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Annual integrated report 2011


Explanatory notes to the notice of the AGM

FOR THE YEAR ENDED 30 SEPTEMBER 2011

Resolutions

Ordinary resolution 1 – Approval of the annual financial statements

In terms of the Companies Act the directors are obliged to present to members at the AGM, the annual financial statements and Group annual financial statements for the year ended 30 September 2011.

Ordinary resolution 2 – Re-appointment of auditors

In compliance with Section 90 (1) of the Companies Act, a public company must each year at its AGM appoint an auditor.

Ordinary resolutions 3 and 4 – Consulting services for non-executive directors and confirmation of the executive directors' remuneration

In terms of the Company's MOI, the remuneration payable to the executive directors and the consulting fees payable to the non-executive directors must be confirmed by the Company in general meeting.

Ordinary resolution 5 – Re-appointment of retiring directors

The Company's MOI makes provision for the annual retirement from office of a certain proportion of directors including a director appointed after the conclusion of the Company's preceding AGM. In line with current corporate governance best practice, the appointment of each director standing for re-election will be voted on by a separate resolution.

Ordinary resolution 6 – Appointment of Group Audit Committee members

Section 94 (2) of the Companies Act requires the Audit Committee to be a committee of the Board. In terms of this section, the Audit Committee must be elected by the shareholders at the AGM. The Board has approved the proposed membership of the Audit Committee and has confirmed that they are all suitably qualified, collectively possess the skills which are appropriate to the Company's size and circumstances as well as its industry. They are also considered independent in terms of the Companies Act.

Ordinary resolution 7 – Authority to place ordinary shares under the control of the directors

In terms of the Companies Act and Company's MOI, the members of the Company must approve the placement of the unissued ordinary shares under the control of the directors. This authority is due to expire at the forthcoming AGM, unless renewed. This authority is required in terms of the JSE Listings Requirements.

Ordinary resolution 8 – Authority to place preference shares under the control of the directors

This authority is being sought to place the unissued preference shares under the control of the directors. These preference shares, if issued, are non-dilutive to the ordinary shareholders.

Ordinary resolution 9 – Authority to issue shares for cash

A general authority to issue ordinary shares for cash was granted to the directors at the general meeting of shareholders on 6 October 2011. This authority is due to expire at the forthcoming AGM unless renewed. The aggregate number of ordinary shares able to be allotted and issued in terms of this resolution will be limited to 5% of the ordinary shares in issue as at 30 September 2011.

Non-binding resolution 10 – Approval of remuneration report for the year ended 30 September 2011

The reason for proposing this non-binding advisory vote is in accordance with King III's recommendation that companies should table their remuneration policy as contained in the remuneration report to shareholders. This enables shareholders to express their views on remuneration policies. The remuneration policy is set out on page 125 of this annual integrated report which deals with amongst other issues the Company's policy towards remuneration and guidelines on the various components of remuneration packages.

Ordinary resolution 11 – Approval of Forfeiture Share Plan

On 7 December 2011 the Board ratified the Remuneration Committee's decision to implement the Forfeiture Share Plan (FSP). This approval is subject to shareholder approval of ordinary resolution no 11. The FSP is commensurate with market practice for several listed companies and complies with the requirements of the King III.

Currently, the Company operates the Netcare Share Incentive Scheme which is a long-term incentive plan. Awards will continue to be made under this scheme, however an alternate scheme was required to enhance the alignment of employee's remuneration structure with shareholders. The FSP also provides the following additional benefits when compared to the current schemes in place:

  • It addresses any immediate retention risk, as employees will be the owners of the FSP shares from date of award and will immediately benefit from dividends. The same result is not achieved through the grant of awards under the current schemes;
  • The FSP is a flexible instrument in that it will be structured as both a retention and a performance award;
  • As shareholders in the Company, there will be direct alignment between the FSP participants and shareholders;
  • Compared to the current schemes, more meaningful benefits accrue to employees who are hedged against market volatility; and
  • The shares are issued, or bought, on the date of award in the name of the participant.

