Remuneration report

GOVERNANCE

DEAR SHAREHOLDERS

This financial year has been a year of implementation and consolidation of our Hay Grading systems and new remuneration policy. The group's remuneration policy, implementation report and Non-Executive Director's fees were put to shareholder vote at the previous AGM and endorsed with a majority (FY19: 87.98%, 87.56%, and 87.95%, respectively).

Our revised remuneration policy brings us closer to best practice of fair and responsible remuneration aligned to shareholder interests and value creation. In choosing which financial metrics to use in STIs and LTIs, we benchmarked against our peers, considered best practice and, more importantly, incorporated the specific business goals of Blue Label. In the implementation of our policy, we have partnered with our business divisions to ensure that the policy and associated metrics are aligned to the operational strategy and the talent requirements of Blue Label. We believe that the output of this work has enabled consistency of application across the Group and a meaningful analysis of performance.

Section 1 provides an overview of how the Remuneration Committee has championed our alignment to King IV's Code on Corporate Governance, how we have implemented the new remuneration policy and our key focus areas for the year. Section 2 summarises our remuneration philosophy and policy, together with an overview of our total rewards strategy. The full policy can be accessed here (remuneration policy). Finally, Section 3 provides an overview of FY20 performance and discloses payments made to Executive Directors during the year in terms of performance against targets, as well as the fees paid to Non-Executive Directors.

Looking forward to FY21, we will focus on implementation and anchoring of our reward philosophy and policy across the Group and continue to champion the pay for performance principle and EVP #HappinessisBlu. We trust that our holistic and considered approach will enable us to align our talent to shareholder interests, while differentiating us within the marketplace and enabling us to attract and retain talent. The Committee considered and accepted revised proposals to refine the ESG scorecard.

The Remuneration Committee (Remco) has carefully considered the implementation of the revised remuneration policy during the year and believes it has achieved its stated goals. We invite you to give us your views on our policy and its implementation and remain committed to continued engagement with all shareholders in this regard.

GD Harlow

Chairman

23 September 2020

SECTION 1

Background statement regarding committee considerations and decisions

The Blue Label Board and Remuneration Committee endeavour to apply the King IV principles regarding responsible and transparent remuneration practices. During the previous year, the Remuneration Committee actively engaged with the Board, Deloitte, KPMG, Korn Ferry and various shareholders, to comprehensively review our remuneration strategy and supporting policy. We are confident that the new remuneration policy adopted in the current financial year will align shareholder and management objectives while also enabling talent attraction and employee retention.

The FY19 review was undertaken to:

Address institutional shareholders feedback and concerns;
Enable Blue Label to compete within an increasingly competitive talent market, through bringing us closer to best practice of fair and transparent remuneration practices;
Enable us to attract and retain key capabilities and talent required to deliver our growth strategy; and
Align employee performance and value-creating behaviours to our strategy and delivering shareholder returns.

In FY20 our focus has been on implementation of the revised policy and engagement with our employees.

Bringing us closer to best practice fair and transparent remuneration practices

King IV guides organisations to apply remuneration practices which are fair, responsible and transparent. The Committee has engaged with shareholders and external advisers to bring us closer to best practice.

In summary our new remuneration policy

Creates a new total reward philosophy for Blue Label Telecoms;
Aims to achieve a more favourable split between fixed and variable pay overtime, taking us closer to a 35% fixed and 65% variable split;
Positions our fixed pay at market median as opposed to the upper quartile;
Upweights variable pay and pay for performance;
Revises our targets for our STIP and LTIP;
Removes the outperformance bonus from our STIP policy;
Removes the retention criteria for our LTIP policy;
Introduces minimum shareholding values for Executive Directors;
Introduces a new malus and clawback clause; and
Introduces special short-term incentives to enable us to attract and retain critical skills which are key to our strategy.

Further details can be found in section 2 of the report and the full Remuneration Policy which can be accessed in remuneration policy

Attracting and retaining key capabilities and talent required to deliver our growth strategy

In FY20 we have implemented widespread organisational restructuring to enable our growth agenda. Through this process we aligned functions and the business to our new Hay grading philosophy and aligned remuneration. Through the restructuring process, a significant number of our employees received promotional opportunities. In addition, during the process we addressed remuneration anomalies where pay gaps existed. Outside of these processes all employees' grades were reviewed, updated where jobs had evolved and aligned to the Hay grading philosophy. While most of the remuneration policy was implemented in FY20 across the Group, the leave policy will be implemented in FY21. The changes to our policy were shared across the Group and have been well received by employees.

Furthermore, our growth strategy has required us to invest in and attract new skills and capabilities into our organisation. We have found that in the main, our revised Remuneration philosophy and benchmarking has enabled us to be competitive within the marketplace. On occasion, we were able to use our newly introduced special short-term incentives to attract new skills and high potential talent. We are pleased to see how the leadership teams have worked alongside the Human Capital team to respond holistically, through implementing our Blue Label talent strategy with new talent management practices and standardising our grading and remuneration practices across the Group.

