Remuneration report

Adv Kgomotso Moroka

LETTER FROM THE CHAIR OF THE REMUNERATION COMMITTEE

Dear shareholder,

On behalf of the remuneration committee, I am pleased to present our remuneration report for the MultiChoice Group. In alignment with the requirements of King IV, our 2020 remuneration report is divided into three parts:

   

PART 1:

   

PART 2:

   

PART 3:

 
The background statement

The background statement provides context around the company’s performance and how this influenced remuneration decisions.

 
The remuneration policy

The remuneration policy is a forward-looking section that provides an overview of our remuneration philosophy and design principles and the remuneration policy that will be applicable in FY21.

 
The implementation report

The implementation report is a backward-looking section that discloses the remuneration and performance outcomes of the employees and how much each relevant executive received, based on the FY20 remuneration policy.


PART 1:

   
The background statement
 
Factors that influenced our remuneration approach

The video entertainment industry is becoming more competitive, notably with the rise of global OTT players. Therefore, it is critically important that we adopt principles that allow us to attract and proactively retain our top talent. In addition, given the growth potential for our business, we also need to ensure our reward practices are aligned with the delivery of desired results and value creation over time.

The listing of the MultiChoice Group and its unbundling from Naspers provided an opportunity to develop a new fit-for-purpose remuneration strategy. We transitioned from the Naspers video entertainment strategy to a MultiChoice Group strategy in April 2019 but faced certain challenges at the time, most notably:

  • tight timelines to develop the initial reward strategy (which also limited shareholder interaction at the time), and
  • balancing the requirements of the new reward strategy with the need to ensure retention of senior executives following the accelerated vesting of their prior Naspers share awards.

The remuneration policy and implementation report tabled for shareholder vote at the first MultiChoice Group AGM in August 2019 did not achieve the targeted 75% support level. After an engagement process, the board considered the feedback from shareholders and implemented changes which more closely align with a mutually agreeable outcome. The process followed and outcomes are detailed below:

Shareholder engagements

We have engaged with a number of our investors in order to receive feedback on the 2019 report. The engagements undertaken were as follows:

Investor Type of engagement  
Public Investment Corporation Meeting  
Allan Gray Meeting  
Prudential Portfolio Managers Meeting  
Comgest Email exchange  
Ninety One (previously Investec Asset Management) Meeting  
Peregrine Capital Meeting  
Sanlam Investment Management Meeting  
Stanlib Asset Management Meeting  
Old Mutual Investment Group Meeting  
Coronation Fund Managers Meeting  
All Weather Capital Meeting  
Visio Capital Meeting  
Nedgroup Securities Meeting  
Aeon Investment Management Email exchange  
Foord Asset Management Meeting  

Feedback from investors was combined under a number of key issues, which is where we focused our efforts this year. These are listed below together with the steps taken to address the concerns.

  Issue     Remuneration committee response
 
  • The MultiChoice Group does not have malus and clawback provisions
    Malus and clawback provisions were introduced and will be applicable to variable pay for all executives (details below)
 
  • The MultiChoice Group’s share scheme cap is too high
    The share scheme cap will be reduced from 10% to 5% of issued share capital, subject to shareholder approval at the 2020 AGM
 
  • Minimum shareholding requirement (MSR) should be higher for executives
    MSR will be increased for the group CEO (to 3x salary) and group CFO (to 2x salary) to be achieved by July 2024
 
  • Disclosure on performance hurdles does not adequately detail the link between performance and pay
    Retrospective disclosure was introduced on a one-year lagged basis for the short-term incentive (STI) and on a one-year lagged and forward-looking basis for the performance share unit (PSU)/LTI hurdles (details below)
 
  • The ratio for long-term incentive (LTI) awards is not sufficiently weighted towards performance
    The PSU to restricted share unit (RSU) ratio will be increased from 50:50 to 75:25 from 2021 share awards
 
  • Initial vesting of LTIs after two years is too short and not aligned with market
    PSUs to fully vest after three years and RSUs will vest 50:50 in years 3 and 4 from the 2021 share awards subject to shareholder approval at the 2020 AGM
Our approach to remuneration

Our people are at the heart of our success. We focus on remuneration structures that help us to attract and retain the best talent in a fair and responsible way. Our approach to remuneration is detailed in Part 2 but we essentially focus on the following:

  We believe in a pay-for-performance culture that incentivises achievement of strategic, operational and financial objectives in the short and long term.
  We continually monitor the level of pay to ensure it is fair. This is achieved by using credible benchmark surveys as outlined below.
  We believe remuneration must be aligned with shareholder expectations considering the need to continually balance short and long-term goals.
  We structure our remuneration to help us attract and retain the best talent around the world in a responsible way, which means we pay in line with company and individual performance. Malus and clawback were introduced for executives to ensure there are consequences for inappropriate conduct.
  We are consistent in our remuneration approach. Our guaranteed remuneration package elements are broadly the same across different levels of seniority/employment. Variable pay is tailored to be appropriate for each level of employee with more senior employees typically receiving a higher proportion of variable pay.
Talent and fairness

We aim to be the preferred destination for candidates and current employees in the video entertainment and digital platform security sectors and be recognised as a leading employer in the markets where we operate. We focus on recruiting experienced talent into critical areas (such as data, digital and content), which are important to scale our business and deliver our strategic and operational imperatives. However, we also provide opportunities for new, young talent to learn and develop.

