Annual General Meeting –
Explanatory notes
PRESENTATION OF ANNUAL FINANCIAL STATEMENTS AND REPORTS
Section 61(8) of the Companies Act requires directors to present the annual financial statements for the ye a r ended 30 June 2018 to shareholders, together with the reports of the directors, external Auditors and the Audit Committee at the AGM. These are contained within the Integrated Report.
Shareholders are advised that, in terms of section 62(3)(d) of the Companies Act, a copy of the complete annual financial statements for the preceding financial year may be obtained by submitting a written request to the Company Secretary, and electronic copies are available on the Adcock Ingram website (www.adcock.com).
PRESENTATION OF THE SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE REPORT
Regulation 43(5)(c) of the Companies Regulations requires the Social and Ethics Committee, through 1 (one) of its members, to report to the shareholders on matters within its mandate at the AGM. The Social, Ethics and Transformation Committee's report will be presented during the AGM.
Ordinary Resolution 1 – Re-election of non-executive directors
In terms of the MOI, one-third of the non-executive directors are required to retire at each annual general meeting and may offer themselves for re-election. The MOI also provides that non-executive directors who were appointed by the Board to fill a vacancy or as an addition to the Board shall retire in terms of clause 15.5.
| 1.1 | Ms N Madisa (as Ordinary resolution number 1.1) retires by rotation in terms of clause 15.5 of the MOI; |
| The following non-executive directors accordingly retire by rotation as required in terms of clause 17.1 of the MOI: | |
| 1.2 | Prof M Haus (as Ordinary resolution number 1.2); |
| 1.3 | Mr Makwana (as Ordinary resolution number 1.3); and |
Ms Madisa, Prof Haus, and Mr Makwana have offered themselves for re-election and, having been evaluated and had their suitability for re-appointment confirmed by the Nominations Committee, are eligible for re-election.
Brief curriculum vitae in respect of the retiring directors who have offered themselves for re-election, are set out on page 6 of the Integrated Report.
To be approved, each of the resolutions set out under Ordinary Resolution 1 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
If each of the resolutions set out under Ordinary Resolution 1 is approved, the effect would be to elect the retiring directors who have offered themselves for re-election (i.e. Ms Madisa, Prof Haus and Mr Makwana) as non-executive directors to the Board of the Company until such time as any of them resign or is otherwise removed from office.
Ordinary Resolution 2 – Election of the Audit Committee members
Section 94(2) of the Companies Act requires the Company to elect an Audit Committee comprising at least 3 (three) non-executive directors of the Board at each AGM. In order to comply with this provision of the Companies Act, the Board, following a recommendation by the Nominations Committee, hereby nominates the following non-executive directors to be elected as members of the Audit Committee:
| 2.1 | Ms J John (Chairperson) (as Ordinary Resolution 2.1); |
| 2.2 | Ms L Boyce (as Ordinary Resolution 2.2); |
| 2.3 | Prof M Haus (as Ordinary Resolution 2.3) subject to being re-elected as a director in terms of resolution 1.2); and |
| 2.4 | Dr R Stewart (as Ordinary Resolution 2.4). |
A brief curriculum vitae in respect of each of the above non-executive directors offering themselves for re-election as a member of the Audit Committee, is set out on page 6 of the Integrated Report.
To be approved, each of the resolutions for the election of members of the Audit Committee in Ordinary Resolution 2 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
If Ordinary Resolution 2 is approved, the effect would be to elect the abovementioned directors to the Audit Committee until the next AGM of the Company.
Ordinary Resolution 3 – Re-appointment of External Auditors
In terms of section 90(1) of the Companies Act the Company must appoint an auditor each year at its AGM by way of an ordinary resolution of the shareholders entitled to exercise voting rights on that resolution. In terms of section 94(7)(a) (as read with section 90(2)) of the Companies Act, the Audit Committee of the Company must nominate a registered auditor for appointment as auditor of the Company who is, in the opinion of the Audit Committee, independent of the Company.
The Audit Committee has nominated Ernst & Young Inc. (''EY'') as the independent external auditors of the Company. The Audit Committee is satisfied that EY and the individual auditor designated by EY as responsible for performing the functions of the Company's auditor on behalf of EY, namely Mr Warren Kinnear, can be regarded as independent and are thereby able to conduct their audit functions without any conflict or influence. The relevant section of the Audit Committee Report relating to the Audit Committee's nomination of EY as the auditors of the Company is contained on pages 64 and 65 of the Integrated Report.
