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Published by Candace Bentel, 2016-08-25 09:07:12

Long-Term Share Incentive Plan

Understanding Gold Fields’
Long-Term Share Incentive Plan (SIP)


Contents
A short summary of Gold Fields Long-Term Share Incentive Plan 2
The principles of the SIP 2 How it works 3 How your award will vest 3 How the SIP fits in with your remuneration package 4 My influence over the SIP 4
How performance impacts the SIP 5
Three Corporate Performance Conditions 5 How thresholds, targets and stretches work 6 Recap 6 Two hypothetical examples 7
How the SIP runs over three-year cycles 8
Diagram 1
Frequently asked questions 10


1
GOLD FIELDS LONG TERM INCENTIVE SHARE PLAN


2
A Short Summary Of Gold Fields’
Share Incentive Plan
Gold Fields has a long-term share incentive plan (SIP) for D-Band and above employees. This forms part of the total remuneration package and is designed to incentivise high-performance over the long-term. Qualifying employees may receive an
annual Conditional Performance Share award, and a percentage of this is settled when the award vests after three years, depending on how well the company has met certain Corporate Performance Conditions.
Up until 2014, these awards were in the form of performance shares, but in 2014 they changed to a cash award. Gold Fields and its shareholders prefer a share-based scheme as it creates better alignment between shareholder returns and management rewards.
For this reason, 2016 saw the re-introduction of the share-based long- term incentive plan. Participation of all of management in the long- term share incentive plan differentiates Gold Fields from its peers because in most companies, shares are only awarded to executives or by invitation. This is an attractive feature of the total remuneration package for management employees and enhances Gold Fields Employee Value Proposition.
The principles of the SIP
The SIP uses very similar criteria to the cash-based scheme. Firstly, we need to ensure that shareholders receive a return on their investment. This is known as Total Shareholder Return or TSR. We need to meet two TSR criteria – Absolute TSR and Relative TSR (these will be explained later in more detail – see page 5). We can’t justify paying management incentive- based rewards if our shareholders, who invest money in our business, are not receiving a return.
Secondly, we need to meet certain financial targets. For the 2016 award, the target is Free Cash Flow Margin. This is directly linked to our strategy and it ensures that employees are rewarded when the company meets its strategic objectives. Any future changes in strategy may necessitate a change to this performance measure.
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


How your annual award is determined
Each year in March, qualifying employees are awarded (i.e. allocated) Conditional Performance shares. It is important to note that the annual awards are approved by the Remuneration Committee and the Committee has, within its mandate the discretion to amend the annual aggregate award in accordance with the Rules of the Amended Gold Fields Limited 2012 Share plan. The Committee, in its decision, takes into account prevailing market conditions and company affordability. The number of shares that you are awarded will be determined by the following factors:
123
Your salary – your performance share award is based on your salary
Your job grade – each job grade has a percentage attached to it that determines what percentage of your salary you are eligible for in shares
Your individual performance rating, as determined by your BSC – the better you perform, the better you are rated on your BSC, and therefore the more favourable your performance share award will be
GOLD FIELDS Long-Term Share Incentive Plan (SIP)
456
Exchange rate – conversion to ZAR using the six month exchange rate
How your award will vest
VWAP – conversion to Gold Fields shares using the 3-day VWAP (see definition on page 13)
Remuneration Committee Approval – due consideration given by Remco based on market conditions and company affordability
3
1. Corporate Performance Conditions
At the end of the three-year cycle (i.e. on vesting) we assess how well the company has performed against the Corporate Performance Conditions (Absolute Shareholder Return, Relative Shareholder Return and Free Cash Flow Margin). Depending on the extent to which these targets have been met, a percentage of the shares allocated to you for each of the three Corporate Performance Conditions will be settled to you. This means they will become yours to either sell or retain. If we haven’t met the minimum criteria for all three Corporate Performance Conditions, none of the shares will be ‘settled’ to employees. If we meet some of the Corporate Performance Conditions, a pro rata portion of the award will vest. But if we have met them all – and met them well – vesting could be between 100% to 200% of the number of Conditional Performance Shares awarded to you.
2. Remain in the employ of Gold Fields
It is important to note that you have to still be employed by the company at date of vesting to benefit from the scheme. If you resign, are dismissed, terminated or abscond from your position, your Conditional Performance Shares will be forfeited. (However, if you retire, are retrenched, die or suffer disability, your shares will vest early on a pro rata basis.)


