committee has applied Principle 14 of King IV and is committed to fair, responsible and transparent remuneration. As a result, the remuneration and related policies are reviewed regularly to make them more transparent and comprehensive. We have considered the recommended practices under Principle 14 by mindfully contemplating how each practice could enhance the quality of our disclosures, considering each recommended practice in light of what is appropriate for the Group, and in light of other required and voluntary governance standards with which we comply.

The recommended practices which have been applied in this remuneration report are listed below. We have:

• Restructured our remuneration report according to the three parts recommended in King IV. The remuneration policy overview and implementation report focus on executive management as defined within King IV. In addition, within the section on the remuneration policy, the remuneration elements and design principles informing the remuneration arrangements for other employees are included at a high level
• Focused on fair and responsible remuneration, especially how our policy addresses remuneration for executive management in the context of overall employee remuneration
• Provided details of any obligations in executive employment contracts which could give rise to payments on termination of employment or office
• Adopted the single, total figure reporting within our remuneration disclosures
• Implemented the new voting regime and have requested advisory endorsement of our remuneration policy and the implementation report

Fair and responsible pay agenda

The Group is committed to fair pay, ensuring that all our employees are appropriately and fairly rewarded for their contributions. This concept touches on many areas of our work, including fair pay for the lowest-paid people in our organisation, as well as the alignment of executive reward outcomes with business performance.

Additionally, the Board is committed to individuals being able to progress through the organisation based on capability and performance, irrespective of any other difference such as gender, race, age, ethnicity, religion or sexual orientation. We consider employees' views throughout our deliberations and review potential approaches. We have embarked on extensive training with managers to entrench our remuneration philosophy, principles and policy.

Synntech previously conducted a comprehensive analysis of our annual basic pay to assess equal pay for work of equal value. This analysis showed that there are no unjustifiable variances in annual basic pay across management and bargaining unit populations, as well as across gender and race groups. The Group continues this analysis on an annual basis, and the positive impact of the remuneration policy and governance is evident in the year-on-year progress.

Shareholder engagement and voting

The revised remuneration policy was presented for voting at the AGM and the policy was accepted by majority vote of 99.44%.

No material issues were raised for consideration.