REMUNERATION REPORT

Statement from the Chairman of the Group Remuneration Committee

This remuneration report was prepared by the Group Remuneration Committee (the ‘committee’) and approved by the board.

This report describes the Nedbank Group total reward philosophy and the key elements of reward for staff members and executive and non-executive directors. In summary, the overall philosophy and practices remained unchanged from the previous year, aside from the introduction of the Bonus Deferral Scheme. During 2009, other than the normal course of business, the committee attended to the following matters:

• Determination of the remuneration structures for the new Group Executive and Chief Executive appointments.
• An initial review of Nedbank Group’s compliance with relevant corporate governance frameworks on remuneration (King III, Financial Services Board, Basel II, EU Commission Executive and the Financial Services Authority) and concluding on amendments required to existing remuneration arrangements in order to ensure compliance.
• Review of the short-term and long-term incentive schemes.
• Implementation of the compulsory deferral of annual performance bonus amounts in excess of a predetermined amount.
• A review of the composition of the non-executive directors’ fees.
• The vesting of the first tranche of the Nedbank Eyethu Black Executive and Black Management Schemes.

The committee will continue to ensure that total reward in Nedbank remains appropriately competitive, provides an incentive for individual and team performances, aids the retention of staff and supports the implementation of the overall business strategy. The committee reviewed the remuneration schemes and practices to ensure that these do not encourage excessive risk taking.

The challenges for 2010 are as follows:

• Compliance with King III and other relevant governance frameworks as these continue to evolve.
• The vesting of the Eyethu Broad-based Scheme in July 2010.
• The vesting of the second tranche of the Nedbank Eyethu Black Executive and Black Management Schemes.
• The continual monitoring of total remuneration for executive directors, management and staffmembers to ensure that it remains market-related and equitable.
• Changes in remuneration practices globally and the impact thereof on SA-based reward systems.
• The continual upholding of the principles in the Remuneration Committee Charter while taking cognisance of remuneration challenges.
• Responding to the improvements suggested in the annual evaluation of the committee’s effectiveness.

I wish to thank my fellow committee members for their commitment to and support of the business during this challenging period.

Prof Brian de Lacy Figaji
24 February 2010

Total-reward philosophy

The overall purpose of remuneration in Nedbank Group is to attract, retain, motivate and reward all our people. Furthermore, the remuneration philosophy is aimed at encouraging sustainable long-term performance and at all times aligning performance with the strategic direction and specific value drivers of the business, as well as the interests of stakeholders in a manner that does not encourage excessive risk taking.

Nedbank Group has adopted a total-reward philosophy as part of an enterprisewide human resources (HR) strategy, which in turn supports the group’s business strategy. Total reward, comprising fixed and variable pay, plays a critical role in attracting, motivating and retaining high-performing and talented individuals who are required to achieve Nedbank Group’s objectives. This total-reward approach within Nedbank Group is integrated into its people management processes, such as transformation, performance management, recognition, work-home balance, learning and development, career development, talent management and organisational development. Furthermore, this approach takes into account the importance and positioning of the risk management function within the organisation.

The group’s market position is to pay for performance, while ensuring that there is a distribution of remuneration around the market median when performance is on par with predetermined financial and non-financial targets. Performance in excess of these targets is rewarded through additional incentives created through Nedbank Group’s short-term incentive (STI) scheme, as well as Nedbank Group’s recognition programme. Performance is measured at a group and business unit level against agreed targets after the finalisation of the year-end results. Both financial and non-financial results drive the creation of STI pools in the group and in each business unit. Distribution of these STI pools to individuals is on a discretionary basis, is aligned with market practice and utilises individual performance measured against agreed targets as stated in individual and team performance scorecards. To take full cognisance of long-term sustainability of performance, a portion of the cash bonus earned is deferred and remains at risk over a future settlement period.

Nedbank Group’s long-term incentive (LTI) schemes are primarily aimed at the retention of key, high-impact staffmembers. They are intended to provide additional motivation for high performers to remain with Nedbank Group and also to align the interests of staffmembers with shareholders.

Nedbank Group benchmarks remuneration in terms of the roles staffmembers are required to perform by comparison with the external market and in relation to individual performance. Credible information on external remuneration is critical to ensure that remuneration is market-related, and substantial effort is made to ensure that market information is sourced from a number of different remuneration surveys on an annual basis.

Remuneration governance

The global financial crisis precipitated a number of initiatives aimed at improving the governance and management of remuneration. The recommendations, guidance and practice notes are primarily aimed at the remuneration of executive directors, but the underlying principles and statements of good practice can be applied to most incentive arrangements for the majority of staffmembers.

The main sources of recently published material in this regard include:

• King III on governance for South Africa 2009 (September 2009).
• Implementation standards for the Financial Stability Board principles for sound compensation practices (September 2009).
• Enhancements to the Basel II Framework (July 2009).
• EU Commission Executive Remuneration Guidelines (April 2009).
• The Financial Services Authority publication on reforming remuneration practices in financial services (March 2009).

The committee has undertaken a comprehensive review of all Nedbank Group remuneration schemes and arrangements to assess the current level of compliance with the codes of good remuneration practices. The findings indicated a high level of compliance with nearly all of the recommended practices.