If you have any questions, please talk to your HR or remuneration consultant in your Region.
4
How the SIP fits
in with your remuneration package
In a nutshell, the SIP is an additional incentive that employees can receive every three years, provided the company has performed well and met certain Corporate Performance Conditions. You can think of it as a ‘bonus’ on top of your annual performance bonus – but it is not guaranteed. Here’s how it fits in with the rest of your remuneration package:
Future focussed performance driver
SIP
(Variable pay – not guaranteed)
Reward for Annual Performance performance
achieved in a Bonus
particular year (Variable pay – not guaranteed)
Payment for doing your job
Your Benefits
Your Salary
(Guaranteed Pay)
My influence over the SIP
Your personal performance is taken into account when your own individual share award is determined. So you can influence your SIP award by performing well in your own job and increasing your BSC rating. Working together, efficiently and in a cost-conscious way, can also help Gold Fields meet its objectives and reach the Free Cash Flow Margin target.
For more detail on exactly how the scheme works, read the How Performance Impacts the SIP section that follows.
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


How performance impacts the SIP
Let’s look at the SIP’s Corporate Performance Conditions in more detail to understand how they impact the number of shares that may be awarded – and eventually settled – to you.
Three Corporate Performance Conditions
There are three Corporate Performance Conditions and each carries an equal one third weighting in determining whether we reach the minimum requirements for the Conditional Performance Shares to settle to you. In other words, each of the criteria is equally important.
1 2
†
†
Absolute Total Shareholder Return – this is the compounded percentage return that investors can reasonably expect to get on their Gold Fields shares, over the measurement period, given prevailing market conditions. This percentage is determined by our Corporate Finance department using the cost of equity formula (see the FAQs section if you want to know what the formula is).
Relative Total Shareholder Return – this compares how much value our share price delivers to Gold Fields shareholders when compared to the share price performance of a selected peer group. This is an important measure because it tells us if our shareholders would have received a better return if they had decided to invest in one of the companies within the peer group. We need to be positioned at the median of our peer group or higher for this portion to vest. If our share price return is positioned above the median of the peer group, it means we have met our target for this criteria. The higher our share price return relative to the top 5, the greater the Conditional Performance Share settlement will be.
Free Cash Flow Margin (FCFM) – we need to exceed the minimum threshold of 5% FCFM at a gold price of US1,300 / oz. (If the gold price changes, this margin will be adjusted accordingly). If we exceed this minimum threshold and achieve the target FCFM of 15%, or the stretch target of 20%, the Conditional Performance Share settlement will obviously be greater.

Conditions for the 2016 Award
Condition
Threshold
Target
Stretch
Absolute TSR
13%
34%
Relative TSR
Median of peer group
Linear vesting between median and upper quartile of peer group
FCFM
5% @ US$1,300/oz gold price
15% @ US$1,300/oz gold price
20% @ US$1,300/oz gold price
5
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


• • •
6
• •

How thresholds, targets and stretches work
The portion of the Conditional Performance Shares that you will receive is determined by how well the company has met the minimum Corporate Performance Conditions. This means that the number of shares quoted in your annual Long-Term Incentive letter is not necessarily the actual amount you will receive on vesting. You could receive more, or less, depending on company performance:
If we achieve the TARGETS for all three of the Corporate Performance Conditions, you will receive the number of shares quoted in your annual SIP letter;
If we achieve more than the targets, or achieve the STRETCH for all three Corporate Performance Conditions, you could receive up to double (200%) the number of shares quoted in your annual SIP letter; or
If we do not achieve the THRESHOLD for Free Cash Flow Margin, and the TARGETS for Absolute and Relative Shareholder Return, none of the shares quoted in your annual SIP letter will be settled to you.
(Linear vesting occurs for performance above the threshold – in other words, the award may be any percentage between 0% and 200%, depending on how far we have exceeded the threshold).
TO RECAP
Remember that you may be eligible to receive an SIP award every year in the form of Conditional Performance Shares. These are the shares that are referred to in the annual SIP letter you get from the company. Getting the performance share award does not mean that the shares are actually yours yet – they have just been ‘allocated’ to you.
They will only become yours:
When the Conditional Performance Share Scheme reaches maturity or ‘vests’ at the end of a three-year cycle
IF Gold Fields has achieved the Corporate Performance Conditions of the Conditional Performance Share Scheme (for the 2016 award these are: Absolute Total Shareholder Return, Relative Total Shareholder Return and minimum Free Cash Flow Margin)
AND you are still employed by the company on the vesting date.
Only when all three of these things are in place, will the shares actually become yours or ‘be settled to you’. At this point you can choose to retain or sell them.
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