In FY20 we have

Updated our Succession Planning Policy;
Implemented new talent management processes;
Completed our first round of talent reviews;
Aligned our two-year Capability Plan and workplace skills plans to support insights from our talent reviews and associated personal development plans;
Invested in capability building and technology to enable us to apply the Hay Grading philosophy effectively across the Group;
Engaged Deloitte and KPMG to understand what our strengths are as an organisation and where we could improve our remuneration practices;
Revised our total reward framework and introduced new benefits and components to our #HappinessisBlu EVP, to create a compelling and competitive EVP and maintain our high-performance Blue Label culture;
Introduced support mechanisms for employees during the COVID-19 pandemic to ensure that our Blu Family were not negatively impacted by the pandemic and its associated psychological and economic impact on families;
Systematically aligned the organisation across all entities to Hay grades and the newly defined Blue Label bands;
Applied our new internal pay scales in our organisational restructuring, when drafting offers for promotions and new appointments;
Used the new internal pay scales to offer packages targeted at the market median, taking into consideration individual criteria, such as availability of skill within the market, employee experience, qualifications, leadership skills and technical competencies;
Conducted an equal pay for equal work assessment, with regard to gender and race, to understand our pay practices across the Group and found that no bias exists within our business based on race and gender, where there is equal representation. The bigger issue that needs to be addressed is female and black representation in Senior Management and Top Management occupational bands.

As demonstrated, we have responded in a holistic approach, to compete effectively, through a total reward philosophy that is fair and transparent and that aims to engage the hearts, hands and minds of our talent.

Aligning employee performance and value-creating behaviours to our strategy and delivering shareholder returns

In our FY19 consultations with our institutional shareholders and taking cognisance of our strategy, we revised our metrics to align employee performance to value-creating behaviours and shareholder returns. The revised metrics were:

NPAT targets for Senior Management;
Core HEPS growth targets for Senior Management at Group level and Executive Directors as a key metric;
EBITDA targets for Senior Management at Group level and Executive Directors;
Return on capital employed as a new key metric to ensure an appropriate capital allocation policy is implemented and delivered against;
ESG performance scorecard for our LTIP scheme, further aligning us to King IV; and
TSR (total shareholder return) targets for our LTIP scheme.

In addition, we introduced

Minimum holding requirements for Executive Directors; and
Malus and clawback provisions.

The revised policy and metrics were effective for FY20.

Additional decisions taken in FY20:

Updated the Remuneration and Nomination Committee Terms of Reference.
Updated the Succession Planning Policy.
Set performance conditions for short and long-term incentives for FY20 for Executive Directors.
Approved no increases and bonuses for Executive Directors, Executives, Senior Management and employees. This was due to COVID-19 and the anticipated negative impact thereof on the Group's financial performance. The Committee agreed that exceptions would be considered on an individual basis to enable retention of critical skills and high performing talent.
Recommended to the Board for onward recommendation and approval by shareholders a zero percent increase in Non-Executive Directors' fees, in line with the zero percent annual increase proposed for executive staff. The Committee resolved that the same recommendation would be made to the Board in respect of directors' fees for Non-Executive Directors who serve on subsidiary company boards.
Evaluated the LTIP vesting conditions for the 2016 scheme and approved final vesting ratios.

VOTING AT THE 2020 VIRTUAL ANNUAL GENERAL MEETING

In line with the Companies Act and King IV, we will table the following resolutions for shareholders voting at the AGM:

Advisory vote for the approval of the remuneration policy.
Advisory vote for FY20 implementation report.
Binding vote on Non-Executive Directors' fees.

Shareholders are invited to engage on our remuneration policy and this remuneration report by sending a request for engagement to the Chairman of the Remuneration Committee to [email protected].

Remuneration committee focus areas for FY21:

The Board has mandated the Remuneration Committee to continually assess the executive remuneration market and governance frameworks. Given the current South African economic environment and Blue Label's strategy and operational performance, we anticipate the following focus areas for the year ahead:

Monitor the implementation of the revised remuneration policy across the organisation to assess the impact of the policy on performance against the goals set.
Continue to champion the fair and responsible pay of our talent, support the transformation agenda and eliminate any unfair bias or practices.
Monitor and assess the impact of COVID-19 on our business and evaluate our Remuneration practices in light of this, if required.
Monitor and assess the remuneration landscape within South Africa, particularly relative to other telcos and similarly sized organisations.
Refine our ESG Scorecard and associated metrics for our LTIP scheme.
Review of our peer group applicable to the LTIP.
Alignment of metrics to value creating behaviour and hence shareholder interests and rewarding performance accordingly.
Assessing who our prescribed officers should be as an outcome of the finalised organisational re-design.
Continue reviewing potential talent with new skills and capabilities that will complement our non-executive Board, with a focus on succession for Non-Executive Directors who have served on the Board for more than nine years and specifically attracting black female talent onto our Board of Directors of BLT.

SECTION 2

Our remuneration philosophy, policy and framework

Blue Label recognises that our talent is a critical enabler to us achieving our aspirations and strategic goals. Our remuneration policy and practices, together with our EVP of #HappinessisBlu aims to differentiate us from our peers. Through our remuneration policy and employment practices, we aim to:

create shareholder value by aligning our remuneration practices to our strategic goals;
achieve our employment equity aspirations;
align our employees' performance with shareholder interests;
support our talent strategy through enabling Blue Label to attract, motivate and retain the very best calibre of directors and employees who have above-average industry ability and expertise;
create an entrepreneurial, competitive, innovative and high-performance Company through rewarding demanding performance goals that are consistent with our strategy and shareholder growth expectations;
achieve our employment equity targets; and
reinforce our desired culture through encouraging and rewarding ethical behaviour that is consistent with our values and leadership behaviours, thereby stimulating employee engagement and corporate citizenship simultaneously.

The competitive talent landscape, within which Blue Label operates, demands a differentiated reward system that is capable of competitively matching pay for results and which can be executed fairly and without bias.

To create a progressive and yet pragmatic remuneration policy, we have applied the following design principles:

market competitiveness and affordability;
transparency, fairness and clarity;
performance and alignment; and
differentiation and flexibility.

This policy applies to all subsidiaries, associates and joint venture companies in which the Group holds a shareholding in excess of 40%, excluding Cell C who have their own remuneration policy and committee. Furthermore, it applies uniformly in all such jurisdictions, except where it conflicts with either local statutes or regulations, in which case such statutes or regulations will apply. Where an operating jurisdiction has a more onerous regulatory or statutory framework, the local standards of governance in that jurisdiction will apply. The Remuneration Committee may approve by exception, for the policy to apply to seconded Blue Label employees.

At Blue Label we subscribe to a total reward philosophy. Fixed remuneration includes cash and benefits. When combined with incentive payments and awards and other non-quantifiable elements, they make up the Blue Label Total Rewards Plan.

The components of the Blue Label employee remuneration and reward plans are:

fixed annual remuneration (FAR);
short-term incentives (STI);
long-term incentives (LTI);
commissions for sales staff;
ad hoc rewards for performance and behaviours linked to our values, leadership programmes and competitions; and
non-financial benefits aligned to our EVP #HappinessisBlu.

Blue Label pays additional benefits when specific business circumstances require it, including costs and allowances related to relocation and international assignments; and we reimburse all necessary and reasonable business expenses.

BLUE LABEL TALENT STRATEGY

GUARANTEED

NON-FINANCIAL

Fixed Annual Remuneration

Sales commissions

Short-term incentive plan

Short-term variable remuneration

Long-term incentive plan

#HappinessisBlu

Enables us to attract and retain talent, taking into consideration, skills, experience, high potential and value contribution.

Aligned to drive continuous improvement, improved customer service and increased revenue in sales and operations.

Reward the achievement of challenging strategic, financial and operational objectives, aligning individuals to divisional, Group performance and the interests of our shareholders. The scheme is structured to reward collaborative work across the Group to ensure we leverage our capabilities, increase innovation, improve customer and consumer service, reduce inefficiencies and increase revenue and profits.

Special-purpose variable remuneration arrangements to help attract and retain high-potential talent who are the holders of scarce skills. Arrangements are subject to individual performance and time-based conditions to ensure an appropriate return on the remuneration investment.

Aligning employees to shareholder interests through incentivising performance in line with strategic goals and long-term shareholder value.

Create a differentiated EVP and work experience to increase the engagement and retention of existing employees and position Blue Label as an employer of choice within an increasingly competitive landscape.

All.

Specific roles within sales and operations.

All.

Critical and scarce skills.
High-performing employees with high potential and critical skills.

Executives and management.

All.

Due to COVID-19 and its likely aftermath, the Remuneration Committee recommended 0% increases for FY21. Increases awarded on exception to retain critical skills and high performing talent.

As defined by the operational plan and budget.

Schemes with varying components linked to:

individual performance;
divisional performance (where applicable); and
Group performance.

Gatekeeper conditions are in place.

Individual metrics are limited to five key performance indicators (KPI) and must be verifiable and challenging.

The following financial measures will be applied in determining the STIP for Group head office and Executive Directors:

core HEPS; and
EBITDA.

The following financial measure will be applied in determining the STIP at divisional level:

NPAT.

CEO's thresholds are calculated at 80% of FAR, target at 100% of FAR and a maximum pay-out at 150% of FAR.

FD threshold is calculated at 50% of FAR, target at 70% of FAR and a maximum pay-out at 100% of FAR.

Further details on targets can be found in the remuneration policy.

In some instances, STI bonuses were due but the Remuneration Committee took a decision due to COVID-19 not to pay any STI bonuses for FY20 (only by exception) in order to preserve financial liquidity in the BLT Group.

Cash-based sign-on awards and retention bonuses are assessed on a case-by-case instance in line with policy.

Schemes available.

Eligibility based on:

senior leadership;
talent key to driving business strategy;
retention of talent with high potential and/or critical skills; and
transformation objective.

Gatekeeper conditions are in place.

Awards are subject to malus and clawback provisions.

Minimum holding requirements are in place for Executive Directors.

From 1 September 2019 the following metrics will be applied:

core HEPS compounded cumulatively over three years;
total shareholder return versus the all share capped index;
return on capital employed; and
ESG performance scorecard.