We always strive to recruit and retain the best calibre of executive talent to lead the organisation and create value for our stakeholders. Balancing the levels of executive remuneration with the demand to remain competitive in attracting global talent in the video entertainment industry has become challenging. However, our internal talent development practices enabled internal leadership promotions to key positions in the business.

Our investments and collaboration with leading educational institutions, industry bodies, partners and subject matter experts enable us to recruit and build young talent to drive our business forward. Spanning our operational footprint in Africa and beyond, we grow local talent through the MultiChoice Talent Factory to seed, incubate and nurture African storytellers. We further develop deep technical TV, film, technology, engineering and data science expertise in partnership with prestigious global institutions like the New York Film Academy, Duke University, Henley Business School and leading local institutions in each country such as the University of Pretoria and University of the Witwatersrand in South Africa. Our flagship executive programme, The Chairman’s Top Leaders Programme, is one of our ways to prioritise and solidify our bench strength to create a pipeline for future executive talent. We are being intentional with the talent that will take us forward and drive the sustainability of our organisation. The programme ensures that the delegates’ experiences are impactful and mimic real business challenges. We have also partnered with a prestigious global learning institution to ensure we create an African leader with a global context.

Benchmarking and remuneration advisers

We strive to be consistent, offering remuneration structures that help attract and retain the best talent in our market. We consider market practices, the needs of the business and the calibre of the individual in our recruitment processes.

We benchmark our remuneration using the PwC Remchannel Survey in South Africa and the Mercer Total Remuneration Surveys in the Rest of Africa. For executives, who we sometimes recruit globally, we use the LMO Executive Survey and the Willis Towers Watson Executive Survey.

We target our guaranteed salary at the median of the market with exceptions based on performance and critical skills. We appointed Bowman Gilfillan as independent adviser to the remuneration committee, and we are satisfied the advice is objective and independent.

Key focus areas and key decisions taken during the reporting period

The remuneration committee met five times before the financial year-end and is satisfied it achieved its objectives, and complied with its statutory duties. As discussed, a key focus of this year’s activity was to address shareholder concerns around the remuneration policy and the implementation thereof. In addition, the following key decisions were made:

  • approved the executive committee goals and targets for FY21
  • approved the FY21 executive committee increases and the FY20 bonus and share awards
  • approved the non-executive director fees, and
  • approved the group salary increases, bonuses and share pool for all employees.
Role of the remuneration committee

The remuneration committee’s responsibilities are to:

  • independently review and monitor the integrity of the group’s remuneration policies and implementation thereof
  • ensure the company remunerates fairly, responsibly and transparently, and
  • ensure compliance with the statutory duties of the remuneration committee as contained in relevant legislation.

In fulfilment of these responsibilities, the remuneration committee’s functions include:

  • reviewing executive remuneration and benefits and ensuring that the directors and senior management are fairly and responsibly rewarded for their individual contributions to the group’s overall performance
  • evaluating the group’s remuneration and benefit competitiveness
  • reviewing and approving the overall annual increase pool awarded to group employees
  • approving employment agreements, offers of employment and severance agreements for the CEO and the executive committee
  • reviewing and monitoring the implementation of the group’s guaranteed and variable pay plans, and making recommendations to the board with respect to new guaranteed and variable pay plans
  • reviewing the potential risk in respect of the group’s remuneration and benefit programmes and policies
  • evaluating and monitoring the group’s remuneration philosophy and practices annually, and
  • actively engaging with shareholders about concerns raised in the event of the remuneration policy or implementation report, or both, receiving an ‘against’ vote of 25% or more of the voting rights exercised at any shareholders’ meeting.

Non-binding advisory vote on remuneration policy and implementation report

The remuneration policy and implementation report, as set out in Parts 2 and 3 of this remuneration report, will be tabled for separate non-binding advisory votes at the AGM on 27 August 2020. In the event that 25% or more of the voting rights exercised vote against either the remuneration policy or implementation report or both, the board will take steps, in good faith and with best reasonable effort, to do the following as a minimum:

  • implement an engagement process to ascertain the reasons for the dissenting votes, and
  • appropriately address legitimate and reasonable objections and concerns raised, which may include amending the remuneration policy, or clarifying or adjusting remuneration governance and/or processes.

In addition, in the remuneration report published in the year subsequent to the vote, the background statement will set out with whom the company engaged, and the manner and form of engagement to determine the reasons for the dissenting votes and the nature of steps taken to address legitimate and reasonable objections and concerns.

PART 2:

   
The remuneration policy
 
Remuneration philosophy

Our remuneration philosophy underpins the group’s strategy and enables us to achieve our business objectives. Our commitment to pay-for-performance aligns with the principle of creating long-term value for our shareholders – it drives our remuneration activities and supports the ownership mentality and spirit of entrepreneurship in our teams around the world. As far as possible, the structure of our pay is similar across the business and it meets the minimum legal requirements in all the jurisdictions in which we operate. We endeavour at all times to balance the need to compete globally for the best talent with the need to pay fairly and responsibly. When making executive pay decisions, we consider the individual’s performance and the performance of the business, the complexity of executives’ responsibilities and the growth trajectory and life cycle of the business for which he/she is responsible. Our STIs are aimed at rewarding employees for overperformance and are typically capped at a percentage of an employee’s salary. Our approach to LTIs strives to ensure executives are invested in driving sustainable performance of the business over the long term.