Certain areas have been identified as requiring further investigation, including:

• The structure and timing of adjustments to non-executive directors’ fees.
• The use of vesting corporate performance targets in the LTI schemes.
• Additional remuneration disclosure requirements, other than those currently required for executive directors.

To ensure independence of the Group Risk and Group Finance functions, the committee paid particular attention to the total rewards of senior staffmembers in these functions in order to ensure that their own individual performance significantly impacts the determination of their overall package.

The committee will evaluate proposals for amending current practice in these areas in the course of 2010 and amend where necessary.

Remuneration committee membership and charter

The committee functions according to a charter approved by the Nedbank Group Limited Board. The board delegates responsibility to the committee for the investigation and benchmarking of remuneration practices and for considering and approving proposals made on remuneration practices within the group.

For 2009 the committee initially comprised three independent non-executive directors, namely JB Magwaza (Chairman), Chris Ball, Brian Figaji and one non-executive director, namely Bob Head. Nomavuso Mnxasana, an independent non-executive director, was appointed as a member of the committee with effect from 31 July 2009. JB Magwaza, having reached retirement age, resigned as Chairman and member of the committee, and Brian Figaji was appointed Chairman with effect from 19 November 2009. Tom Boardman (Chief Executive), Mike Brown (Chief Executive Designate), Shirley Zinn (Group Executive: Human Resources), and Graham Dempster (Chief Operating Officer) are permanent invitees to the committee meetings and recuse themselves from discussions on their own remuneration. Bob Head, Chief Executive Officer of Old Mutual Wealth Management, Old Mutual plc, advised of his intention to resign as a non-executive director of Nedbank Group Limited and Nedbank Limited with effect from 19 February 2010 and will thereafter no longer be a member of the committee. Don Hope was appointed as a non-executive director on 19 February 2010 to the committee and Malcolm Wyman was appointed as an independent non-executive director to the committee on 1 March 2010. The committee met six times during 2009.

The committee’s responsibilities include:

• Investigating and benchmarking remuneration practices and broad terms and conditions of employment for all permanent staffmembers to ensure that these are fair and competitive, and approving the cost of annual remuneration increases awarded to staffmembers.
  
• Reviewing, monitoring and approving the design principles supporting incentive arrangements and the quantification of final STI pools for distribution to eligible staffmembers.
  
• Reviewing, monitoring and approving the Nedbank Group Employee Share Scheme rules, including the Eyethu Employee Scheme rules.
  
• Approving the design principles supporting the LTI arrangements and the granting of LTIs to staffmembers, as well as the financial targets linked to these incentives, where applicable.
  
• Making recommendations to the board on guaranteed remuneration adjustments, as well as STIs and LTIs for the executive directors and members of the Group Executive Committee. The Chief Executive’s remuneration is subject to final confirmation by the Remuneration Committee of Old Mutual plc.
  
• Establishing a subcommittee to make recommendations on the fees paid to the Chairman, Senior Independent Non-executive Director and non-executive directors.
  
• Approving performance scorecards for the Chief Executive and members of the Group Executive Committee.
  

The committee applies the guiding principles of the remuneration policy as far as is feasible, but both the board and the committee retain the right to use their discretion to deviate from this policy in exceptional circumstances.

The committee provides the board with feedback on decisions taken after each meeting or more frequently, if deemed necessary.

As in previous years, a self-assessment of the committee was conducted in July 2009 to evaluate the committee’s effectiveness against the objectives of the committee’s charter and to highlight and therefore focus on areas where its performance could be enhanced.

Overall the results of the evaluation regarding the effectiveness of the committee were positive and indicated that the committee is functioning well. High-level feedback confirmed the following:

• The committee performs its responsibilities according to its charter and often exceeds the objectives that have been set.
  
• There is good interaction between the board and the committee.
  
• The committee meetings are productive and well-facilitated, with appropriately robust discussions and debate.
  

Areas of improvement relate to the committee ensuring that the terms and conditions of staffmembers’ employment are fair and competitive and devoting more time to the evaluation of Group Executive Committee members’ scorecards to ensure that these deliver on the business strategy. In terms of meeting logistics, it was recommended that documentation should be streamlined, allowing more focus and discussion time on key issues.

Advisers to the committee

The committee is informed of market-related information on guaranteed packages (remuneration on a total cost-to-company basis), as well as STIs and LTSs, based on a number of remuneration surveys in which the group participates. These include Remchannel, the Global Remuneration Solutions Top Executive Remuneration Survey, the LMO Executive Remuneration Survey, the Hay Investment Banking Survey and a number of smaller niche remuneration surveys. Specialists within the Group Remuneration Services Department collate and analyse the information sourced from external service providers and prepare documentation for consideration and approval by the committee. Where appropriate, the committee has access to independent executive remuneration consultants, and has utilised the services of Vasdex Associates and PricewaterhouseCoopers during the year. During 2009, as in previous years, the Old Mutual plc Remuneration Unit provided the committee with input from the perspective of the Old Mutual plc Remuneration Committee.

Education of committee members

As part of the ongoing education of directors, a training session on the latest international executive remuneration practices was facilitated by PricewaterhouseCoopers.