Allocation awards for Executive Directors looking forward are:

50% of FAR for the CEOs with a maximum of 70%; and
50% of FAR for the FD with a maximum of 70%.

Further details on targets can be found in the remuneration policy.

Individualised employee engagement, development and growth.

Fixed annual remuneration

FAR is a critical enabler in the attraction and retention of human capital, taking into regard skills, experience, high-potential and value contribution. The components of guaranteed fixed remuneration are:

cash salary;
medical aid benefits;
allowances; and
disability and death benefits.

While we aim to keep changes to benefit contribution levels cost neutral to the Group, in FY20 a decision was made to offer access to a fully integrated, proactive digitally enabled employee assistance programme.

Consideration is given to local market conditions and FAR, and total annual remuneration is benchmarked against independent market data. We have revised our policy and we aim to pay at the median of the general South African market. We have transitioned to the Hay Grading Methodology across the Group and each graded role reflects the scope and depth of role, experience required and level of responsibility. An acceptable earnings range is allocated to each role. In limited instances, salaries above the market median may exist due to historical factors or where we have aimed to attract or retain high potential human capital, with above-average experience or critical skills.

In line with equal pay for equal work, every effort is made to ensure internal equity (between race, gender and grade) within the Group. The policy is flexible and allows for management discretion to consider consistent high-performance, high potential human capital, above-average experience or critical skills within an increasingly competitive talent marketplace. An assessment of our pay practices found that no real gaps exist based on race or gender. As mentioned previously, our greater challenge is addressing representation and diversity gaps within certain occupational levels. Where any remuneration levels are not market-related or reflect internal inequity as per our grading and recommended pay scales, appropriate adjustments are made. In addition, management may motivate to the CEOs, Group Head of Human Capital and Remco, for Senior Management and executive's remuneration adjustments, within reason, to retain above-average experience, high potential human capital or critical skills.

Annual salary review process

Blue Label's annual salary review process provides an opportunity for management to reward for performance and adjust salaries in line with market increases and organisational affordability. Blue Label's annual performance-based increases are affected in June each year. We aim to differentiate between non-performance, average performance and exceptional performance. A pool of allocated budget linked to inflation is distributed amongst employees. Whilst most divisions performed well, despite COVID-19, the Committee mandated no increases for FY21. We aim to maintain cash liquidity in an uncertain market to enable us to weather the likely COVID-19 aftermath. The Remco further mandated that where appropriate, on exception, increases may be awarded to retain critical skills and capabilities in the organisation and high performing talent.

Short-term Incentive Plan

Within our revised policy we have extended our Blue Label STI plan to additional bands within our grading framework. Looking forward STIs will reward the achievement of strategic, financial, and operational objectives. In line with our entrepreneurial spirit, targets and metrics are challenging and align individuals to divisional and Group performance and the interests of our shareholders. In this way, we encourage the achievement of sustainable results within an agreed risk appetite. Further detail on its components, eligibility and operation can be found within our remuneration policy.

We have introduced further incentives for managers to use within exceptional instances. The special-purpose short-term variable remuneration arrangements have been designed to help attract and retain high potential human capital who are the holders of scarce skills. These include sign-on awards and deferred short-term incentive (DSTI) arrangements, both of which are subject to individual performance and time-based conditions to ensure an appropriate return on the remuneration investment.

The emphasis was on performance beyond target for Executive Directors for FY20. Group performance accounted for 80% of the STI and individual goals accounted for 20% of the STI. In FY20, for Executive Directors, these individual goals related to the recapitalisation of Cell C, implementation of a new turnaround strategy and disposals to reduce debt. By the end of the Financial year, the recapitalisation of Cell C was not concluded. On the other hand, assets have been disposed of and our debt has been significantly reduced and the turnaround strategy within Cell C, is well underway with the new MTN deal having being concluded as well as other initiatives. That said, the Executive Directors together with the Remco, have elected to not be awarded any bonuses in FY20.

The emphasis remains on performance beyond target for Executive Directors for FY21:

Individual goals will account for 20% of the STI. In FY21, for Executive Directors, these relate to the recapitalisation of Cell C, implementation of a new turnaround strategy and disposals to reduce debt.
Group performance will account for 80% of the STI.

Organisation targets will be linked to the financial metrics as defined within the annual budget and performance management cycle.

		Individual	Division	Group
Executive Directors
(Band 8)
STI scheme	Group	20%		80%

	Executive Directors (Scheme 5) Group STI financial metrics
		Threshold	Target	Stretch
EBITDA (40%)	Group	CPI + 5%	CPI + 10%	CPI + 15%*
	Payout %	1/3 of 40%^#	3/3 of 40%^#	Remco discretion^#
Core HEPS (40%)	Group	CPI + 5%	CPI + 10%	CPI + 15%*
	Payout %	1/3 of 40%^#	3/3 of 40%^#	Remco discretion^#

* Remco discretion to be applied for performance above target.
^# The bonus is calculated per objective. Values awarded will be a weighted average of scores attained versus target and pro-rated as the case may be

CEOs thresholds are calculated at 80% of FAR, target at 100% of FAR and a maximum pay-out at 150% of FAR.

