| | |

Sustainability

Directors remuneration report

Governance

The remuneration and nomination committee is responsible for determining the remuneration of the executive directors and executive management, as well as approving grants to these individuals under the company’s share incentive schemes. The committee also makes recommendations in respect of the fee structure for non-executive directors and the fees for members of the board committees for ratification by the shareholders, once approved by the board.

The remuneration and nomination committee operates under a board-approved mandate and terms of reference that was last updated in February 2008.

Remuneration policies

The Altech group’s remuneration philosophy is to set appropriate remuneration levels to attract, motivate and retain top-grade, high-calibre directors and executive managers required to run the company successfully while aligning their interests with those of the shareholders.

With effect from 1 March 2007, the Altech group changed its remuneration practice of “cash and benefits” to “total cost of employment” (TCOE). The concept of TCOE introduced a remuneration philosophy and practice that enables remuneration to be compared by the employer across the various peer groupings. Consequently, it aims to achieve equitable remuneration practices within the greater Altech group and in the longer term assisting in achieving fair treatment of all group employees. Adopting the TCOE concept offers transparency as each employee is able to view and understand his/her total remuneration package.

The group’s remuneration structure for senior management has three components:

Fixed remuneration – annual/base salary and benefits.
Variable remuneration – a short–term performance-related incentive scheme.
Share option and/or conditional rights grants – a long-term performance-related incentive scheme.

Fixed remuneration is reviewed annually to ensure that the directors and executives who contribute to the success of the group and who have the potential to sustain performance are remunerated competitively.

The variable pay element provided by the short-term incentive scheme is intended to provide superior total pay opportunities, should corporate performance merit it, as well as rewarding individual performance. Long-term incentives in the form of share options and/or conditional rights have been based on multiples of TCOE and are intended to reward sustained long- term performance.

Advisors

matters presented to the remuneration and nomination committee. Altech bears all the expenses relating to the appointment of external remuneration consultants and other appropriate independent professional advisors.

Executive directors’ remuneration

The Altech group aims to employ individuals of the highest calibre who create value for all of its stakeholders. Executive directors are rewarded as individuals for the value they add through the payment of fixed remuneration, performance bonuses and share option and/or conditional rights allocations.

a) Fixed remuneration

Altech applies discretion in all remuneration reviews and there is no minimum across-the-board increase for employees, including executive directors. The sustainable contribution of each executive director is used as a basis for remuneration reviews and a TCOE approach is followed. Benefits included as part of their TCOE packages include a retirement scheme, medical aid cover and a car allowance.

The remuneration and nomination committee reviewed and revised the TCOE packages of the executive directors at its meeting in February 2008. These packages were compared to a market information survey of companies similar in size and structure to Altech and adjusted to reflect levels in the median to upper quartile levels of the survey.

b) Pensions

During the year, the relevant Altech operations made contributions for the executives to the Altron Group Pension Fund. The rate of contribution is 12% of pensionable salary of these individuals. The value of contributions made for each executive director is also depicted in the summary of the directors’ emoluments on page 61.

c) Annual incentive schemes

Every executive director is entitled to participate in an annual performance bonus plan to reward achievement in the group and subsidiary company financial performances as well as strategic and personal objectives agreed with the chief executive officer. These arrangements are also approved by the remuneration and nomination committee.

The Altech group’s financial performance targets relate to headline earnings per share growth, return on equity, and return on operating assets. In all cases 60% of the maximum bonus is based on the achievement of financial objectives, with the remaining 40% relating to identified key performance indicators.

At its meeting in April 2008, the remuneration and nomination committee reviewed the performance of executives participating in the performance bonus plan as measured against their agreed targets. The bonuses were approved in accordance with these parameters.

d) Share option scheme

Altech operates a share option scheme which grants options and/or conditional rights to all senior employees. Grants are made annually and are capped at 6.4 times TCOE for the chief executive officer and between 4.4 and 5.3 times TCOE for the members of the executive committee.

Options and conditional rights are exercisable after the expiry of a three-year period and vest in equal tranches in years three, four and five. All options and conditional rights granted expire after a six-year period. Grants are made annually to ensure that the multiple of TCOE reflects increases in remuneration packages. These are granted based both on corporate and individual performance.

Vesting of conditional rights is based on achieving performance-related conditions.

Service contracts

Executive directors are appointed subject to Altech’s standard terms and conditions of employment where notice periods may vary between 30 and 60 days.

Non-executive directors’ fees

Non-executive directors are remunerated for their membership of the board of Altech and board-appointed committees. The fees reflect the size and complexity of the Altech group and market practices are taken into account in determining non-executive directors’ fees. The elements of non-executive directors’ remuneration are an annual board fee and a fee as a member of a board committee.

Non-executive directors are not eligible to participate in any of Altech’s incentivisation arrangements or share option schemes. The fees of the non-executive directors are recommended by the remuneration and nomination committee, approved by the board and ratified by the shareholders in general meeting. Fees for the period 1 March 2007 to 29 February 2008 in respect of directorship and membership of the various committees were as follows: