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TRUWORTHS INTERNATIONAL LIMITED - Group remuneration policy and annual general meeting update

Release Date: 30/10/2019 14:28
Code(s): TRU     PDF:  
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Group remuneration policy and annual general meeting update

TRUWORTHS INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1944/017491/06)
PO Box 600, Cape Town, South Africa, 8000
JSE code: TRU; NSX code: TRW
ISIN: ZAE000028296
(“Truworths” or “the Group” or “the company”)

Group Remuneration Policy and Annual General Meeting Update

Shareholders are referred to the “No-Change Statement and Announcement
of Annual General Meeting” announcement on the JSE news service, SENS,
on 30 September 2019 advising that Truworths’ 2019 integrated report, as
well as its 2019 audited preliminary report on the audited Group annual
results and notice of annual general meeting had been published on the
Group’s website: www.truworthsinternational.com.

Subsequent to such publication, certain shareholders have engaged with
Group management requesting clarification and further information on certain
aspects of the Group’s remuneration policy that was incorporated in the 2019
integrated report, and in relation to which shareholders will be voting at the
upcoming annual general meeting.

Such engagement has been constructive, and the shareholders have
positively acknowledged the changes brought about to the Group’s
remuneration policies, practices and disclosures in the financial year under
review, and have responded favourably to the further changes being
implemented in the current year.

Accordingly, Truworths provides the following information in relation to the
Group’s remuneration policy:

   -   the existing policy relating to share usage for the purposes of the
       company’s share incentive schemes, and the change to such policy
       which is to apply with immediate effect; and
   -   the policy according to which dividends are paid on unvested
       performance shares awarded in terms of the said schemes, and which
       policy will be subject to review during the current financial year.


Policy on share usage in incentive schemes:

Introduction

In the Group’s 2019 integrated report the following was stated in the Report of
the Remuneration Committee (“the Committee”), (“Committee Report”), as
regards the Group’s policy and practices on share usage in incentive
schemes:
                                                                             
Remuneration policy section

The maximum aggregate allocation in terms of all the schemes is limited to
10% of the company’s issued shares at June 2012 over the life of the
schemes in terms of the policy, being 46 181 002 shares, but the Committee’s
guideline is to keep this below 7.5%.

Annual allocations are capped at 1.25% of issued shares at June 2012 in any
one year and no more than 5% in any five-year period in terms of the policy,
but the Committee’s guidelines are to limit annual allocations to below 1% in
any one year.

Implementation report section

Share instruments awarded to employees and executives, including the share
scheme allocations in the 2019 financial period, constitute 17 482 000 shares,
being 3.8% (2018: 4.7%) of total issued shares at June 2012 which is below
the Committee’s guideline aggregate allocation of 7.5% (10% in terms of the
share scheme rules).

The annual allocation in the 2019 financial period is 0.35% of issued shares at
June 2012 which is below the Committee guideline of 1% in any one year
(1.25% in terms of the policy).

Comment

The policy that provides for the maximum aggregate allocation in terms of all
the share schemes to be limited to 10% of the company’s issued shares at
June 2012 originated at the company’s November 2012 annual general
meeting, at which the company’s new share scheme proposed by the board,
viz the Truworths 2012 Share Plan, was approved by shareholders holding
92% of the votes exercised.

In terms of the JSE Limited Listings Requirements, the company must fix the
actual number of shares available for allocation, rather than express the
allocation as a percentage of the number of shares in issue from time to time.

Notwithstanding this policy, the Committee subsequently adopted more
conservative guidelines in respect of the aggregate allocation in response to
feedback received from shareholders, thereby further limiting the actual
allocations made. At the past three financial year-ends, the aggregate
allocation of share instruments has consistently been less than the limits set
in the policy (10%) and the Committee’s guidelines (7.5%), as shown below.


Financial year end        2017        2018           2019

Aggregate allocation      21.007m     21.859m        17.482m

June 2012 issued shares   461.81m     461.81m        461.81m
Share usage percentage    4.55%       4.73%          3.79%
                                                                            
At 30 June 2019, when the company had 442 876 470 shares in issue, the
aggregate share scheme allocation of 17.482 million shares comprised 3.95%
of the company’s shares in issue at that date.

Policy change

Noting the reservations raised by shareholders and governance advisers that
potential future share scheme allocations could exceed the policy limits and
the Committee’s guidelines, the Committee has resolved to adopt a revised
policy that will henceforth limit share usage across all incentive schemes to an
aggregate 23 090 501 shares, being 5% of the company’s shares in issue at
30 June 2012.


Policy on paying dividends on unvested performance shares:

Introduction

In the Group’s 2019 integrated report the following was stated in the
Committee’s Report as regards the Group’s policy and practices in relation to
the payment of dividends on shares held in terms of the Group’s share
incentive schemes:

Remuneration policy section

The following activities (amongst others) were undertaken by the
Remuneration Committee during the period:

   -   Approved the payment of dividends to LTI share scheme participants holding
       restricted and performance shares.