The FD threshold is calculated at 50% of FAR, target at 70% of FAR and a maximum pay out at 100% of FAR.

Executive Directors' service contracts

The service contracts of the following Executive Directors which expire on 4 November 2020, were renegotiated and renewed for a further 12 months:

BM Levy
MS Levy
DA Suntup

After careful consideration, the Board has agreed to pay BM Levy and MS Levy a restraint of trade payment of R3.3 million each over the next 12 months commencing November 2020 on the proviso that they adhere to the original three-year restraint clause should their employment be terminated for whatever reason. These terms were incorporated in their renewed employment contracts. There are no contractual termination benefits in place for the Executive Directors.

Executive Directors' composition of FY21 total remuneration

* Forfeitable share scheme vesting in August 2023.

In addition to the basic salary of R9.733 million each, the joint CEOs will receive R3.3 million each in line with the restraint of trade agreements that were concluded with them in November 2017.

The tenure of the restraint of trade undertaking is 36 months, which commenced on 1 November 2017 and will expire on 31 October 2020. This restraint has been extended by a further 12 months to 31 October 2021.

In determining the short-term incentives and forfeitable share scheme awards, the above restraint payments do not form part of the base calculation thereof.

Long-term Incentive Plan

Blue Label's LTIP aligns employees to shareholder interests through incentivising performance in line with strategic goals and long-term shareholder value. In addition, they aim to retain human capital with scarce or critical skills. The Remco, through engagement with shareholders, has determined applicable criteria for LTIs, ensuring that the interests of all stakeholders are appropriately considered. These may be reviewed and adjusted in future, upon further engagement with shareholders. Awards are made once a year post our annual performance and pay reviews. All awards are subject to the necessary governance and approval processes. Awards are subject to vesting over a period of three years from the date of the grant.

Minimum levels of financial performance must be met. Employees who do not meet minimum performance requirements or are on a performance improvement plan, are not eligible.

Awards from 2019 onwards are subject to malus and clawback provisions as set out in our policy (further detail can be accessed in the remuneration policy).

To further align management's interests directly with those of shareholders and to encourage long-term commitment to the organisation, Executive Directors will be expected to accumulate a minimum holding of shares from September 2019.

From September 2019, the following metrics will apply for the performance period 1 June to 31 May of each year:

		Group LTI financial metrics*
		Threshold	Target	Stretch
Core HEPS (30%)¹	Group	CPI + 5%	CPI + 10%	CPI + 15%
	Payout %	1/3 of 30%	3/3 of 30%	38% of max
TSR (30%)²	Group	Greater than or equal to JSECapped All Share Index	JSE CappedAll Share IndexReturn + CPI + 5%	JSE CappedAll Share IndexReturn + CPI + 15%
	Payout %	1/3 of 30%	3/3 of 30%	38% of max
ROCE** (20%)¹	Group	ROCE greater than or equal to WACC	ROCE greater than or equal to WACC + 2.5%	ROCE greater than or equal to WACC + 5%
	Payout %	1/3 of 20%	3/3 of 20%	24% of max
ESG*** (20%)	Group	Succession plans for key roles	B-BBEE performance + succession plans for key roles	N/A
	Payout %	1/3 of 20%	3/3 of 20%	N/A

*	Remco may review targets post-FY21. The LTI is calculated per objective. Values awarded will be a weighted average of scores attained versus target and pro-rated as the case may be.
**	ROCE is calculated using the following formula:
	ROCE = Net operating profit (EBIT)/Capital employed. Capital employed = total assets - current liabilities.
***	ESG targets may be replaced for Executive Directors with personal strategic objectives.
¹	These measures are compounded over three years.
²	This measure is not compounded over three years.

Malus and clawback provision

Our revised remuneration malus and clawback ensures that excessive risk-taking is not rewarded. This malus and clawback clause applies to both vested and unvested 'at risk' remuneration. It is designed to be preventative rather than a purely remedial or punitive measure as it removes the incentive for executives to consider deliberately misstating company earnings to inflate variable pay. The clause applies to both the STIP and LTIP from June 2019 and September 2019 respectively. The provision may be implemented up to 10 years after a trigger event and is applicable to financial year ending 31 May 2020 and each financial year-end thereafter.

The Board may act on the recommendation of the Remuneration Committee to adjust (malus) or recover (clawback) unvested and vested 'at risk' remuneration where there is reasonable evidence that a Blue Label employee has materially contributed to, or been materially responsible for, the need for the restatement of financial results. The malus and clawback clause does not apply in the case of a restatement of financial results caused by a change in applicable accounting standards or interpretations thereof, provided originally approved by the Company's auditor.

The CEOs or Company Secretary are required to notify the Chairman of the Remco and the Chairman of the Board respectively, of any circumstances that could constitute a 'trigger' under this policy as soon as practical. If either the CEOs or Company Secretary is involved in the trigger event, the Head of Group Risk and Compliance is required to notify the Chairman of the Remco and the Chairman of the Board respectively.

Before the Remco makes a recommendation to the Board to implement malus or clawback provisions under the policy, they shall:

review the situation to understand the impact of the misstatement;
assess the involvement of the employee and their level of responsibility regarding the trigger; and
provide the relevant employee with written notice of the intended actions and the right to respond in writing within 15 working days to raise salient matters.