Total remuneration

Guaranteed remuneration for all staffmembers

All staffmembers in the Nedbank Group are remunerated on a total-cost-to-company basis (‘the guaranteed package’), which includes a basic salary, 13th cheque (if selected), allowances and contributions to benefit funds. From the guaranteed package contributions are made to the Nedgroup Medical Aid Scheme, a postretirement medical aid fund (applicable only to qualifying staffmembers), retirement funds, a disability fund and a death benefit scheme. A car allowance/company car contribution may be structured into the package where the employee is required to travel on group business, subject to the requirements of SA Revenue Service (SARS).

Increases in guaranteed remuneration

Annual increases in the guaranteed remuneration are performance- and market-related, based on the rate of inflation, increases awarded by other major banks and the financial services industry, and the group’s remuneration position against the banking and financial services markets. To maintain appropriate remuneration competitiveness relative to the labour market, remuneration is reviewed at least annually and annual increases take effect on 1 April.

Non-managerial staffmembers form part of a bargaining unit, and annual increases granted for this grouping depend on negotiations with the recognised trade unions, SASBO and IBSA. In April 2009 the non-managerial remuneration bill was increased by 10,2% and the managerial and executive remuneration bill increased by 8%. Individual increases are granted on the basis of personal performance and market comparisons within the overall adjustment percentage.

Retirement schemes

Nedbank Group has a closed defined-benefit pension scheme, called the Nedgroup Pension Fund, and at 31 December 2009 had 397 members. The majority of staffmembers as well as all new appointees since 1 January 1994 are members of the Nedgroup Defined-contribution Pension and Provident Fund: Flexible Investment Choice.

Short-term incentive scheme

STIs are intended to encourage particular behaviours and obtain desired results within the agreed risk appetite framework. Nedbank Group’s STI schemes are structured to support collaborative work across different clusters. The committee has agreed a set of principles and all group and cluster incentive schemes are designed according to those principles.

The incentive pools for all support clusters are based on a combination of performance relative to the target in respect of Nedbank Group economic profit (EP), Nedbank Group headline earnings and non-financial performance drivers.

In the income-generating clusters incentive pools are structured with a weighting linked to the group, cluster and, where appropriate, divisional performance. The five income-generating clusters within Nedbank (Corporate, Capital, Business Banking, Retail and Bancassurance and Wealth) were measured against a combination of relevant EP targets, headline earnings targets and non-financial driver targets, with these pools being calculated independently of one another. Independent calculations are done to ensure that the total amount calculated on the group’s EP, headline earnings and non-financial drivers and the amounts calculated taking into consideration each cluster’s and division’s independent performance do not differ by more than 10%. Distribution of these pools is based on individual performance relative to the agreed deliverables in the performance management process.

Executive bonuses are based on group, cluster and individual performance measured against agreed financial and non-financial targets as approved by the committee.

To align with the group’s three-year business plan targets and its approach to risk management, the STI targets were aligned to include EP targets from 2008. At a group level EP is calculated using International Financial Reporting Standards, headline earnings and simple average shareholders’ funds (excluding goodwill) together with an appropriate group cost of equity. Similar calculations are performed in the income-generating clusters using allocated economic capital and group cost of equity.

Bonus deferral scheme

In line with the recent trends regarding executive remuneration, the committee agreed, for financial year 2009, to introduce the compulsory deferral of part of the annual performance bonus earned in excess of R1 million. Going forward the deferral rates are 25% of the excess above R1 million and up to R3 million, and 50% of the excess above R3 million. All deferred amounts will attract interest at the prevailing call rate or can be invested in the Matched Share Scheme, subject to the rules of the scheme. The deferred amount will be forfeited should the employee resign before the end of the deferral period as well as in cases where, in the sole opinion of the board, material irregularities or misrepresentation of financial results come to light during the deferral period. The board will have absolute discretion as to the nature of any action to be taken as well as to the individual, or grouping of individuals, who may be affected by the transgression in question. The deferral policy will be reviewed annually.

Deferred short-term incentive scheme

Since 2006 Nedbank has operated a deferred short-term incentive (DSTI) scheme aimed at the retention of key staffmembers for a 24- or 36-month period in specific areas where these skills were in demand. The Chief Executive Officer is granted a pool for the financial year, within which he may make discretionary allocations to specific individuals where flight risk is a concern. The Chief Executive and members of the Group Executive Committee are excluded from participating in the scheme, except in circumstances where they received an allocation prior to their appointment as a Group Executive Committee member.

During 2009 allocations totalling R14 million were made to 25 staffmembers. Participants leaving the service of the group before the termination date of the scheme are required to reimburse Nedbank Group the gross initial amount awarded.

Executive directors

Increases in guaranteed remuneration

Chief Executive Tom Boardman’s guaranteed package was reviewed in February 2009 and adjusted to R5 200 000 per annum with effect from 1 April 2009. This increase took into account an annual increase in line with the consumer price index (CPI), as well as a market adjustment based on his performance and remuneration levels relative to his peer group. Chief Financial Officer Mike Brown’s guaranteed package was reviewed and adjusted to R2 900 000 per annum with effect from 1 April 2009, using the same CPI, individual performance and market-related criteria. Following Mike Brown’s appointment to Chief Executive Designate, his guaranteed package was adjusted to R4 000 000 per annum with effect from 1 July 2009. Graham Dempster was appointed Chief Operating Officer with effect from 5 August 2009 on an annual guaranteed package of R3 500 000. Raisibe Morathi was appointed as the Chief Financial Officer with effect from 1 September 2009 on an annual guaranteed package of R2 600 000. These increases and appointments for executive directors cover the period from 1 April 2009 to 31 March 2010.