The MultiChoice Group remuneration policy can be found at https://www.multichoice.com/investors/ governance/.

Our remuneration policy and pay decisions are driven by and linked to the principles below:

Performance

Pay-for-performance is one of the pillars of our reward philosophy. Personal performance is a key factor in determining whether an individual qualifies for an increase in total cost to company (TCTC)/base salary and an annual performancerelated incentive.

Our executives are eligible to participate in a performance-related STI programme. This is an annual programme through which, having achieved certain pre-approved business and personal goals, participants may receive an annual performance-related incentive payment. The incentive payments for our executive directors and prescribed officers, based on FY20 performance, are detailed below.

Performance goals are directly aligned with the board-approved business plans. Personal goals are arrived at as an outcome of the annual business planning process. As budgets and operating plans are designed prior to the end of the financial year, so too are the personal performance goals at an individual level. These goals, if achieved, drive the accomplishment of the financial and operating plan of the business and how it is delivered.

We encourage leaders to engage in continuous conversations with their people throughout the year to ensure they remain on track to achieve their personal objectives. At the end of the financial year, the overall performance of the business and the individual’s achievement of their personal goals are considered. While we do not force-rank performance scores, we do expect any performance-related incentive payments to reflect the overall performance of the business where appropriate.

Fairness

We continually monitor the level of fair and responsible pay for all our employees. As a starting point, our minimum salary in South Africa is substantially above the minimum wage requirements set by government and, on average, 7% higher than the median salary in the market for the same role. We are proud of the suite of benefits offered to our employees (detailed below), which we believe is highly competitive in our markets.

Our remuneration structure

We have outlined the four elements of pay for our executives below. The same principles are applied to employees across the company. Our four-tier remuneration structure provides an appropriate balance between guaranteed remuneration and variable remuneration, which is directly linked to performance that enhances shareholder value.

These are detailed as follows:

Guaranteed pay

In South Africa, we follow the local market practice of TCTC remuneration, which comprises a basic salary plus cash and non-cash benefits. Outside of South Africa, we follow the market practice of base salary plus cash and non-cash benefits. These cash and non-cash benefits are aligned with the market practice and statutory requirements of each country. Personal performance is the primary driver for pay increases but also factors in salary movements in the local market and local economic indicators such as inflation to ensure they are fair, sensible and market competitive.

Guaranteed pay is set at a level that ensures we can attract and retain talent of the required calibre and considers market practice and an individual’s contribution. Guaranteed pay is reviewed annually and any increases are typically effective from June each year.

Benefits

We offer a suite of competitive employee benefits, which vary across countries as per market practice. Examples of these benefits are:

  • bursaries for employees and families
  • a range of wellness benefits such as onsite healthcare and counselling, a gym and a concierge service
  • work-life balance leave
  • a closed medical aid scheme and retirement scheme with highly competitive benefits
  • an early childhood development allowance and an onsite crèche (in Johannesburg), and
  • significant DStv discounts for employees and family members.
Malus and clawback

We believe inappropriate conduct should not be rewarded. To protect stakeholders against inappropriate conduct by executives, malus and clawback were introduced on all variable pay (STI and LTI) for the executives. Malus will be applicable prior to the vesting and/or payment of any STI or LTI. Clawback will be applicable for up to three years after the vesting and/or payment of any STI or LTI.

STI

The STI refers to the annual performance-related incentive, which pays out depending on company and individual performance.

The purpose of the annual incentive plan is to ensure executive alignment with and focus on delivering the annual business plan as we believe the achievement of these annual plans will cumulatively drive long-term shareholder value over time.

STI principles for executives

For executives, targets are set for a blend of MultiChoice Group level objectives and business unit level objectives. This ensures that business unit performance is aligned with the overall group outcome. For the level below executive, targets are closely linked to the performance of the specific business unit for which they have responsibility.

The individual performance measures for each executive are tailored to their roles and responsibilities. The incentive plan is agreed annually in advance and based on targets that are verifiable and aligned with the specific business unit’s annual business plan.

All eligible employees, including executives, have a target bonus percentage based on their level in the organisation. The target bonus percentage is used to calculate the bonus, based on performance against targets. The remuneration committee ensures these targets are appropriately ambitious using several reference points, including the business plans and historic company performance.

For FY20, the calculation to determine the performance outcome is detailed below:

STI calculation is as follows:

For FY21, the company performance measures, weightings and their respective targets are set out below:

Performance measure        Weighting 
%
 
   Performance levels    
         Threshold  
(80% payment)
   Target  
(100% payment)
   Stretch  
(120% payment)
  
Revenue        25     2% below target     On target     2% above target    
Core headline earnings        25     10% below target     On target     10% above target    
Free cash flow        25     10% below target     On target     10% above target    
Subscriber base growth        15     5% below target     On target     5% above target    
Online user base growth        10     5% below target     On target     5% above target    

Performance below threshold results in a 0% payment for the specific measure. Between threshold and stretch, we apply linear progression of the payment from 80% and 120%. The outcome of each measure is capped at 120% of the weighting.