Having completed an investigation and following due process, the Board, on advice from the Remco, may decide to clawback, cancel or adjust any vested or unvested STI or LTI awards, where they are not satisfied that an award is appropriate or warranted due to exceptional circumstances.

Minimum shareholding requirements for Executive Directors

To further align the Executive Directors' interests directly with those of shareholders and to encourage long-term commitment to the organisation, Executive Directors will be required to accumulate a prescribed minimum holding of share allocations within five years from September 2019. Joint CEOs will be required to accumulate two times their Fixed Annual Remuneration over a period of five years. Our joint CEOs own a significant shareholding in Blue Label, and we will continue to review this. The FD will be required to accumulate one times his Fixed Annual Remuneration over a period of five years.

Termination arrangements

Conditions of employment are comparable to those companies in our sector. In ordinary practice, no special or extraordinary conditions are applicable to senior executives. Exceptions may exist because of acquisitions and these must be reviewed and signed off by the Board and Remco.

In the event that services are terminated due to a no-fault basis, Executive Directors, prescribed officers and senior managers are entitled to severance pay equal to two weeks' FAR per completed year of service. Contractual notice and accrued leave will also be paid out in the normal course. Treatment of any unpaid bonus or unvested LTIP awards, will be dealt with in accordance with this policy and will in all instances be subject to Group Remco and Board oversight and approval.

In line with King IV, Blue Label has not concluded any termination agreements with its Executive Directors, other than a restraint of trade agreement entered into in 2017 and extended in 2020 for a further 12 months with the joint CEOs. No fixed sums of money or "balloon payments" in recognition of service to the company, without any performance conditions attached, will be paid on termination of employment.

Non-executive director remuneration

The fees of the Group Chairman and the Non-Executive Directors reflect their specific responsibilities relating to their membership of the Board and, where applicable, Board committees. Blue Label's Non-executive directors do not receive any performance-related remuneration or any employee benefits. Changes to fees, were approved at the AGM dated 28 November 2019, and became applicable on 1 June retrospectively. Together with Executive Directors and Senior Management, no annual increases will be awarded in FY21.

SECTION 3

Implementation report

Short-term incentive bonus

For the 2020 financial year, on exclusion of the extraneous costs explained in the Financial Director's report, the Group did not achieve the levels required in terms of its predetermined targets for growth in EBITDA and core HEPS. As a result thereof, as well as the Executive Directors electing to forfeit bonuses for the non-financial targets, no short-term incentive bonuses were paid to them.

Performance metric	Threshold	Target	Stretch	Weighting	Amount paid to Executive Directors R’000	Amount forfeited by Executive Directors R’000
EBITDA (40%)	CPI + 5%	CPI + 10%	CPI + 15% *	40%	–	–
Core HEPS (40%)	CPI + 5%	CPI + 10%	CPI + 15% *	40%	–	–
Individual goals (20%)	Varies per individual	Varies per individual	Varies per individual	20%	–	**
Total					–	–

*	Remco discretion to be applied for performance above target.
**	For FY20, these individual goals related to the recapitalisation of Cell C, implementation of a new turnaround strategy and disposals to reduce debt. Certain targets were met for the 20% non-financial measures. However, the Executive Directors elected to forfeit this portion of the STI bonus.

Long-term incentive plan

The Long-term incentive plan related to the allocation of shares in 2016, which vested on 18 November 2019. The financial measurement was for the period 1 June 2016 to 31 May 2019.

The retention criteria of 33.33% was met.

Growth in core headline earnings per share over the three-year period equated to -295%. Growth in CPI over the three-year period accumulated to 14%, which after inclusion of the maximum growth target of 25%, equated to 39%. As the actual growth amounted to -295%, the resultant allocation of 33.34% was not met.

In respect of growth in shareholder returns, the weighted average price per share at commencement of the allocation in September 2016 was R20.75. The required compounded growth of 10% per annum over the vesting period as at 31 August 2019 equated to a targeted share price of R27.62 inclusive of dividends paid totalling R0.40. The qualifying target equated to R27.22 net of dividends. The market price at vesting date was R2.55, therefore the minimum target requirement was not met. Therefore the 33.33% allocation relating to growth in shareholder returns did not vest.

On 18 November 2019, 33.33% of the 2016 share scheme allocations fell due.

Performance metric	Target	Actual performance	Weighting %	Amount paid to Executive Directors R‘000
Long-term incentive plan (2016 forfeitable share scheme vested in November 2019)
Retention	3 years		33.33	296
Growth in core HEPS	25% + (cumulative CPI over 3 years) = 39%	(295%)	33.34	-
Shareholder returns	R27.22 market price per share	R2.55 market price per share	33.33	-
Total vesting related to performance conditions (excluding retention portion) included in 2020 Total Single Figure of Remuneration				296

Tables of single total figure of remuneration for FY20

The single total figure of remuneration disclosure is based on the IoDSA and SARA application guidance issued in November 2017 on remuneration disclosure in accordance with King IV and presents the remuneration for Executive Management consisting of the Executive Directors of Blue Label Telecoms. The comparative information has been presented in a manner consistent with the current year presentation.

