Directors’ remuneration and interest report

for the year ended 30 September 2009

Remuneration strategy

Our remuneration strategy is designed to attract, retain and appropriately reward talented and committed executives to ensure that the strategic objectives of the Group and Company are achieved in a sustainable and ethical manner.

Remuneration Committee

The main purpose of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in establishing remuneration policies and practices. This ensures that Netcare is able to attract and retain executives and to award executives appropriately based on their achievement of the short- and long-term objectives of the Group.

The Remuneration Committee consists of five non-executive directors, HR Levin (Chair), APH Jammine, AA Ngcaba, MI Sacks and SJ Vilakazi (appointed 12 February 2009), three of whom are independent.

The Committee meets twice a year, once in December to consider the payment of bonuses and again in March to review and confirm annual increases for executives. The Chief Executive Officer and Group Human Resources Director attend meetings by invitation and are not present when matters relating to their own remuneration are discussed.

External consultants are used on a bi-annual basis to evaluate the benchmarks of executive’s salaries and to ensure that we remain cognisant of best practice.

Details on the terms of reference of the Remuneration Committee are outlined in the Corporate governance report on page 78.

Executive remuneration structure

The executive remuneration structure consists of a guaranteed package, short- and long-term incentives.

Guaranteed package

Our policy is to provide guaranteed remuneration at the median of the market taking into account individual responsibilities and performance. Guaranteed remuneration packages are benchmarked against the market every two years. Guaranteed pay includes salary, employee benefits such as retirement funding and medical aid contributions and leave allocations. Executives are not entitled to carry over, accumulate or encash leave.

Variable pay

Short-term incentives

The objective of the short-term incentives are to provide managers and executives with rewards based on the achievement of annual strategic objectives. The targets and objectives are compiled in individual balanced scorecards which are evaluated on a six-monthly basis.

Short-term incentives are calculated based on individual, divisional and company achievement gateways and the maximum potential rewards are based on set percentages of guaranteed remuneration. All short-term incentives are calculated after the audited results of the business unit and the Group are confirmed. Eligible participants are all managers with varying degrees of potential bonus qualification.

Long-term incentives

The objectives of long-term incentives are to align the objectives of executives with those of shareholders; to provide the opportunity for longer-term reward for sustainable performance and to retain key executives.

The Netcare Share Incentive Scheme

Recent scheme allocations have been linked to senior employees. The granting of options was last made in 2008. The vesting of options occur in tranches of 20% commencing two years after issue. Additional details on the Netcare Share Incentive Scheme are provided in note 34 on pages 191 to 193 of the annual financial statements of the Group.

Executive leveraged bonus scheme

The objectives of the scheme are to provide medium-term reward and retention opportunities to executives which are directly aligned to the growth in the share price. Allocations were made during the course of the year and potential payments based on the prevailing share price are due in May and November of 2009 and 2010. Participants have to be employees in service to qualify for payment at the above stated dates.

Non-executive directors’ remuneration

The remuneration of non-executive directors is reviewed annually in line with market practices by the Remuneration Committee. Recommendations are made to shareholders at the annual general meeting for consideration and approval.

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Service contracts

All executives have notice periods of three months. Restraint of trade agreements are detailed on page 131 of this report.

Interests of directors

Director holding in excess of 1% in Netcare is: MI Sacks 2.3% (2008: 2.4%; 2007: 2.4%). The calculation of the director’s holdings is based on 1 266 451 288 (2008: 1 262 072 944; 2007: 1 244 765 494) shares in issue, after deducting treasury shares.

The beneficial and non-beneficial interests of directors in the ordinary shares of the Company were:

The register of interests of directors and others in the shares of the Company is available to members on request.

Directors’ share options

The following share options were held by the directors at 30 September 2009:

PG Nelson resigned as executive director with effect from 5 December 2008. Details of his share options exercised are as follows:

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Directors’ emoluments – Benefits on share options exercised

The following are the gains on share options exercised by directors:

The share option exercise terms are detailed on page 191.

Directors’ emoluments

Emoluments paid to directors of the Company by the Company and its subsidiaries (excluding gains on share options exercised reflected on above) for the year to 30 September, are set out below:

Executive directors

1 Bonuses paid in respect of the 2008 financial year.
2 The fair value of options granted is the annual expense determined by IFRS 2.

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1 Bonuses paid in respect of the 2007 financial year.
2 The fair value of options granted is the annual expense determined by IFRS 2.

1 Bonuses paid in respect of the 2006 financial year.
2 The fair value of options granted is the annual expense determined by IFRS 2.

Non-executive directors

Leveraged executive bonus scheme – share option gains

In May 2009, the Group entered into a leveraged bonus scheme with a financial institution. The bonus obligation yielding the benefits has been settled by the Group during the year following a hedging arrangement entered into with the financial institution. The bonus obligation is expensed in the income statement over the vesting period of the options. An amount of R1 million relating to the directors listed below was expensed in the current financial year. The effective share option gains earned during the year by the directors are listed below.

Pursuant to the leveraged bonus scheme entered into by the Company with a financial institution in February 2005, the undermentioned effective share option gains were earned by the directors listed below. The bonus obligations yielding the benefits had been settled by the Company during the September 2005 financial year pursuant to a hedging arrangement with the financial institution.

Contracts

The following directors are restrained from competing with the Group and have entered into service agreements with the Company for a six-month period: IM Davis and RH Friedland.

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