LTI

Following the unbundling of MultiChoice from Naspers, a new RSU scheme was introduced. In 2019, we made a broad-based share allocation to all eligible employees. From 2020, the share awards will be more targeted to specific employee groups.

Qualifying employees below the executive level and other critical employees are eligible to receive LTIs in the form of RSUs in line with the vesting rules. At the executive level, performance conditions are linked to the PSUs to align LTIs with the performance of the group and shareholder value creation. The executive directors and prescribed officers participate in the MultiChoice Group RSU scheme and they retain the MultiChoice Share Appreciation Rights (SARs), which will vest in line with the original rules.

A robust governance process is in place to ensure the LTIs are appropriately awarded and administered. Awards are normally granted annually. Dividends are not payable on unvested shares.

The table below sets out the MultiChoice Group LTI schemes:

Legacy scheme     Current     Current  
MultiChoice and Irdeto SARs     MultiChoice RSUs     Irdeto RSUs  
Detail of award              
A right to benefit from any increase in value of the business unit over which an award is made     An award of MultiChoice Group shares registered to the participants subject to an employment condition (continued tenure). For the executive committee, achievement of performance conditions applies     A phantom award of value to the participants subject to an employment condition (continued tenure). For the Irdeto executive committee, achievement of performance conditions applies  
Value delivered to participant              
Change in value of business unit between grant and vesting     Full value delivered to the participant     Full value delivered to the participant  
Vesting detail              
  • No new awards to be made
  • Current awards will vest in line with current vesting profile
  • The MultiChoice SARs vest over five years (one-third in years 3, 4 and five) and the Irdeto SARs vest in equal tranches over four years
  • If there is no change or a decrease in value, there is no gain for the participant
  • Gains settled in MultiChoice Group shares
   
  • Current scheme vests over five years – awards vest in 4 equal tranches from year 2 (25% vesting in each year)
  • Executives’ awards are split 50:50 between RSUs and RSUs with performance conditions (PSUs)
  • Quantum of PSU vesting dependent on achievement of performance conditions
  • Settlement of the awards will take place on the respective vesting date of the awards and at the board’s discretion
   
  • Value determined by valuation of Irdeto business
  • RSUs vest over four years – awards will vest in two equal tranches from year 3 (50% vesting in each year)
  • PSUs vest 100% after three years
  • Executives’ awards are split 25:75 between RSUs and RSUs with performance conditions (PSUs)
  • Quantum of PSU vesting dependent on achievement of performance conditions
  • Settlement of the awards will take place on the respective vesting date of the awards and at the board’s discretion
 
Changes being made              
None    
  • Share scheme cap to be reduced from 10% to 5% of issued share capital
  • Increase MSR to 3 times salary for group CEO and 2 times salary for group CFO from July 2024. Other executives remain on 1 times salary
  • From the 2021 share awards, the PSU:RSU ratio for executives will increase from 50:50 to 75:25
  • From the 2021 awards, introduce full vesting after three years on PSUs with 50:50 vesting in years 3 and 4 on RSUs subject to shareholder approval
    None  
Performance conditions applicable to executives on the MultiChoice Group RSU scheme

The executives have performance conditions linked to their RSUs in the form of PSUs. The performance measures and weightings are set out below. Performance is measured against group performance on a two-year basis. From the time of the 2021 awards, when the vesting moves to three years for PSUs, it will be measured on a three-year timeframe.

Performance measure  Weighting 
%
 
   Performance levels    
   Threshold 
(50% vesting)
   Target 
(75% vesting)
   Stretch 
(100% vesting)
  
Core headline earnings per share (core HEPS) 25     5% below target     On target     5% above target    
Free cash flow  50     5% below  target     On target     5% above target    
Return on capital employed  25     5% below target     On target     5% above target    

Performance below threshold results in a 0% vesting for the specific measure. Between threshold and stretch, we apply linear progression of the vesting from 50% to 100%. The maximum vesting that can take place is 100% of the shares awarded.

The measurement of the performance conditions for the 2019 awards will take place in June 2021. Below is an indication of how the business is tracking against the measures on a one-year and two-year view. On the back of weaker macroeconomic conditions in the Rest of Africa, the current year budget reflects all three PSU targets (core headline earnings, free cash flow and return on capital employed) not being achieved at target level. This is primarily due to weaker exchange rates and the potential impact of lower subscriber growth as a result of consumer pressure in the aftermath of COVID-19.