Salient Features

1. The FSP has been introduced as a long-term incentive for selected employees (participants) of the Company, including executive directors but excluding any non-executive directors of the Company.
2. The maximum aggregate number of shares which may at any time be allocated to all participants in respect of the FSP shall not exceed 180 811 216 shares, either alone or when aggregated with existing share plans.
3. The maximum number of shares which may at any time be allocated to any one participant in respect of the FSP shall not exceed 14 464 897 shares, either alone or when aggregated with existing share plans.
4. Save for securities transfer tax, the participant will give no consideration for the grant of an award under the FSP (FSP awards).
5. The participants shall not be entitled to any voting rights prior to the vesting of the FSP awards.
6. The number of forfeitable shares subject to an FSP award made to an employee, and the mix between performance shares and retention shares will primarily be based on the employee's total cost to Company, grade, performance, retention requirements and market benchmarks as determined by the Remuneration Committee of the Company.
7. In the event of a merger, takeover or corporate action, a portion of the FSP awards held by the Participant will vest and will be calculated as follows:

V = X/Y x Z

Where:

V = the number of forfeitable shares that will vest in the event of a merger, takeover or corporate action;

X = the number of complete months served from the award date to the change of control date (rounded down to the nearest whole month, if applicable);

Y = the total number of months in the relevant vesting period; and

Z = the number of forfeitable shares subject to an award of performance shares or the number of forfeitable shares subject to an award of retential shares.

8. In the event of termination or resignation of an employee, the FSP awards will be forfeited in its entirety and all rights will lapse immediately (but the Remuneration Committee shall nevertheless be entitled, in its sole and absolute discretion, to determine in writing that all or any part of such FSP awards shall not be forfeited).
9. In the event of a capitalisation issue, sub-division, consolidation, the Company being put into liquidation, any event affecting the share capital of the Company (other than a rights issue), the shares ceasing to be listed on the JSE, the Company making distributions other than a dividend, the participants shall continue to participate in the FSP. However, the Remuneration Committee shall make such adjustment to the number of forfeitable shares or take such other action to ensure the participant receives entitlement to the same proportion of equity capital as that which he/she was previously entitled to.
10. The issue of equity securities as consideration for an acquisition, issues of securities for cash and the issue of securities for a vendor consideration placing will not be regarded as circumstances requiring adjustments in terms of 9 above.
11. The Company's auditors will confirm to the JSE in writing of any adjustments made in terms of 9 above and such adjustments will be reported on in the Company's annual financial statements.
12. FSP awards not subsequently issued to participants will revert to the FSP.

Ordinary resolution number 12 – Signature of documents

The reason for proposing this ordinary resolution is that the Board requires authorisation to take various actions and sign the documents pertaining to the resolutions to be proposed at this meeting. It is appropriate corporate practice for the members to grant this authority.

Special resolution 1 – General authority to repurchase shares

Special resolution 1 is required to grant the directors a general authority, up to and including the date of the following AGM of the Company, to approve the purchase of the Company's ordinary shares by the Company or one of its subsidiaries. The directors consider that such general authority should be put in place to facilitate the repurchase of securities should an opportunity present itself which would be in the best interests of the Company and its shareholders in the ensuing year.

Special resolution 2 – Approval of non-executive directors' remuneration for the period 1 October 2011 to 30 September 2012

Special resolution 2 is required to obtain approval of remuneration payable to non-executive directors for the period 1 October 2011 to 30 September 2012. The approval of the shareholders is sought to ensure the remuneration paid to the non-executive directors of the Company remains adequate for the purposes of attracting persons of sufficient calibre and skill to act as non-executive directors of the Company.

Special resolution 3 – Financial assistance to related and inter-related companies in terms of Section 45 of the Companies Act

Special resolution 3 is required to grant the directors the authority to authorise the Company to provide direct and indirect financial assistance as contemplated in Section 45 of the Companies Act to any one or more related or inter-related companies or corporations of the Company pursuant to a shareholders resolution being procured and provided that the directors are satisfied that immediately after providing the financial assistance the Company could satisfy the solvency and liquidity test and that the terms under which the financial assistance is given is fair and reasonable.