EY has confirmed its willingness to continue in office and Ordinary Resolution 3 proposes the re-appointment of the firm as the Company's auditors with effect from 1 December 2018 until the next AGM. As contemplated in section 90(3) of the Companies Act, the name of the designated auditor, Mr Warren Kinnear, forms part of the resolution. The resolution also notes the remuneration of the independent external auditors as determined by the Audit Committee of the Board.
To be approved, Ordinary Resolution 3 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
If Ordinary Resolution 3 is approved, the effect would be to approve the appointment of EY as the independent external auditors of the Company until the next AGM of the Company.
Ordinary Resolution 4 – Approval of the Remuneration policy
Principle 14 of King IV requires companies to ensure that they remunerate fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short-, medium- and long-term and requires companies to table their remuneration policy to shareholders every year for a non-binding advisory vote at the AGM. This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation. The Group's remuneration report is contained on pages 50 to 58 of the Integrated Report. Ordinary Resolution 5 is of an advisory nature only and failure to pass this resolution will therefore not have any legal consequences relating to existing arrangements. However, the Board will, as required in terms of King IV, disclose in the background statement of the remuneration report succeeding the voting: with whom the Company engaged, and the manner and form of engagement to ascertain the reasons for dissenting votes; and the nature of steps taken to address legitimate and reasonable objections and concerns, in the event that either the remuneration policy or implementation report, or both, were voted against by 25% (twenty-five percent), or more, of the voting rights exercised.
To be approved, Ordinary Resolution 4 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
Ordinary Resolution 5 – Approval of the implementation of the remuneration policy
Principle 14 of King IV further recommends that the implementation of a Company's remuneration policy be tabled for a non-binding advisory vote by shareholders at each AGM. This resolution is of advisory nature only to enable shareholders to express their views on the implementation of the Group's remuneration policy.
To be approved, Ordinary Resolution 5 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
Ordinary Resolution 6 – Delegation of Authority
This reason for Ordinary Resolution 6 is to authorise any 1 (one) director or the Company Secretary of the Company to do all such things and sign all documents and take all such action as he/she may consider necessary to implement the resolutions set out in the notice convening the AGM at which Ordinary Resolution 6 will be considered.
To be approved, Ordinary Resolution 6 requires the support of more than 50% (fifty percent) of the voting rights exercised on the resolution.
Special Resolution 1 – Financial assistance to related and inter-related parties
It is important for the Group to be able to administer its cash resources efficiently. From time to time it is advisable for the Company to borrow from its subsidiaries, and to on-lend or provide loans to its subsidiaries and other potential recipients envisaged in Special Resolution 1 in accordance with the provisions of section 45 of the Companies Act. It is not possible to detail in advance all instances where such financial assistance could be required, and approval is accordingly sought as contemplated in section 45(3)(a)(ii) of the Companies Act generally for the provision of financial assistance to certain categories of potential recipients. If approved, this general authority will expire at the end of 2 (two) years from the date on which Special Resolution 1 is approved. In addition, it would be impractical and difficult to obtain shareholder approval every time the Company wishes to provide financial assistance as contemplated above. Accordingly, the Company requires flexibility and the authority to act promptly as the need arises, and the authority of this special resolution is sought in advance to obviate the need for shareholder approval in each instance.
To be approved, Special Resolution 1 requires the support of more than 75% (seventy-five percent) of the voting rights exercised on the resolution.
If Special Resolution 1 is approved, the effect would be to authorise the Company to grant the aforementioned financial assistance to the relevant persons, subject to compliance with the MOI and the Companies Act (including but not limited to the Board being satisfied that immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in section 4 of the Companies Act and that the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company).
Special Resolution 2 – Proposed remuneration of non-executive directors – payable with effect from 1 December 2018
Shareholders are requested to consider and if deemed appropriate, approve the proposed annual market related fees and remuneration payable monthly or quarterly (as may be arranged with individual directors) in arrears to non-executive directors for their services as directors (which for clarity includes their participation in sub-committees of the Board) with effect from 1 December 2018 until the next AGM as set out in the table hereunder. Full particulars of all fees and remuneration for the past financial year are contained on page 58 the Integrated Report. Since the coming into effect of the Companies Act, in particular sections 65(11), 66(8) and (9), remuneration may only be paid to directors for their services as directors in accordance with a special resolution approved by the shareholders (i.e. a resolution passed with the support of at least 75% (seventy-five percent) of the voting rights exercised on the resolution) within the previous 2 (two) years.