Performance measure Weighting
%
  1-year
performance view
as at FY20
  Expected
2-year
performance view
as at FY21
  Expected
vesting %
as at FY21
 
Core HEPS 25       50  
Free cash flow 50       50  
Return on capital employed 25       50  
On track to achieve target or above On track to achieve between threshold and target

LTI award policy

  Employee level     LTI awarded
 
  • Executives
    A mix of RSUs and PSUs to create alignment with shareholders’ interests – the ratio for the 2020 awards was 50:50 and, from the 2021 award, will be 75% PSUs and 25% RSUs
 
  • Heads of departments
    RSUs
 
  • Senior managers/specialists
    RSUs for high-potential, scarce and critical skills
 
  • Scarce and critical skills
    RSUs for scarce and critical skills

Termination provisions

  Issue     Remuneration committee response
 
  • Death, ill health, disability or other event approved at the board’s discretion
    All unvested awards will be accelerated and fully vest on the date of termination of employment. If applicable, the outcomes of PSUs are reviewed by the remuneration committee on a case-by-case basis
 
  • Redundancy or termination as a result of a business disposition/change of control or jurisdictional issue or retirement
    Vesting of the awards will be accelerated on a pro rata basis. However, the pro rata portion is only applicable to the next upcoming vesting portion. If applicable, the outcomes of PSUs are reviewed by the remuneration committee on a case-by-case basis
 
  • For other causes
    All unvested awards will lapse

Minimum shareholding requirement

The executive committee is required to hold a minimum ratio of 1 times TCTC/base salary in vested shares to align with shareholder interests and best practice. The MSR will increase to 3 times TCTC/base salary for the group CEO and 2 times TCTC/base salary for the group CFO. Other executives will remain on 1 times TCTC/base salary. These MSR requirements are phased in over a period to 2024.

Executive contracts

Service contracts

Executives’ service contracts comply with terms and conditions of employment in the jurisdiction in which they are employed. Executives’ contracts do not contain guaranteed payments on termination. Details of the date of appointment and relevant notice period for executive directors and prescribed officers are set out in the table below:

  Executive chair:
M I Patel
  Group CEO:
C P Mawela
  Group CFO:
T N Jacobs
  Group COO: 
B de Villiers*
 
Date of appointment 8/11/1999   1/3/2007   1/11/2018   1/12/2015  
Notice period     6 months   6 months   6 months   
Restraint period     12 months   6 months   6 months   
* Brand de Villiers was the group COO until 22 October 2019 at which time he returned to the role of CEO: MultiChoice Africa Holdings.
Recruitment policy

On the appointment of a new executive, his/her package will typically be in line with the principles as outlined above. To facilitate recruitment, it may be necessary to ‘buy out’ remuneration forfeited on exiting the previous employer. This will be considered on a case-by-case basis and may comprise cash or shares.

Termination policy

Payments in lieu of notice may be made to executives for the unexpired portion of the notice period. On cessation, there is no automatic entitlement to an annual performance-related incentive (bonus). However, the committee retains the discretion to award a bonus to a leaver during the financial year considering the circumstances of his/her departure.

Non-executive directors’ terms of appointment

The board has clear procedures for the appointment and orientation of directors, and annual self-evaluations are completed by the board and its committees. The nomination committee periodically assesses the skills represented on the board and determines whether or not these meet the company’s needs. Directors are invited to give their input in identifying potential candidates. Members of the nomination committee propose suitable candidates for consideration by the board. A fit-and-proper evaluation is performed for each candidate.

Retirement and re-election of non-executive directors

All non-executive directors are subject to retirement and re-election by shareholders every three years. Additionally, non-executive directors are subject to election by shareholders at the first suitable opportunity for interim appointments. The names of non-executive directors submitted for election or re-election are accompanied by brief biographical details to enable shareholders to make an informed decision on their election. The reappointment of non-executive directors is not automatic.

Setting non-executive directors’ fees

The fee structure for non-executive directors was designed to ensure we attract, retain and appropriately compensate a diverse and experienced board of non-executive directors.

Non-executive directors receive an annual fee as opposed to a fee per meeting, which recognises their ongoing responsibility to ensure effective governance of the company. Remuneration is reviewed annually and is not linked to the company’s share price or performance. Non-executive directors do not qualify for share allocations under the group’s incentive schemes.

A comprehensive benchmarking exercise is performed using PwC’s non-executive director surveys and this is tabled for consideration by the remuneration committee and the board to determine what the proposed directors and committees’ fees should be.

Directors on the board have cross-membership on the South African major subsidiary boards: MultiChoice South Africa Holdings Proprietary Limited and MultiChoice South Africa Proprietary Limited. As a result of cross-membership, non-executive directors received director fees from the MultiChoice Group and MultiChoice South Africa. Going forward, non-executive directors with cross-membership on the MultiChoice Group, MultiChoice South Africa Holdings and MultiChoice South Africa boards will receive a single fee at a MultiChoice Group level. Non-executive directors will receive a fee of R725 000 per annum and the lead independent director will receive a fee of R1 087 500. The new non-executive director fee is 31% lower than the previous combined fees for MultiChoice Group and MultiChoice South Africa. Subcommittee fees are paid separately to the board fee.

Non-binding advisory vote on remuneration policy

The remuneration policy, as set out in Part 2, will be subject to a non-binding advisory vote by shareholders at the AGM on 27 August 2020.

PART 3:

   
The implementation report
 

This section explains how the remuneration policy was implemented in the reporting year and the resulting payments each member of executive management received (backward-looking). All decisions in relation to executive remuneration were made in line with our remuneration policy for this financial year.

Guaranteed pay (TCTC/base salary) adjustments

In determining any increases for executives, we considered personal performance, business performance, market benchmarks and local economic indicators.

