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Corporate governance

Pick n Pay Stores Limited

Remuneration committee report

This report sets out the Group's remuneration policy, the role of the remuneration committee, the remuneration structure of the Group, the remuneration and benefits granted to key executives during the 2013 annual financial period as well as the procedures followed in ensuring that remuneration practices adhere to appropriate corporate governance principles and in ensuring alignment with the Group's strategy. This report and the recommendations of the remuneration committee have been approved by the Board and will be submitted to shareholders for consideration at the AGM to be held on 25 June 2013.

Remuneration policy

		Remuneration at all levels is benchmarked to ensure that it is fair and just;
		An independent expert attends remuneration committee meetings to assist in benchmarking;
		Employees and executives are rewarded for meeting key performance targets;
		Remuneration levels for executive directors take into account remuneration policies and practices of comparable companies;
		Executive remuneration must be balanced between long-term and short-term incentives; and
		Non-executive directors do not receive remuneration or incentive awards related to share price or corporate performance.

Remuneration committee

		Determine the remuneration packages of executive directors and to review the remuneration packages of senior management and key employees;
		Propose fees for non-executive directors, subject to shareholder approval;
		Approve performance-related short-term incentives as well as long-term share-based incentives; and
		Review the Group's remuneration philosophy and policies to ensure alignment with market practices.

Remuneration activities and decisions taken during the 2013 annual financial period

		Executive and non-executive director remuneration benchmarking;
		Annual salary increases for executives;
		Remuneration package for the incoming CEO;
		Remuneration package for the non-executive Chairman for the 2014 annual financial period;
		Review of the Group's short-term incentive scheme;
		Review and approval of the Group's remuneration policy and report; and
		Review and approval of proposed non-executive directors' fees for the 2014 annual financial period.

Remuneration structure

Remuneration comprises the following elements:

Base pay
Executive directors

Executive directors' base pay is benchmarked to information disclosed in the remuneration reports of comparative organisations. The annual remuneration of executive directors is directly related to individual performance ratings and is reviewed in April each year. The performance of the CEO is assessed by the Chairman and the Board, while the performance of the other executive directors is evaluated by the CEO and reviewed by the remuneration committee.

Management and employees

The remuneration committee reviews the salaries of senior management annually. Remuneration reflects the relative skill, experience, contribution and performance of the individual. Base pay is set at levels which are competitive with the rest of the market so that the Group can attract, motivate and retain the right calibre of people to achieve the Group's strategic business objectives. Annual increases in base pay are determined with reference to the scope of the employee's role, the competence and performance of the employee as well as the projected consumer price index (CPI) figures. If approved, annual increases are effective in June each year.

Retirement and medical

Pick n Pay contributes a total of 17.35% of salary towards retirement funding of executive directors and employees. In addition, the Company also contributes towards medical aid. For further details please refer to note 23 of the annual financial statements where retirement benefits are disclosed.

Company car allowances

Executive directors and management are granted a travel allowance or the use of a Company vehicle which includes service maintenance, fuel and insurance.

Low-interest housing loans

Salaried employees are granted low-interest loans for the purpose of acquisition of residential property. Interest rates average 3.3%.

The value of executive directors' low interest loans at period end is R0.4 million.

Short-term incentive scheme (profit-sharing scheme)

Executives and management participate in the Group's short-term incentive scheme. Bonuses awarded to executives and management are linked to the achievement of net profit growth hurdles as well as individual performance as measured through the Group's annual performance appraisal process. Bonuses are paid as a multiple of basic monthly salary, with multiples varying at the various hurdle levels. Bonuses awarded to executives are capped at 2 times annual basic salary.

The short-term incentive scheme mitigates the risk that management focus attention on managing the share price rather than the business, thus protecting the dividend flow for all shareholders.

All bonuses paid to management and executives are subject to approval by the remuneration committee. No bonuses were paid during the 2013 annual financial period as the Group did not meet its targets.

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