Retirement schemes

All executive directors are members of Nedgroup Defined-contribution Pension and Provident Fund: Flexible Investment Choice. There are therefore no defined-benefit liabilities in respect of the executive directors. Contributions to the retirement funds form part of the guaranteed package.

Short-term incentive scheme

For the Chief Executive, the Chief Executive Designate, the Chief Operating Officer and the Chief Financial Officer the STI amounts provided for 2009 were based on a combination of performance against target in respect of the level of group EP, group headline earnings and performance against their individual performance scorecards. The current Chief Operating Officer was Managing Executive: Nedbank Corporate for the majority of 2009 and hence the cluster performance also played a role in the determination of his bonus.

The individual performance of Tom Boardman, Mike Brown, Graham Dempster and Raisibe Morathi are measured across five dimensions to determine their respective share of the bonus pool, namely financial, clients, internal processes, transformation and organisational learning. Raisibe Morathi was only in the employ of the group for the last four months of the year, so increased judgement was applied.

The specific objectives for each of these dimensions were as follows:

• Financial – delivering sustainable financial outperformance.
  
• Clients – investing for growth by expanding into the mass and middle markets, the public sector and business banking, and implementing the three-tiered African strategy; improving Nedbank’s client relations by empowering our clients through delivery of affordable banking; and finally leading as a corporate citizen.
  
• Internal processes – enhancing productivity and execution; managing risk as an enabler; growing regulatory and government relationships; and growing stakeholder relations.
• Transformation – accelerating transformation in support of achieving the group’s transformation targets and objectives.
  
• Organisational learning – building an innovative and differentiated culture and becoming an employer of choice by creating a great place to work.
  

In 2008 Nedbank measured the bonus pool based purely on an EP basis. This approach resulted in a large year-on-year reduction in the 2008 bonus pool in line with the reduction in EP. This was, in hindsight, out of line with the approach taken by competitors and resulted in a 2008 bonus pool well below market levels. During 2009 the committee approved changes to the Nedbank STI scheme to take EP, headline earnings and non-financial performance into account relative to targets set by the board in order to ensure more market-related alignment.

As part of our philosophy of sustainability we subscribe to the balanced scorecard approach. Our remuneration schemes are not excessive and are conservative when measured by both local and global standards. In 2008 the group’s headline earnings declined 3% and our bonus pools were reduced by 33%. Bonus schemes were refocused in 2009 to recognise headline earnings and EP performance against predetermined targets, as well as increased capital and liquidity weightings in scorecards. Bonus pools in 2009 consequently increased by 5%. Therefore, using 2007 as a base, headline earnings in 2009 are 28% lower than 2007 and bonus pools are 29% lower.

Performance across all five scorecard dimensions in 2009 was satisfactory in the light of prevailing market conditions. Targets across four of the major focus areas, namely clients, internal processes, transformation and organisational learning, were exceeded. Financial targets which were set taking into account the deteriorating macroenvironment, were largely met despite group EP declining compared with that of 2008 and being below target.

The net result of the STI, when taking the financial performance and non-financial performance into account, is a total bonus pool for 2009 that is largely in line with that approved for 2008, but is still less than in 2007.

Service contracts

Tom Boardman’s service contract expires on 28 February 2010. Mike Brown’s appointment as Chief Executive Officer will become effective on 1 March 2010, with a notice period of 12 months and retirement age of 60 years.

The service contracts of all other executive directors include a maximum notice period of six months.

Severance arrangements

In the event of their services being terminated as a no-fault termination, executive directors will be entitled to a severance pay equal to two weeks’ guaranteed remuneration per completed year, with no maximum.

Total remuneration

The remuneration of executive directors for the years ended 31 December 2009 and 31 December 2008 was as follows:

Table 1: Executive directors’ remuneration – year to 31 December 2009

Name	Basic salary and other benefits* (R000)	Defined contribution Retirement Fund (R000)	Guaranteed remuneration (R000)	Performance bonus (R000)	Total (R000)	2009- on-2008 change (%)
TA Boardman	4 697	354	5 051	9 500**	14 551	40%
MWT Brown	2 984	417	3 401	4 250***	7 651	31%+++
GW Dempster+	1 239	219	1 458	1 667****	3 125	–
RK Morathi++	761	106	867	1 000	1 867	–
Total	9 681	1 096	10 777	16 417	27 194

*	This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the package. No additional benefits are offered to executive directors.
**	Bonus relates to performance in 2009 as well as recognition of Tom Boardman’s role during his tenure as CE, where a minimum of R3,750 million will be deferred in terms of the bonus deferral scheme.
***	Bonus relates to performance in 2009, where a minimum of R1,125 million will be deferred in terms of the bonus deferral scheme.
****	Bonus relates to performance in 2009, where a minimum of R1 million will be deferred in terms of the bonus deferral scheme. The bonus indicated in the table reflects a pro rata portion of the total bonus received of R4 million in his roles as MD Nedbank Corporate and Chief Operating Officer for 2009.
+	Graham Dempster was appointed as Chief Operating Officer and executive director to both boards from 5 August 2009. As part of the Nedbank employee benefits, Graham Dempster encashed leave to the value of R99 617. Furthermore, a dependent family member received a study grant of R8 000.
++	Raisibe Morathi was appointed as Chief Financial Officer and executive director to both boards from 1 September 2009. She received a relocation payment of R216 667 based on the terms and conditions of Nedbank’s relocation policy.
+++	The bonus awarded in 2009 took into account both MWT Brown’s role as Chief Financial Officer up until 30 June 2009 and as CEO Designate for the rest of the year.