During FY20, group companies made contributions for executive directors to the appropriate pension schemes. These contributions are in line with market norms and constitute a modest portion of the individual’s total remuneration. Below we show the guaranteed remuneration of the executive directors and prescribed officers for FY21 as approved by the remuneration committee in June 2020.

  M I Patel   C P Mawela(2)     T N Jacobs(3)  
  Base   
salary(1)
(US$’000)
  FY21 
increase 
(%)
  Base   
salary(1)
(US$’000)
  FY21 
increase 
(%)
TCTC 
    TCTC 
(ZAR’000)
  FY21 
increase 
increase 
(%)
 
Guaranteed pay 620    –    649        7 503    29   
(1) Imtiaz Patel and Calvo Mawela are paid in US$, which is aligned with the MultiChoice Group Dubai-based contracts and considers Dubai’s cost of living and typical expatriate benefits for Dubai.
(2) To focus significant time on the MultiChoice Rest of Africa business, Calvo Mawela’s employment transferred from South Africa to Dubai. Being based in Dubai enables Calvo to be closer to the MultiChoice Africa management team and to have more accessible travel into the Rest of Africa and with the added focus on returning the Rest of Africa business to profitability. With the move to Dubai, Calvo’s remuneration was aligned with the policy as applicable in Dubai and is reflected in US$.
(3) As part of his role, Tim Jacobs is required to spend a significant amount of time off-shore and will move to a dual contract in FY21. The increase includes the portion for the new contract dependent on exchange rates.
FY20 STI outcomes

Financial/company goals

In the following tables we outline the actual STI outcomes for each financial performance measure relative to the target set at the beginning of the financial year:

FY20 target  Weighting
%
 
   Threshold 
(80%)
   Target 
(100%)
   Stretch 
(120%)
   FY20 
outcome
 
  Payout
(%)
  
Revenue (ZAR’bn) 25     53.0     53.6     54.1     51.4    –    
Core headline earnings (ZAR’bn) 25     2.3     2.6     2.8     2.5    23.3    
Free cash flow (ZAR’bn) 25     3.7     3.9     4.1     5.2    30.0    
Subscriber growth South Africa (%)(1)  8.3     5.4     5.7     6.0     5.9    9.6    
Subscriber growth Rest of Africa (%)(1)  8.3     6.5     6.9     7.2     2.7     –    
Online user base growth (%) 8.4     22.8     29.3     35.7     38.6     10.0    
Total company outcome                                72.9    
(1) Based on active subscribers, defined as all subscribers that have an active primary/principal subscription on the reporting date.
Individual goals

The table below sets out the incentive bonus paid out relative to the TCTC/base salary of the executive director/prescribed officer:

   A     B     C     D     E = 
C x D
 
   F = 
A x B x E
 
   G     H = 
(F + G)/A
 
  
Executive director/ prescribed officer  FY20 
TCTC/
base 
salary 
as at 
31 March 
2020 
('000)
   On-target 
bonus 
(%)
   Company/
financial 
goals 
achieved 
weighted 
outcome 
(%)
   Personal 
goals 
achieved 
weighted 
outcome 
(%)
   Total 
performance 
outcome 
(%)
   FY20 
bonus 
('000)
   FY20  
remuneration  
committee  
discretion(2)
('000)
   FY20 
bonus 
as % of 
TCTC/ 
base 
salary
 
  
M I Patel (US$) 620     80     72.9     106.8     77.9     386     41     69    
C P Mawela (US$) 630     80     72.9     99.8     72.8     367     16     61    
T N Jacobs (ZAR) 5 803     80     72.9     95.0     69.3     3 217     800     69    
B de Villiers (US$)(1)  362     80     66.8     105.0     70.1     203     –     56    
(1) The outcome for Brand de Villiers is based on him holding two different roles within the year.
(2) The remuneration committee applied discretionary STI awards to:
  – Imtiaz Patel: To recognise his role in establishing the new board and finalising the corporate structures and processes.
– Calvo Mawela: Has been instrumental in the Naspers unbundling and delivering our performance on core headline earnings and free cash flow.
– Tim Jacobs: To recognise his role in managing costs across the business and delivering on key projects.
FY20 LTI vesting outcomes

The table below details the value of unvested share awards as at 31 March 2020:

Name  Share plan     Offer date     Number
of shares
 
   Offer price 
(ZAR)
   Release  
date(1)
 
   Share price 
as at 31 March 
2020 
(ZAR)
   Fair value per 
share of 
vested and 
unvested 
SARs as at 
31 March 
2020 
(ZAR)
   Fair value per 
award of 
vested and 
unvested 
SARs as at 
31 March 
2020 
(ZAR)
   Intrinsic value 
of vested 
and 
unvested 
SARs as at 
31 March 
2020 
(ZAR)
  
M I Patel  MCA 2008 
SAR Plan 
   15 Sep 2015     82 276     113.19     15 Sep 2020     79.59     17.19     1 414 293     –    
      01 Sep 2016     58 369     116.30     01 Sep 2020     79.59     18.18     1 061 284     –    
      01 Sep 2016     58 370     116.30     01 Sep 2021     79.59     20.40     1 191 029     –    
      28 Jun 2017     67 996     94.39     28 Jun 2020     79.59     22.06     1 500 002     –    
      28 Jun 2017     67 996     94.39     28 Jun 2021     79.59     26.07     1 772 723     –    
      28 Jun 2017     67 996     94.39     28 Jun 2022     79.59     30.01     2 040 671     –    
      27 Jun 2018     119 527     77.19     27 Jun 2021     79.59     32.80     3 920 954     286 865    
      27 Jun 2018     119 527     77.19     27 Jun 2022     79.59     37.30     4 458 114     286 865    
      27 Jun 2018     119 529     77.19     27 Jun 2023     79.59     41.16     4 919 243     286 870    
MultiChoice
Group RSU1 
   18 Jun 2019     51 548     –     18 Jun 2021     85.77     85.77     4 421 272     3 315 954    
      18 Jun 2019     51 548     –     18 Jun 2022     85.77     85.77     4 421 272     3 315 954    
      18 Jun 2019     51 548     –     18 Jun 2023     85.77     85.77     4 421 272     3 315 954    
      18 Jun 2019     51 549     –     18 Jun 2024     85.77     85.77     4 421 358     3 316 018    
C P Mawela  MCA 2008
SAR Plan 
   15 Sep 2015     16 242     113.19     15 Sep 2020     79.59     17.19     279 194     –    
      01 Sep 2016     13 958     116.30     01 Sep 2020     79.59     18.18     253 789     –    
      01 Sep 2016     13 958     116.30     01 Sep 2021     79.59     20.40     284 810     –    
      28 Jun 2017     10 594     94.39     28 Jun 2020     79.59     22.06     233 705     –    
      28 Jun 2017     10 594     94.39     28 Jun 2021     79.59     26.07     276 196     –    
      28 Jun 2017     10 595     94.39     28 Jun 2022     79.59     30.01     317 973     –    
      27 Jun 2018     26 119     77.19     27 Jun 2021     79.59     32.80     856 806     539 619    
      27 Jun 2018     26 119     77.19     27 Jun 2022     79.59     37.30     974 186     539 619    
      27 Jun 2018     26 119     77.19     27 Jun 2023     79.59     41.16     1 074 933     539 619    
MultiChoice
Group RSU1 
   18 Jun 2019     61 162     –     18 Jun 2021     85.77     85.77     5 245 865     3 934 399    
      18 Jun 2019     61 162     –     18 Jun 2022     85.77     85.77     5 245 865     3 934 399    
      18 Jun 2019     61 162     –     18 Jun 2023     85.77     85.77     5 245 865     3 934 399    
      18 Jun 2019     61 162     –     18 Jun 2024     85.77     85.77     5 245 865     3 934 399    
T N Jacobs  MCA 2008
SAR Plan 
   03 Dec 2018     151 142     77.19     03 Dec 2021     79.59     35.15     5 312 438     362 741    
      03 Dec 2018     151 142     77.19     03 Dec 2022     79.59     39.48     5 966 909     362 741    
      03 Dec 2018     151 143     77.19     03 Dec 2023     79.59     43.19     6 527 306     362 743    
MultiChoice
Group RSU1 
   18 Jun 2019     15 768     –     18 Jun 2021     85.77     85.77     1 352 421     1 014 316    
      18 Jun 2019     15 768     –     18 Jun 2022     85.77     85.77     1 352 421     1 014 316    
      18 Jun 2019     15 768     –     18 Jun 2023     85.77     85.77     1 352 421     1 014 316    
      18 Jun 2019     15 769     –     18 Jun 2024     85.77     85.77     1 352 507     1 014 380    
(1) 50% of RSUs issued are subject to performance conditions.
Executive director and prescribed officer single figure remuneration
   M I Patel(1)     C P Mawela(2)     T N Jacobs(3)     B de Villiers(4)    
Element  FY20 
(USD'000)
   FY19 
(USD'000)
   FY20 
(USD'000)
   FY19 
(USD'000)
   FY20 
(ZAR'000)
   FY19 
(ZAR'000)
   FY20 
(USD'000)
   FY19 
(USD'000)
  
TCTC/base salary  695     648     571     371     5 128     2 352     362     517    
Pension  47     42     67     38     756     271     43     63    
Benefits(5)  384     339     227     46     319     16     90     153    
Short and medium-term incentive(6)  427     434     726     252     4 017     5 810     482     287    
Long-term incentive RSU(7)  –     –     –     –     –     –     –     –    
Long-term incentive SAR(7)  –     –     –     –     –     –     –     –    
Total single figure  1 553     1 463     1 591     708     10 220     8 449     977     1 020    
(1) Includes officer’s fees as a prescribed officer of MultiChoice South Africa.
(2) Calvo Mawela moved to a MCG Dubai-based contract during FY20. The average exchange rate between USD and ZAR has been applied for comparison purposes.
(3) Tim Jacobs was appointed on 1 November 2018 and his remuneration for FY19 reflects his earnings for the five months in the year.
(4) Brand de Villiers was the Group COO until 22 October 2019 at which time he returned to the role of CEO: MultiChoice Africa Holdings. His pay is reported in relation to the time that he was Group COO.
(5) Benefits exclude pension and includes all benefits not included in TCTC/base salary such as medical benefits, fringe benefits, family benefits, travel, long-service and disability benefits.
(6) The STI reflects bonus paid based on the performance of the relevant financial year. During 2017 the MCSA Remco approved a medium-term incentive scheme. This scheme came about in the light of a challenging operating environment which saw a significant decline in the value of the MultiChoice Share Appreciation Rights (SAR) Scheme. This decline created a retention risk in relation to the executives of the business. The scheme was designed to incentivise the delivery of key business results including a multi-year sustainable cost saving deliverable that would be permanently removed from the cost base in FY18 and FY19, with payments taking place in FY20 and FY21.
(7) The LTI value reflects the value of SARs that become exercisable in FY21. RSUs will be reflected when their performance period ends in the financial year – none for FY20 and the first to be reflected in FY21.

