Introduction

As indicated in the legal, regulatory and compliance review, PwC was engaged to assess compliance with the King III report, including a remuneration perspective. A number of actions were undertaken in 2010 to align with these remuneration requirements; however, achieving full compliance will be an ongoing exercise in coming years.

Remuneration philosophy

The Exxaro brand is built on a strong vision – everything we do and deliver today will allow others to realise their vision
tomorrow. Exxaro believes in the power of people and their ability to explore and shift boundaries that lead to success.
Exxaro’s people strategies have been developed to reinforce the brand values of:

• People powered
• Inspired leaders
• Leading performance
• Sustainable effort.

A total remuneration approach is followed. This includes guaranteed and variable components which play a critical role in attracting, motivating and retaining the high-performing and talented individuals required to achieve Exxaro’s objectives.

We recognise that one of our competitive sources of value is our people, and we believe that to meet our corporate goals
and business objectives, our reward policies and objectives must:

• Be an integral part of an overall human resource strategy, geared to support business strategies
• Be designed to motivate and reinforce superior performance
• Be designed to motivate and reinforce living the values in an outstanding and demonstrable manner
• Encourage the development of organisational and individual performance
• Encourage the development of competencies required to meet future business needs
• Be based on the premise that employees should share in the success of the company
• Be designed to attract and retain high-quality individuals with the optimum mix of competencies
• Be aimed at securing our people’s commitment to goals via the optimum mix of financial and non-financial rewards.

Remuneration governance

The transformation, remuneration, human resources and nomination committee (Tremco) sets and monitors non-executive and executive remuneration policies for the company. This committee is responsible for making recommendations on remuneration policies and practices for the company’s executive directors, senior management and personnel in general.

The committee comprises four non-executive directors. The CEO, finance director (FD), executive general manager: human resources, and compensation and benefits advisers may be invited to attend any meeting but they have no voting rights. For full details on the committee, refer to the review.

At the annual general meeting to be held on 19 May 2011, shareholders will be requested to approve the remuneration policy as outlined in this report and that the board of directors be authorised to undertake the necessary acts to implement the remuneration policy as summarised here. Resolutions for consideration are included in the notice of meeting found here.

Remuneration benchmarking

External remuneration benchmarking for executives and general staff positions is done continually and external comparisons are reported to Tremco every six months.

The benchmarking used for median performance of the management and specialist category is the 50th percentile (median) of the market’s guaranteed remuneration values. Exxaro allows for a 30% differentiation from median market values depending on the performance rating of the individual.

Remuneration policy

The total remuneration approach includes guaranteed and variable components, as noted earlier, to attract, motivate and retain the caliber of individuals required to achieve Exxaro’s objectives.

Exxaro remuneration: overview
Remuneration elements		Management and specialist category employees					Bargaining category employees
		F band	E band	DU band	DL band	CU band	A-DL band
Guaranteed remuneration	Notional cost of employment or basic salary	Annual adjustments based on:    Performance External market benchmark Internal parity Affordability					Annual adjustments   based on:    Wage negotiations Mandate on affordability
	Benefits	Retirement fund: employer and employee contributions Medical aid: employer and employee contributions Housing: Company housing or allowances/subsidies applicable to a specific business unit
	Circumstantial    remuneration	Job-specific Skills scarcity
Variable remuneration	Short-term   incentives	Special performance: Individual performance base		Not applicable
		On-target incentive: Business unit stretch budget achievement
		Second and third tier above target improvement incentives: Capped at 30% of Exxaro above-budget improvement Annually set stretched targets
	Long-term Incentives	Deferred   bonus   plan Share match	Not applicable
		Long-term incentive    scheme Performance conditions		Not applicable
		Share appreciation right scheme Performance conditions			Not applicable
		Not applicable			Mpower scheme 3% and five-year employee share option scheme

Guaranteed remuneration

Management and specialist category

Employees in the management and specialist category, including executives, are remunerated on a total-package approach. Guaranteed remuneration adjustments to employees’ are based on the following fundamental principles:

• Remuneration based on performance: individual performance contracting and assessment
• External competitiveness: use the market median for median performance per job family, per level as reference point to determine competitiveness
• Internal equity: same job – same performance – same pay (except circumstantial)
• Affordability: all salary account-related mandates first to be included in Exxaro financial forecasting model to determine affordability.

Non-management category

Employees in the non-management category are remunerated on a traditional menu package consisting of basic salary, housing allowance, employer contributions to retirement and medical funds. Annual adjustments are determined through wage negotiations as applicable.

Benefits

Contributions to retirement funds and medical aids are made by both employees and employers.

Retirement funds

Retirement fund contributions are made according to the specific conditions of employment and fund rules for the different levels and categories of employees. Employer and employee contributions to these funds are reflected in note 30 of the annual financial statements.

Employees belong to any one of the following retirement funds:

	Fund description	Employee   % contribution   or range	Employer   % contribution   or range	Total   % contribution   or range
	Chamber of Mines	13,20	11,45	24,65
	Sentinel Funds	7,50-10,70	12,50-20,52	20,00-28,02
	Mine Employees Pension Funds	7,50-10,70	12,50-15,00	20,00-24,65
	Namakwa Sands Sentinel Funds	6,50-7,50	13,90-26,60	20,40-34,10
	Alexander Forbes Pension Fund	7,50	12,50	20,00
	Coris Capital Pension Funds (non-package and notional cost of employment)	7,00	10,00	17,00
	Rosh Pinah Retirement Fund	9,75	16,25	26,00
	BillProv	7,00	10,50	17,50
	Iscor Employees Umbrella Provident Fund	7,00	10,00	17,00
	Mine Workers Provident Funds	7,50-10,70	12,50-15,00	20,00-24,65
	Namakwa Sands Provident Funds (C up & D+)	7,50	9,00-15,00	16,50-22,50
	Zincor: Iscor Provident Fund – old	8,00	14,74	22,74
	Zincor: Selector Umbrella – (new and old)	7,00-8,00	10,00-14,74	17,00-22,74

Exxaro-accredited retirement funds are defined contribution funds. Any actuarially valued defined benefit fund obligation disclosed in the annual financial statements (refer to note 30) merely recognises past practice with no new entrants allowed.