Nomination and Remuneration Committee report

Attendees at committee meetings include the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the HR  Director, the Company Secretary and other persons with specific skills and expertise to assist the committee in discharging its functions.

The number of meetings and attendance per committee member is shown in Corporate governance.

The Board is satisfied that the members of the committee have the necessary skills and experience to enable the committee to fulfil its duties.

Summaries in Board of directors provide an overview of the directors' qualifications and experience.

* Appointed 2 February 2021

ROLE OF THE COMMITTEE

The committee assists the Board in exercising its function to ensure that the Company remunerates its employees fairly, responsibly and transparently by, among others, implementing affordable, competitive and fair reward practices so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.

Role and responsibilities – remuneration:

• ensure that the remuneration policy promotes the achievement of strategic objectives and encourages individual and team performance;
• annually review the remuneration strategy and policy (including higher-level strategic principles that would inform the policy and implementation thereof) and oversee the implementation of the policy over an annual cycle to ensure its continued relevance;
• ensure that Executive Directors are remunerated for their contribution to the Company's overall performance, after giving due regard to the interest of the shareholders and to the financial and commercial health of the Company;
• advise on the remuneration of Non-executive Directors;
• ensure that the Company remunerates directors, management, and employees fairly, responsibly and transparently and oversees the setting and administering of remuneration at all levels in the  Company;
• approve material human resources policies for the EOH Group;
• approve proposals on new short and long-term incentive schemes and, where appropriate, make recommendations to the Board for approval by shareholders;
• oversee the preparation of the Remunerations Committee's report, which includes a background statement, the overall remuneration policy and the implementation report, which forms part of the integrated annual report;
• review the outcome of the implementation of the remuneration policy as to whether the policy promotes the achievement of strategic objectives and encourage individual performance;
• ensure that the remuneration policy is put to a non-binding advisory vote at the annual general meeting of shareholders once every  year; and
• ensure that the process set out in King IV relating to shareholders' engagement if the remuneration policy or the remuneration report (or both) have been voted against by 25% or more of the voting rights at the annual general meeting of shareholders is followed.

The committee will recommend the necessary improvements to the Board in this regard.

Role and responsibilities – nomination of directors:

• Regularly review the Board and Board committees' skill, knowledge, expertise, structure, size and composition, and make recommendations to the Board with regard to any adjustments and/or appointments and/or establishment that are deemed necessary.
• Establish a formal and transparent procedure for the appointment of directors:
  • identifying and participating in the selection of suitable candidates to be recommended to the Board for appointment as Executive and Non-executive Directors; and
  • review the results of background checks on potential candidates prior to their nomination, taking into account the provisions of section 69 and 162 of the Companies Act and the recommendations of King IV on Corporate Governance for South Africa, 2016 (King Code) relating to the attributes of directors in general.
• Make recommendations to the Board on the appointment, removal, and resignation of Executive and Non-executive Directors.
• Review and report to the Board on the adequacy of the succession planning policies for the Board Chairman, Chief Executive and Executive Directors.
• Identify individuals qualified to be elected as members of the Board and Board committees and recommend such individuals to the Board for appointment in terms of the Company's MoI and establish a procedure to ensure that the selection of individuals for such recommendation is transparent.
• Annually review the independence of Non-executive Directors, taking into account all applicable corporate governance requirements and make recommendations to the Board.
• Ensure that directors undergo proper 'on-boarding'/induction.
• Ensure that directors receive ongoing training as and when  required.
• Assist the Chairperson and the Board in evaluating the performance of the Board, its committees and individual directors.

TERMS OF SERVICE

Executive Directors

• The minimum terms and conditions applied to South African Executive Directors are governed by legislation. The notice period for these directors is three months. In exceptional situations of termination of the Executive Directors' services, the  Remuneration Committee (assisted by independent labour law  legal advisers) oversees the settlement of terms.
• Executive Directors are permitted to serve as Non-executive Directors on one other public company board with the express permission of the Chief Executive and the Remuneration and Nomination Committee. This excludes directorships where the Company holds a strategic investment in that public company (ie  nominee directorship).
• Fees paid to nominee directors accrue to the Company and not to  the individual directors concerned.

Non-executive Directors

• Non-executive Directors are appointed by the shareholders at the AGM. Interim Board appointments are permitted between AGMs. Appointments are made in accordance with Group policy. Interim appointees retire at the next AGM when they may make themselves available for re-election.

REMUNERATION POLICY

In line with our commitment to fair and responsible remuneration and governance objectives, the committee reviewed the remuneration policy and practices and is satisfied with its relevance and that remuneration practices were aligned with the policy objectives. However, the committee will further assess the impact of COVID-19 over time and will, when necessary, consider the performance metrics for incentive pay in the Group.

SHAREHOLDERS' VOTE ON THE REMUNERATION POLICY AND THE IMPLEMENTATION REPORT

At the AGM on 20 January 2021, the Company did not receive the required votes in favour of the remuneration policy and the implementation report.

The below voting results is a testimony of a significant improvement in the remuneration policy and the execution of fair and responsible  pay.

The results of the voting were as follows:

• Remuneration policy 70.65% compared to 34.64%
  (5 December 2019) in favour.
• Implementation report 84.55% compared to 34.64%
  (5 December 2019) in favour.

The voting results are indicative of remnant shareholders' concerns that we aimed to adequately address to achieve the required threshold votes for the remuneration policy.

Furthermore, the Company obtained a 73.66% vote to authorise the issue of shares in terms of section 41(1) of the Companies Act in respect of the EOH 2020 Share Plan:

Our engagements with shareholders revealed the following shareholder concerns regarding the EOH 2020 Share Plan:

• insufficient level of disclosure and transparency in respect of the performance targets;
• the dilutionary impact on shareholders; and
• insufficient detail in relation to the malus and clawback principles to be applied, which made it difficult to assess the reasonability of variable remuneration outcomes of the EOH 2020 Share Plan.

The Board has considered these concerns in its detailed review of the EOH 2020 Share Plan, resulting in the formulation of the new 2021 Share Plan. The salient features of this plan are explained in more detail in the remuneration policy section of this report.

During FY2021, no long-term incentive share awards were made to the Executive Directors, as these awards were subject to the approval of the EOH 2020 Share Plan. Unfortunately, the requisite 75% vote for the remuneration report and the adoption of the 2020 EOH Share Plan were not obtained.

In the unfortunate event of not receiving the required number of votes in favour of the 2021 Share Plan at the AGM on 2 December 2021, the Remuneration and Nomination Committee will consider other long-term incentive alternatives to compensate the executives to mitigate the retention risk.

Other than the abovementioned, no further shareholder concerns were received by the Remuneration and Nomination Committee

We are committed to building and maintaining a strong relationship with our shareholders.

ACTIVITIES DURING THE YEAR

The committee met three times during the year to discharge its responsibilities.

The committee's key focus areas for the 2021 financial year included:

CONCLUSION

The committee is satisfied that it discharged its responsibilities in accordance with its terms of reference during the year.

Mr Sipho Ngidi
Chairperson, Nomination and Remuneration Committee

26 October 2021