LTIs to be awarded during FY21

Executive director/prescribed officer Award 
(as a multiple 
of TCTC/base 
salary)
 
M I Patel –   
C P Mawela 2.2   
T N Jacobs 1.2   
Non-executive directors’ fees

The fees paid to non-executive directors by the company are set out below:

   Directors' remuneration     Directors' fees     Committee
and trustee fees(1)(2)
 
   Total 
(ZAR'm)
  
Element  Paid for 
services 
to the 
group 
(ZAR'm)
   Paid for 
services 
to other 
group 
companies 
(ZAR'm)
   Paid for 
services 
to the 
group 
(ZAR'm)
   Paid for 
services 
to other 
group 
companies 
(ZAR'm)
   Paid for 
services 
to the 
group 
(ZAR'm)
   Paid for 
services 
to other 
group 
companies 
(ZAR'm)
     
D G Eriksson  –     –     0.54     0.51     0.34     0.51     1.90    
F L N Letele(3)  –     5.69     0.18     0.17     0.03     0.03     6.10    
E Masilela  –     –     0.54     0.51     –     0.30     1.35    
K D Moroka(4)  0.54     –     0.54     0.51     0.73     0.48     2.80    
S J Z Pacak  –     –     0.54     0.51     0.93     0.21     2.19    
L Stephens  –     –     0.54     0.51     0.44     0.53     2.02    
J J Volkwyn(5)  2.89     –     –     –     –     –     2.89    
C M Sabwa(6)  –     –     0.54     –     0.25     –     0.79    
J A Mabuza(7)  –     –     0.41     0.38     0.06     –     0.85    
FA Sanusi(7)  –     –     0.41     –     0.03     –     0.44    
   3.43     5.69     4.24     3.10     2.81     2.06     21.33    
(1) Committee fees include fees for the attendance of the audit committee, risk committee, human resources and remuneration committee, the nomination committee and the social and ethics committee meetings of the board.
(2) Trustee fees include fees for the attendance of the various trustee meetings of the group. An additional fee may be paid to directors for work done as directors with specific expertise.
(3) Effective 1 October 2019, F L N Letele changed roles from MultiChoice South Africa executive chairman to a non-executive director.
(4) In addition to director’s fees, emoluments shown are based on a consultancy agreement whereby K D Moroka provides professional advisory services to the company and its subsidiaries.
(5) Emoluments shown are based on a consultancy agreement whereby J J Volkwyn provides consultancy services to the group.
(6) Appointed 14 May 2019.
(7) Appointed 5 July 2019.
Termination payments

No termination payments were made to executive and non-executive directors on termination of employment or office in FY20.

Consulting arrangements

Adv Kgomotso Moroka

The consultancy agreement entered into between the company and Adv Kgomotso Moroka for professional advisory services to the company and its subsidiaries, is considered immaterial to the wealth of Kgomotso and the board has, after consideration on a balanced and substance-over-form basis, determined the agreement does not affect her categorisation as an independent non-executive director.

The consultancy services agreement was renewed for 12 months effective April 2020.

Jim Volkwyn

The consultancy agreement entered into between the company and Jim Volkwyn for professional advisory services to the chair and CEO, is considered immaterial to the wealth of Jim.

The consultancy services agreement was renewed for 12 months effective April 2020.

Compliance

There were no deviations from the remuneration policy in FY20.

Directors’ interest in the MultiChoice Group shares

The directors of the MultiChoice Group (and their associates) had the following beneficial interest in the MultiChoice Group ordinary shares at 31 March 2020:

MultiChoice Group ordinary shares Direct   Indirect   Total  
M I Patel 1 412     1 412  
F L N Letele(1) 88 836     88 836  
J A Mabuza(2) 9 850     9 850  
S J Z Pacak 376 635   291 548   668 183  
J J Volkwyn 5 000     5 000  
T N Jacobs 2 731     2 731  
Total 484 464   291 548   776 012  
(1) F L N Letele acquired additional MultiChoice Group Limited ordinary shares for no consideration in FY20 as a result of the PN share swap transaction.
(2) A Mabuza acquired MultiChoice Group Limited ordinary shares prior to his appointment on 5 July 2019.
Non-binding advisory vote on implementation report

The implementation report, as set out in Part 3, will be subject to a non-binding advisory vote by shareholders at the AGM on 27 August 2020.