Implementation report section

As reflected in the single figure remuneration table setting out the executive
directors’ remuneration, the amounts of qualifying dividends received by them
in respect of the 2019 and the prior year, were disclosed per director, in
accordance with the recommendations of the King IV Report on Corporate
Governance for South Africa, 2016 (“King IV”).

Comment

The company presented such single figure remuneration in respect of its
directors for the first time in its 2019 Committee Report, following the
extensive review undertaken during the financial year on the spectrum of the
Group’s reward policies and practices in consultation with both external
remuneration advisers and certain shareholders.

The Committee has since 2013 considered, at each bi-annual dividend
declaration date, the appropriateness of the company paying dividends to
share scheme participants holding restricted and performance shares.
                                                                              
Since March 2017, following advice received from external remuneration
advisers, and in the absence of guidance expected to have been provided
through a King IV practice note, the Committee adopted and implemented a
restrictive policy whereby dividends payable on unvested performance shares
would not be paid on shares forfeited as a result of corporate performance
targets not having been met.

Pursuant to the implementation of this policy, the number of performance
shares to be forfeited is determined shortly after the conclusion of the
assessment of performance against targets, over the three financial-year
performance measurement period after the date of the share award.
Accordingly, with immediate effect after such assessment, share scheme
participants no longer qualify for dividends on such forfeited shares over the
vesting period, which period ranges from three to six years after the date of
the share award. The company was advised at the time that this policy was
amongst the prevailing practices acceptable to the market. The company
further notes that confirmation of the market acceptability of this practice was
obtained in the 2019 financial year during the aforesaid review of its reward
policies and practices.

Furthermore the company notes that the practice of paying dividends on
unvested performance shares prior to performance being assessed against
corporate performance targets is not unreasonable, given that participants
can be both advantaged or disadvantaged thereby, depending on whether the
assessment would qualify them for either a reduced or an additional, number
of vested shares. This practice too ensures fiscal certainty regarding the
dividends received by participants.

The company advises that only a portion of the dividends received by
executive directors in the 2019 financial year in fact relates to unvested
performance shares, as reflected in the table below. The other portion of
these dividends accrued on restricted shares held pursuant to the Group’s
1998 or 2012 share schemes.

             DIVIDENDS RECEIVED FOR THE 2019 FINANCIAL YEAR (R)

                     ON VESTED       ON UNVESTED       ON UNVESTED
                    RESTRICTED        RESTRICTED       PERFORMANCE        TOTAL
                  SHARES HELD ITO   SHARES HELD ITO   SHARES HELD ITO   DIVIDENDS
                  THE 1998 SCHEME   THE 2012 SCHEME   THE 2012 SCHEME   RECEIVED
  Michael Mark         5 059 200                 -         1 248 809    6 308 009
  David Pfaff                  -            82 128           567 582      649 710
  Doug Dare                    -            75 883           407 628      483 511

Policy review

The company has noted that market practice in relation to the payment of
dividends on unvested performance shares is evolving, and accordingly the
Committee has undertaken to review the company’s policy in this regard
during the current financial year.
                                                                                   
Conclusion

Truworths trusts that the above additional disclosures and commitments are
useful to shareholders and will enable them to vote in an informed manner in
relation to the resolution to approve the Group’s 2019 remuneration policy,
which resolution is to be considered under agenda item 8.1 at the annual
general meeting.


Annual General Meeting

Shareholders are reminded that the said annual general meeting is scheduled
to be held in the auditorium at the company’s registered office, being No.1
Mostert Street, Cape Town, South Africa on Thursday, 7 November 2019 at
09h30, to transact the business set out in the notice of the meeting, which
notice is contained in the Group's 2019 audited preliminary report on the
audited Group annual results and published on the Group’s website:
www.truworthsinternational.com.

Shareholders are encouraged to participate in the voting on all resolutions,
and are advised to make the necessary arrangements to attend or be
represented at the annual general meeting and, where required, to furnish
voting instructions to their CSDP or broker in good time. The record date for
the purposes of participating and voting at the annual general meeting is
17:00 on Friday 1 November 2019.

Shareholders are reminded that in order for forms of proxy (which are
contained in the Group's 2019 audited preliminary report on the audited Group
annual      results   and     published     on     the    Group’s     website:
www.truworthsinternational.com) to be valid for the purposes of the meeting,
such forms are requested to be lodged at the offices of Truworths' transfer
secretaries, Computershare Investor Services (Pty) Limited, Rosebank
Towers, 15 Biermann Avenue, Rosebank, 2196, South Africa (or mailed to be
received by them at PO Box, 61051, Marshalltown, 2107, South Africa) by no
later than 48 hours before the appointed time of the meeting. Forms of proxy
may on the day of the meeting however be submitted, to the chairman of the
meeting, up to the scheduled time for holding the meeting.


By order of the board
Chris Durham
Company Secretary

Cape Town
30 October 2019

Sponsor in South Africa
One Capital

Sponsor in Namibia
Merchantec Capital




                                                                            

Date: 30/10/2019 02:28:00
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