Tom Boardman earned fees of R125 000 for board membership of Mutual & Federal in 2009, which fees were ceded to Nedbank Group.

Table 2: Executive directors’ remuneration – year to 31 December 2008

Name	Basic salary and other benefits* (R000)	Defined contribution Retirement Fund (R000)	Guaranteed remuneration (R000)	Performance bonus (R000)	Total (R000)	2009- on-2008 change (%)
TA Boardman	4 104	309	4 413	6 000***	10 413	(11,5)
MWT Brown	2 282	319	2 601	3 250	5 851	(19,3)
Total	6 386	628	7 014	9 250	16 264	(14,5)

*	This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the package. No additional benefits are offered to executive directors.
**	Bonus relates to performance in 2008, paid in March 2009.
***	The committee recommended a bonus of R6 624 million payable in cash to Tom Boardman. Following a request by Tom Boardman, the committee amended the proposal to a cash bonus of R6 million and an additional allocation of restricted shares to the value of R624 000. The board accepted the committee’s revised proposal.

Tom Boardman earned fees of R235 000 and R159 000 for board and committee membership of Mutual & Federal in 2008 and 2007, which fees were ceded to Nedbank Group.

Non-executive directors

The terms of engagement of the non-executive directors (excluding the Chairman) cover a period of three years, as determined by the rotation requirements of the Nedbank Group articles of association. A non-executive director is required to retire at age 70, unless the board determines otherwise. Any non-executive director serving for a period in excess of nine years is required to retire from the board.

Based on this policy, Michael Katz, JB Magwaza and Mafika Mkwanazi retired as non-executive directors of Nedbank Group Limited and Nedbank Limited with effect from 19 November 2009 as they have each served on these boards for periods in excess of nine years.

In January 2009 Alan Knott-Craig was appointed as an independent non-executive director to the Nedbank Group Limited and Nedbank Limited Boards.

In August 2009 Jabu Moleketi, Wendy Lucas-Bull and Malcolm Wyman were appointed as independent non-executive directors to the Nedbank Group and Nedbank Limited Boards.

In October 2009 Lot Ndlovu resigned as an independent non-executive director due to a potential conflict of interest with other business activities as well as having served for a period in excess of nine years as a boardmember.

In December 2009 Julian Roberts and Don Hope were appointed as non-executive directors to the Nedbank Group Limited and Nedbank Limited Boards.

Non-executive directors’ remuneration

Non-executive directors’ remuneration for the years ended 31 December 2009 and 31 December 2008 was as follows:

Name	Note	Board meeting fees (R000)	Committee meeting fees (R000)	2009 (R000)	2008 (R000)
CJW Ball	1, 2	480	823	1 303	1 328
TCP Chikane		264	235	499	439
BE Davison	b	0	0	0	308
MA Enus-Brey	1	264	312	576	416
B de L Figaji		264	210	474	430
R Harris	4	66	23	89	326
RM Head	2, 4	276	182	458	564
DI Hope	g, 4	22	8	30	0
MM Katz		233	309	542	635
RJ Khoza	c	0	3 300	3 300	3 000
A de VC Knott-Craig	e	264	59	323	0
WE Lucas-Bull	f	110	51	161	0
JB Magwaza	3	233	312	545	1 170
NP Mnxasana	1	334	201	535	173
ME Mkwanazi		233	211	444	455
PJ Moleketi	f	110	26	136	0
ML Ndlovu	2, d	209	300	509	1 349
CML Savage		0	0	0	164
GT Serobe	2, 5	543	122	665	571
JH Sutcliffe	4, a	0	0	0	235
JVE Roberts	4, g	22	4	26	0
MI Wyman	f	110	13	123	0
Total		4 037	6 701	10 738	11 563

1	Includes fees for board, subsidiary board and committee memberships (including Imperial Bank) for the years 2008 and 2009. MA Enus-Brey resigned from the board of Imperial Bank in January 2008.
2	Includes fees for board and committee memberships (including Mutual & Federal) for the years 2008 and 2009.
3	Includes fees for board and committee memberships (and additional services to Mutual & Federal) for the year 2008.
4	Fees for RM Head, JH Sutcliffe, R Harris, JVF Roberts and DI Hope were paid to Old Mutual (SA) Limited for 2008 and 2009.
5	Includes fees for board and committee memberships (including Old Mutual Life Company South Africa) for the years 2008 and 2009.
a	JH Sutcliffe resigned as a non-executive director from the boards of Nedbank Group Limited and Nedbank Limited with effect from 9 September 2008 following his resignation as Chief Executive of Old Mutual plc.
b	BE Davison resigned as non-executive director with effect from 2 August 2008.
c	From 1 January 2008 to 29 February 2008 RJ Khoza’s fees were paid directly to Aka Capital (Pty) Limited.
d	As part of the negotiations to conclude the termination of ML Ndlovu’s services as a consultant to Nedbank Group, it was agreed that he would receive a payment of R500 000 in 2008.
e	In January 2009 A de VC Knott-Craig was appointed as an independent non-executive director.
f	In August 2009 PJ Moleketi, WE Lucas-Bull and MI Wyman were appointed as independent non-executive directors
g	In December 2009 JVF Roberts and DI Hope were appointed as non-executive directors to the Nedbank Group Limited and Nedbank Limited Boards.

The remuneration for non-executive directors for committee membership is as follows:

Committee	Proposed (with effect from 1 July 2010)***	Annual fee 2009	Annual fee** 2008
Boards	(R)	(R)	(R)
Chairman of the board*	3 578 000	3 300 000	3 000 000
Vice-chairmen premium****		100 000	100 000
Senior Independent Director*****	112 000	105 600	96 000
Nedbank Group Limited	152 000	143 000	130 000
Nedbank Limited**	128 000	121 000	110 000
Committees
Group Audit Committee**	120 000	114 000	105 000
Group Finance and Oversight Committee	21 000	20 000	20 000
Group Remuneration Committee**	75 000	64 800	60 000
Group Risk and Capital Management Committee**	105 000	90 000	75 000
Executive Credit Committee******	100 000	67 500	Not applicable
Group Credit Committee	70 000	67 500	65 000
Group Directors’ Affairs Committee	49 000	44 000	40 000
Board Strategic Innovation Management Committee**	49 000	42 000	40 000
Group Transformation and Sustainability Committee**	70 000	65 000	65 000

*	The Nedbank Group Chairman’s fees include his fees for board, subsidiary board and committee memberships.
**	At the annual general meeting held on 14 May 2009 approval was granted to increase non-executive directors’ fees in order to align the board fees with local market practices.
***	Subject to shareholders’ approval at the annual general meeting on 4 May 2010.
****	This function was terminated at the close of the May 2009 annual general meeting.
*****	An additional fee of 40% of the Nedbank Group Limited and Nedbank Limited Board member fee is paid to the senior independent director.
******	Represents a new fee payable from 1 January 2010 to 30 June 2010, subject to approval at the annual general meeting on 4 May 2010.

Committee chairmen (other than the Chairman of the Nedbank Group Directors’ Affairs Committee) receive double the member fees. Fees payable to the non-executive directors and the Nedbank Group Chairman are reviewed annually and adjustments are considered by a subcommittee of the Remuneration Committee. After deliberation, the board has resolved to reconsider the composition of the non-executive fees, as suggested in King III, in the ensuing years. The above increases are effective from 1 July 2010, subject to shareholders’ approval at the 4 May 2010 annual general meeting. As the proposed fees will be applicable from 1 July 2010 to 30 June 2011, the committee members will be paid the 2009 fees from 1 January 2010 to 30 June 2010, until the increase is approved by the shareholders. Board and board committee meeting attendance is recorded in the Enterprise Governance and Compliance Report.

Long-term incentive schemes

LTIs are intended to achieve two strategic objectives: to retain high-impact staffmembers and provide long-term reward that is aligned with the interests of the shareholders. The value of the incentive issued is based on the most recent performance review, individual career path planning, scarcity of skills and the organisation’s need for retaining the individual. The value of the instrument allocated is also benchmarked to the external market. The overall affordability and lock-in values are further considerations.

1994 Nedcor Group Employee Incentive Scheme

The scheme is closed and no further allocations have been granted since April 2005. The scheme will terminate during April 2011.

2005 Nedbank Employee Share Scheme

Since August 2007 no new share options were issued.

During 2009 the committee issued restricted shares to eligible participants. Restricted shares granted for retention purposes were granted with either entry or exit performance vesting targets.

An allocation under this scheme may be granted, subject to committee approval, under the following circumstances:

• On-appointment allocations (internal and external appointments)
  
  On-appointment restricted share allocations are offered at the discretion of the committee to new senior managers and also to staffmembers who have been appointed to more senior positions and have been recommended for an allocation by the Group Executive Committee. On-appointment allocations take place three trading days after the announcement of the annual and interim financial results (typically in February and August), subject to the Nedbank Group Personal Account and Insider Trading Policy. The vesting period for on-appointment allocations is three years from the date of allocation, subject to the achievement of corporate performance targets, where applicable.
   
• Annual allocations
  
  Annual restricted share allocations apply to qualifying staffmembers in terms of criteria recommended by the Group Executive Committee and approved by the committee.
  
  Annual allocations take place once a year (typically in February), subject to the Nedbank Group Personal Account and Insider Trading Policy.
  
  At 31 December 2009 share options and restricted shares in issue under the Nedbank employee schemes (vested and unvested), as a percentage of issued share capital, was 2,5%. Following amendments to Schedule 14 of the JSE Limited (‘the JSE’) Listings Requirements, changes to the 2005 Nedbank Employee Share Scheme in terms of issued share capital requirements will be submitted to the annual general meeting on 4 May 2010 for approval.

This scheme consists of three parts:

• Share Option Scheme
  
  No new share options were granted to staffmembers since August 2007.
  
  
• Matched Share Scheme
  
  The Matched Share Scheme allows staffmembers an opportunity to allocate up to 50% of their after-tax bonus towards the acquisition of Nedbank Group shares or to deposit Nedbank Group shares to the equivalent value into the trust that administers this scheme. The incentive to do so is a matching of this investment to the equivalent value by the 2005 Nedbank Employee Share Scheme on a one-for-one basis. The trust’s obligation to deliver or procure the delivery of the matched shares rests on two conditions, namely that:
  • staffmembers are still in the service of the group on the vesting date (three years after acquisition) for 50% of the matched shares; and
  • the group has met an agreed performance target over a three-year period for the remaining 50% of the matched shares.
  In May 2008 enhancements to the Matched Share Scheme were approved at the annual general meeting. The scheme, of which the principles remain unchanged, now incorporates:
  • the Bonus Share Scheme (being the previous Matched Share Scheme); and
  • the Matched Investment Plan (MIP).
  The MIP is available as a scheme with a different risk profile. The MIP was not offered as an option to staffmembers in 2009. The committee retains the discretion to implement the MIP based on business and market conditions.
• Restricted Share Plan
  
  During 2009 Nedbank issued restricted shares for performance reasons with time-based and performance-based vesting criteria, as well as restricted shares for retention purposes with individual-performance criteria as entry/selection criteria and only time-based criteria for vesting purposes.
  
  The Restricted Share Plan offers awards to new staffmembers and internal appointments (on-appointment allocations) and annually to existing staffmembers (annual allocations).
  
  Annual allocations were made to 1 147 staffmembers on 3 March 2009. On-appointment allocations were made to 94 staffmembers on 3 March 2009 and 11 August 2009 respectively.
  
  The committee agreed that a combination of the following three corporate performance targets will be used for the period 2009 to 2011 on a graduated scale of vesting, namely return on equity (excluding goodwill), fully diluted headline earnings per share growth and the cost-to-income ratio. As part of the Restricted Share Plan rules participants are entitled to receive dividends.
  
  For purposes of the Restricted Share Plan the allocation price is based on the weighted-average (by volume) market price of an ordinary share in the company, as shown by the official trading price list published by the JSE, over the three most recent trading days on the JSE immediately preceding the allocation date.
  

Phantom Share Plan

During 2007 the committee approved the Phantom Share Plan (cash-settled) for key staffmembers in the United Kingdom. The scheme design principles mirror the SA LTI schemes as far as possible. A total of 17 UK staffmembers participated in the scheme in 2009.

Status of the long-term employee incentive schemes:

• 1994 Nedcor Group Employee Incentive Scheme
  
  At 31 December 2009 there were 150 participants and 628 280 Nedbank Group share options outstanding.
  
  
• 2005 Nedbank Employee Share Scheme
  
  At 31 December 2009 there were 1 849 participants and 17 521 060 Nedbank Group share options outstanding. All share options under this scheme were issued with time- and performance-based vesting criteria.
  
  The restricted share allocations made in 2009 were also linked to the achievement of financial targets. A total of 5 080 170 restricted shares were issued in 2009.
  

The number of participants who have committed shares under the Matched Share Scheme at 31 December 2009 is noted below:

2009	2008	2007
247	412	414
The number of shares held in the scheme totals 583 048 shares.	The number of shares held in the scheme totals 595 170 shares.	The number of shares held in the scheme totals 596 762 shares.

During 2009 a total of 62 925 shares were allocated to participants of the 2005 Matched Share Scheme as the timebased vesting criteria had been met. The corporate performance condition was not met.

Nedbank Eyethu Employee Schemes

Nedbank Group implemented its black economic empowerment staff schemes in August 2005. The objective of the schemes is to support the achievement of Nedbank’s broad transformation strategy.

The Eyethu employee schemes consist of the Black Executive Trust, the Black Management Scheme, the Broad-based Scheme and the Evergreen Trust. Share and share option allocations have been made to new and internally appointed staffmembers since the inception of the schemes, in accordance with the scheme rules and the respective trust deeds.

At 31 December 2009 a total of 38 black staffmembers in senior positions with groupwide impact, as identified by the Group Executive Committee and approved by the committee and trustees, were beneficiaries of the Black Executive Trust.

Black permanent staffmembers earning in excess of R362 778 per annum received new or topup options and shares under the Black Management Scheme in the period under review.

Shares under the Eyethu Broad-based Scheme were allocated as a once-off share grant to permanent Nedbank Group staffmembers who met the eligibility criteria at the inception date of the scheme and no subsequent allocations were made. A trading restriction of five years applies to shares issued under this scheme.

The Evergreen Trust was created with the specific purpose of improving the living standards and personal circumstances of black permanent staffmembers who meet certain eligibility criteria. At 31 December 2009 41 beneficiaries had completed their Grade 12 qualification equivalent to a NQF4.

Nedbank Eyethu Non-Executive Directors Trust

This trust holds 952 552 shares. At 31 December 2009 a total of 743 530 shares were allocated to six participants.

On 4 March 2009 46 722 shares were allocated to NP Mnxasana.

As stated in a circular to shareholders, the trust was for the benefit of the existing non-executive directors at the time of launching the scheme and to prospective candidates. As all the positions have now been filled, the scheme is now closed.

Nedbank Africa Subsidiary Schemes

During 2006 the committee approved the Omufima Employee Schemes for Nedbank Namibia. The committee approved localisation and LTI schemes for Swaziland, Malawi, Zimbabwe and Lesotho during 2007.

In February 2009 23 staffmembers were allocated restricted shares in terms of the Nedbank Namibia LTI scheme and one senior manager was allocated an award in terms of the Nedbank Namibia Omufima Black Management scheme.

Executive directors’ share option holdings

Click to enlarge

Share options issued before May 2005 were issued in terms of the 1994 Nedcor Group Employee Incentive Scheme, with 50% vesting after three years from the date of grant and the remaining 50% after four years from the date of grant.

Share options issued after May 2005 were issued in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan, with 100% vesting after three years from the date of grant.

*	Share options issued with performance-based vesting criteria. The rights issue options linked to these share options also have performance-based vesting criteria.
**	No share options have been issued since 2008 as a result of the introduction of the Restricted Share Plan.

Executive directors’ restricted share plan holdings (2009)

Click to enlarge

*	Restricted shares issued with time- and performance-based vesting criteria. No accelerated vesting would apply toTom Boardman, notwithstanding the fact that he retires in February 2010.
**	Restricted shares were issued to Tom Boardman on 3 March 2009 with time- and corporate-performance-based vesting criteria in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.
***	Restricted shares were issued to Tom Boardman on 11 August 2009 with time- and individual-performance-based vesting criteria in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.
+	Restricted shares were issued on 3 March 2009 with corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.
++	Restricted shares were issued on 4 March 2009 without corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.
+++	Restricted shares were issued on 11August 2009 without corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Matched Restricted Share Plan.

Shares purchased/committed by executive directors under the Matched Share Scheme for the period 2006 – 2009

Name	Number of shares	Date of inception	Strike price (R)
TA Boardman	10 000	31/03/2006+	130,18
	20 000	03/31/2008	117,83
	21 100	03/31/2009	85,28
MWT Brown	7 400	31/03/2006+	130,18
	8 878	03/31/2007	141,92
	13 155	03/31/2008	117,83
	11,051	03/31/2009	85,28
GW Dempster	11 881	03/31/2008	117,83

+	50% of the ordinary shares were matched on 1 April 2009 in terms of the rules of the Nedbank Group (2005) Matched Share Scheme.

Directors’ interests

At 31 December 2009 the directors’ interests in ordinary shares in Nedbank Group were as follows:

	Beneficial direct		Beneficial indirect
Number of shares	2009	2008	2009	2008
CJW Ball	10 000	10 000
TA Boardman	81 100	98 936	251 715	60 167
MWT Brown	49 940	49 940	235 815	39 522
TCP Chikane			92 213	86 912
GW Dempster*	11 881		169 584
MA Enus-Brey+			2 076	1 650
B de L Figaji			121 879	114 579
RM Head
DI Hope*
RJ Khoza++			1 374	1 031
A de VC Knott-Craig*
WE Lucas-Bull*
NP Mnxasana			49 572
PJ Moleketi*			1 422	246 769
RK Morathi*
JVF Roberts*
GT Serobe+++			1 296	972
MI Wyman*
Total	152 921	158 876	926 946	551 602

*	Appointed to the board during 2009.
+	Excludes 4 662 678 and 4 996 918 shares held by The Brimstone-Mtha Financial Services Trust in 2008 and 2009 respectively.
++	Excludes 1 946 719 and 2 062 082 shares held by Aka-Nedbank Eyethu Trust in 2008 and 2009 respectively.
+++	Excludes 4 676 324 and 5 017 632 shares held by The Wiphold Financial Services Number Two Trust in 2008 and 2009 respectively.

At 31 December 2009 the directors’ interests in the non-redeemable non-cumulative preference shares of R0,001 each in Nedbank Limited were as follows:

	Beneficial direct		Beneficial indirect
Number of shares	2009	2008	2009	2008
CJW Ball	144 300	144 300
TA Boardman			85 000*	85 000*
MWT Brown
TCP Chikane
GW Dempster**
B de L Figaji
MA Enus-Brey
RM Head
DI Hope**
RJ Khoza
A de VC Knott-Craig**
WE Lucas-Bull**
NP Mnxasana
PJ Moleketi**
RK Morathi**
JVF Roberts**
GT Serobe
MI Wyman**
Total	144 300	144 300	85 000	85 000

*	These shares, which continue to be held in a trust, are now correctly shown as being held on a beneficial indirect basis.
**	Appointed to the board during 2009.

None of the above directors had any beneficial indirect or non-beneficial direct interest in Nedbank preference shares during the year under review.

On 11 August 2009 92 208 restricted shares were granted to TA Boardman with time- and individual performance-based vesting criteria in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.

On 2 March 2010 43 360 performance shares will be granted to MWT Brown, with corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan. On 3 March 2010 43 360 retention shares will be granted to MWT Brown, without corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan.

On 2 March 2010 20 647 performance shares will be granted to GW Dempster, with corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan. On 3 March 2010 20 647 retention shares will be granted to GW Dempster, without corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan.

On 2 March 2010 35 736 performance shares will be granted to RK Morathi, with corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan. On 3 March 2010 35 736 retention shares will be granted to RK Morathi, without corporate performance targets in terms of the Nedbank Group (2005) Share Option Scheme and Restricted Share Plan.

There are 100 000 (2008: 100 000) options outstanding that have been granted to executive directors in terms of the Nedcor Group (1994) Employee Incentive Scheme and 457 765 (2008: 422 765) instruments outstanding that have been granted to executive directors in terms of the Nedbank Group (2005) Share Option Scheme, Matched Share Scheme and Restricted Share Plan.