To be approved, Special Resolution 2 requires the support of at least 75% (seventy-five percent) of the voting rights exercised on the resolution.
| Category | Current annual remuneration |
Proposed annual remuneration payable with effect from 1 December 2018 |
||
| Board | ||||
| Chairman | 1 148 950 | 1 189 163 | ||
| Board member | 262 900 | 284 769 | ||
| Audit Committee | ||||
| Chairman | 249 500 | 249 500 | ||
| Committee member | 124 740 | 124 740 | ||
| Risk and Sustainability Committee | ||||
| Chairman | 235 370 | 235 370 | ||
| Committee member | 117 680 | 117 680 | ||
| Human Resources, Remuneration and Nominations Committee | ||||
| Chairman | 180 000 | 180 000 | ||
| Committee member | 82 700 | 82 700 | ||
| Social, Ethics and Transformation Committee | ||||
| Chairman | 165 900 | 165 900 | ||
| Committee member | 71 230 | 75 500 | ||
| Acquisitions Committee | ||||
| Chairman | 249 500 | 249 500 | ||
| Committee member | 124 740 | 124 740 |
Non-executive directors are paid an additional R13 000 (thirteen thousand Rand) each when they attend special meetings of the Board and/or sub-committees of the Board which last more than 3 (three) hours. The Chairman of the Board does not get paid any additional amount for attending meetings of subcommittees of the Board.
If Special Resolution 2 is approved, the effect would be to authorise the Company to pay the remuneration contemplated in the above table to the nonexecutive directors of the Company for their services as directors, with effect from 1 December 2018 until the next AGM.
Special Resolution 3 – Approval of the Performance-Based Long-Term Incentive Scheme
The reason for Special Resolution 3 is that (i) in terms of Schedule 14 of the JSE Listings Requirements, the PBLTIS must be approved by holders passing an ordinary resolution (requiring a 75% majority of the votes cast in favour of such resolution by all holders present or represented by proxy at the general meeting to approve such resolution) and (ii) the directors of the Company consider it to be in the best interests of the Company that a new share incentive scheme be adopted so as to ensure that appropriate incentives are granted to employees of the Company and/or its subsidiaries to attract, retain, motivate and reward selected critical employees to encourage growth and profitability within the Company. Furthermore, to align with what the market considers to be best practice and to satisfy shareholder concerns in this regard. In terms of the Companies Act, the implementation of the PBLTIS may require approval in terms of, inter alia, section 41, 44 and/or 48. If adopted the effect will be to authorise the establishment and implementation of the PBLTIS in terms of the JSE Listings Requirements and the Companies Act. The copy of the share incentive scheme rules is included as a separate insert and these can also be accessed from the Company website: www.adcock.com. In 2019, share incentive scheme participants' performance shall be measured based on the following financial and non-financial metrics: i) HEPS (50%), ii) Return on Funds Employed (ROFE) (25%) and iii) B-BBEE (25%). These performance metrics will be subject to a minimum threshold, target and stretch requirements
To be approved, Special Resolution 3 requires the support of at least 75% (seventy-five percent) of the voting rights exercised on the resolution
Quorum
The meeting of shareholders contemplated herein may begin, and a matter may begin to be debated at that meeting, only if the following quorum requirements are met as required by the Companies Act and the MOI:
| 1. | subject to 2 and 3 below: | |
| 1.1 | a meeting of shareholders may not begin until sufficient persons are present at the meeting to exercise, in aggregate, at least 25% (twenty-five percent) of all of the voting rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting; and | |
| 1.2 | a matter to be decided at the meeting may not begin to be considered unless sufficient persons are present at the meeting to exercise, in aggregate, at least 25% (twenty-five percent) of all of the voting rights that are entitled to be exercised on that matter at the time the matter is called on the agenda; | |
| 2. | once a quorum has been established at a meeting of shareholders, all the shareholders necessary to maintain such quorum must be present at that meeting to consider and vote on any matter; | |
| 3. | despite the percentage figures set out in 1, as the Company has more than 2 (two) shareholders, a meeting may not begin, or a matter begin to be debated unless: | |
| 3.1 | at least 3 (three) shareholders are “present at the meeting” (as defined in the Companies Act); and | |
| 3.2 | the requirements of 1, are satisfied. | |