Executive Directors remuneration for the year ended 31 May 2020	Explanatory notes	BM Levy R’000	MS Levy R’000	DA Suntup R’000	Total R’000
Fixed remuneration (including salary, allowances and retirement benefits)		9 522	9 538	4 948	24 008
Other benefits		211	195	207	613
STI bonus	1	–	–	–	–
2016 forfeitable share scheme – growth performance component on vesting date (18 November 2019) at fair value	2	–	–	–	–
Single total figure of remuneration		9 733	9 733	5 155	24 621
2016 forfeitable share scheme – vesting of retention component in the current year at fair value	3	117	117	62	296
Dividends on vested shares	4	15	15	8	37
STI bonus of prior year paid in August 2019	5	–	–	–	–
Restraint of trade award paid in 12 equal monthly instalments	6	3 338	3 338	–	6 676
Total cash equivalent value remuneration received for the year ended 31 May 2020	7	13 203	13 203	5 225	31 630
Reconciliation to note 5.3 of the Group annual financial statements
Remuneration as disclosed in terms of IFRS		13 071	13 071	5 155	31 297
Total cash equivalent value remuneration received for the year ended 31 May 2020		13 203	13 203	5 225	31 630
Difference to remuneration as disclosed in note 5.3		132	132	70	333
Reconciling items
STI bonus accrued in May 2019 and settled in August 2020	5	–	–	–	–
Dividends on shares vested in the current year		15	15	8	37
2016 forfeitable share scheme that vested in the current year at fair value		117	117	62	296
2016 forfeitable share scheme – growth performance component on vesting date (18 November 2019) at fair value	2	–	–	–	–
2016 forfeitable share scheme – vesting of retention component in the current year at fair value		117	117	62	296


		132	132	70	333

¹	No STI or outperformance bonuses, for the year ended 31 May 2020, were payable.
²	The 33.34% LTI growth in core HEPS of the 2016 forfeitable share scheme that vested 18 November 2019 was not met.
³	The 33.33% LTI retention portion of the 2016 forfeitable share scheme is added to "the total cash equivalent value remuneration received", as vesting took place on 18 November 2019.
⁴	Dividends are the total of cash receipts during the financial year applicable to the 2016 forfeitable share scheme, as vesting took place on 18 November 2019.
⁵	No STI bonuses paid in August 2019.
⁶	These amounts represent the 12 monthly instalments received during the year.
⁷	Cash equivalent value remuneration represents the total proceeds paid to the Executive Directors for the period 1 June 2019 to the 31 May 2020, inclusive of the cash element of basic remuneration, STIs, LTIs and dividends.

Executive Directors remuneration for the year ended 31 May 2019	Explanatory notes	BM Levy R'000	MS Levy R'000	DA Suntup R'000	Total R'000
Fixed remuneration (including salary, allowances and retirement benefits)		8 991	9 005	4 686	22 682
Other benefits		191	177	177	545
STI bonus	1	–	–	–	–
2018 forfeitable share scheme – retention component on award date (1 September 2018) at fair value	2	1 071	1 071	567	2 709
2015 forfeitable share scheme – growth performance component on vesting date (31 August 2018) at fair value	3	847	847	449	2 143
Outperformance bonus on award date at fair value	1	–	–	–	–
Single total figure of remuneration		11 100	11 100	5 879	28 079
2018 forfeitable share scheme retention component	5	(1 071)	(1 071)	(567)	(2 709)
2015 forfeitable share scheme – vesting of retention component in the current year at fair value	6	677	677	359	1 713
Dividends on vested shares	7	210	210	111	532
STI bonus of prior year paid in August 2018	8	–	–	–	–
Restraint of trade award monthly instalments paid during the year	9	3 338	3 338	–	6 676
Total cash equivalent value remuneration received for the year ended 31 May 2019	10	14 254	14 254	5 782	34 291
Reconciliation to note 5.3 of the Group annual financial statements
Remuneration as disclosed in terms of IFRS		12 520	12 520	4 863	29 903
Total cash equivalent value remuneration received for the year ended 31 May 2019		14 254	14 254	5 782	34 291
Difference to remuneration as disclosed in note 5.3		1 734	1 734	919	4 388
Reconciling items
STI bonus accrued in May 2018 and settled in August 2018		–	–	–	–
Dividends on shares vested in the current year		210	210	111	532
2015 forfeitable share scheme that vested in the current year at fair value		1 524	1 524	808	3 856
2015 forfeitable share scheme – growth performance component on vesting date (31 August 2018) at fair value		847	847	449	2 143
2015 forfeitable share scheme – vesting of retention component in the current year at fair value		677	677	359	1 713


		1 734	1 734	919	4 388

¹	No STI or outperformance bonuses, for the year ended 31 May 2019, were payable.
²	The 33.33% LTI retention portion of the 2018 forfeitable share scheme, awarded on 1 September 2018, which will vest in three years from that date provided that the Executive Directors remain employed by Blue Label Telecoms. As there are no further performance conditions, this portion of the award is recognised at fair value in "the single total figure of remuneration" in the year of award.
³	The 60% LTI growth in core HEPS of the 2015 forfeitable share scheme that vested 1 September 2018.
⁴	The restraint of trade payments of the joint CEOs, although payable in 36 equal instalments, were included in the "2018 single total figure of remuneration" in that there were no conditions pertaining thereto other than retention of employment. This took effect from the 1 November 2017.
⁵	The 33.33% LTI retention portion of the 2018 forfeitable share scheme is deducted from "the total cash equivalent value remuneration received", as vesting will only take place on 31 August 2021.
⁶	The 40% LTI retention portion of the 2015 forfeitable share scheme is added to "the total cash equivalent value remuneration received", as vesting took place on 31 August 2018.
⁷	Dividends are the total of cash receipts during the financial year applicable to the 2015 forfeitable share scheme, as vesting took place on 31 August 2018.
⁸	These amounts relate to the STI bonuses paid in August 2018, which were derived from performance for the year ended 31 May 2018.
⁹	These amounts represent the 12 monthly instalments received during the year.
¹⁰	Cash equivalent value remuneration represents the total proceeds paid to the Executive Directors for the period 1 June 2018 to the 31 May 2019, inclusive of the cash element of basic remuneration, STIs, LTIs and dividends.

Compliance with policy

The Remuneration and Nomination Committee is satisfied that the remuneration and reward policy has been complied with for the year under review in so far as Executive Management is concerned.

Forfeitable share scheme – granted and unvested

Summary of unvested instruments

Forfeitable share scheme

	Issue date	Issue price R	Vesting date	Awards outstanding as at the beginning of the year	Number of shares awarded	Awards forfeited during the year	Awards vested during the year	Balance as at the end of the year	Fair value at grant date R'000	Fair value at 31 May 2020* R'000
Forfeitable share scheme per Director For the year ended 31 May 2020
BM Levy	18 October 2016	20.75	18 November 2019	137 194	–	(91 467)	(45 727)	–	2 846 776	–
BM Levy	1 September 2017	18.49	31 August 2020	163 970	–	–	–	163 970	3 031 805	414 844
BM Levy	1 September 2018	7.16	31 August 2021	448 843	–	–	–	448 843	3 213 716	1 135 573
BM Levy	18 November 2019	2.55	31 August 2022	–	1 908 425	–	–	1 908 425	4 866 484	4 828 315
				750 007	1 908 425	(91 467)	(45 727)	2 521 238	13 958 780	6 378 732
MS Levy	18 October 2016	20.75	18 November 2019	137 194	–	(91 467)	(45 727)	–	2 846 776	–
MS Levy	1 September 2017	18.49	31 August 2020	163 970	–	–	–	163 970	3 031 805	414 844
MS Levy	1 September 2018	7.16	31 August 2021	448 843	–	–	–	448 843	3 213 716	1 135 573
MS Levy	18 November 2019	2.55	31 August 2022	–	1 908 425	–	–	1 908 425	4 866 484	4 828 315
				750 007	1 908 425	(91 467)	(45 727)	2 521 238	13 958 780	6 378 732
DA Suntup	18 October 2016	20.75	18 November 2019	72 663	–	(48 444)	(24 219)	–	1 507 757	–
DA Suntup	1 September 2017	18.49	31 August 2020	86 845	–	–	–	86 845	1 605 764	219 718
DA Suntup	1 September 2018	7.16	31 August 2021	237 725	–	–	–	237 725	1 702 111	601 444
DA Suntup	18 November 2019	2.55	31 August 2022	–	1 010 776	–	–	1 010 7 76	2 577 479	2 557 263
				397 233	1 010 776	(48 444)	(24 219)	1 335 346	7 393 111	3 378 425

* The fair value is based on the closing price of R2.53 at 31 May 2020 and excludes performance criteria.

Non-executive remuneration

	2020 R'000	2019 R'000
Non-Executive Directors
LM Nestadt	2 067	1 950
K Ellerine	640	604
G Harlow	1 961	1 638
J Mthimunye	1 388	1 065
JS Vilakazi	792	747
P Mahanyele**	–	374
	6 848	6 378

** P Mahanyele resigned with effect from 23 November 2018.

The proposed fees payable to Non-Executive Directors are set out below:

	Current fee 2020 R	Proposed fee 2021 R
Services as Directors
– Chairman of the Board (per annum)	1 910 120	1 910 120
– Board members (per annum)	421 350	421 350
Audit, Risk and Compliance Committee
– Chairman (per annum)	382 024	382 024
– Member (per annum)	235 956	235 956
Remuneration and Nomination Committee
– Chairman Remuneration (per annum)	224 720	224 720
– Chairman Nomination (per annum)	157 304	157 304
– Member (per annum)	134 832	134 832
Investment Committee
– Chairman (per annum)	224 720	224 720
– Member (per annum)	134 832	134 832
Transformation, Social and Ethics Committee
– Chairman (per annum)	134 832	134 832
– Member (per annum)	84 270	84 270
Ad hoc Committee
– Chairman (per meeting)	50 562	50 562
– Member (per meeting)	30 337	30 337

GD Harlow
Chairman

23 September 2020