Examples
The following two examples are based on a hypothetical award of 100 Conditional Performance Shares.
Example 1: Assuming all Corporate Performance Conditions met
Number of shares awarded per performance condition
Performance Condition Achievement
% Achievement of Corporate Performance Condition
Number of shares to potentially vest
Absolute TSR
33
13%
100%
33
Relative TSR
33
2nd in peer group
175%
57
FCFM
34
13%
80%
27
Total
100
117
Example 2: Assuming partial achievement of Corporate Performance Conditions
Number of shares awarded per performance condition
Performance Condition Achievement
% Achievement of Corporate Performance Condition
Number of shares to potentially vest
Absolute TSR
33
21%
0%
0
Relative TSR
33
5th in peer group
100%
33
FCFM
34
8%
30%
10
Total
100
43
Corporate Performance Condition models
The following show how percentages are determined for the achievement of the three Corporate Performance Conditions.
FCFM Vesting Model
FCFM Achieved
FCFM Vesting Potential
Absolute TSR Vesting Model
TSR Achieved
TSR Vesting Potential
0% to 12%
0%
13%
100%
23%
150%
34%
200%
Relative TSR Vesting Model
Position in Peer Group Ranking
Relative TSR Vesting Potential
1
200%
2
175%
3
150%
4
125%
5
100%
6
0%
7
0%
8
0%
9
0%
10
0%
5%
0%
6%
10%
7%
20%
8%
30%
9%
40%
10%
50%
11%
60%
12%
70%
13%
80%
14%
90%
15%
100%
16%
120%
17%
140%
18%
160%
19%
180%
20%
200%
7
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


2017
2018
8
How the SIP runs over a three-year period
The long-term incentive share scheme runs over a three-year period. It’s important to understand that each annual Conditional Performance Share Award has its own three-year vesting period and its own Corporate Performance Conditions. This is a rolling share scheme i.e. 2016 Awards vest in 2019; 2017 Awards vest in 2020, and 2018 Awards vest in 2021. Here’s how it works.
2016
Your salary Your job grade Your 2016 BSC
rating
Your 2016 Conditional Performance Shares are awarded to you (as quoted in your annual SIP letter)
Exchange rate VWAP Approval
In 2017 and 2018 the previous 2014 and 2015 cash-based SIP vests and, provided the company has met the Corporate Performance Conditions of the cash LTIP, you may receive a cash-based settlement.
The 2016 SIP award will vest In 3 years (i.e in 2019)
Your 2017 Conditional Performance Shares are awarded to you (as quoted in your annual SIP letter)
Your salary Your job grade Your 2016 BSC
rating Exchange rate VWAP Approval
The 2017 SIP award will vest In 3 years
Your salary Your job grade Your 2016 BSC
rating Exchange rate VWAP Approval
Your 2018 Conditional Performance Shares are awarded to you (as quoted in your annual SIP letter)
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


2019
2020
9
March
If the Corporate Performance Conditions have been met over the 2016 – 2018 period
Absolute Shareholder Return
Relative Shareholder Return
Free Cash Flow Margin
Then your 2016 Conditional Performance Shares are settled to you
March
March
2021
(i.e in 2020)
If the Corporate Performance Conditions have been met over the 2017 – 2019 period
Then your 2017 Conditional Performance Shares are settled to you
The 2018 SIP award will vest In 3 years (i.e in 2021)
If the Corporate Performance Conditions have been met over the 2018 – 2020 period
Then your 2018 Conditional Performance Shares are settled to you
Vesting Date for 2016 SIP award
Vesting Date for 2017 SIP award
Vesting Date for 2018 SIP award
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


GOLD FIELDS Long-Term Share Incentive Plan (SIP)
10
Frequently Asked Questions
1. I am struggling to understand the technical terminology. Can you explain it in layman’s terms?
• Conditional Performance Shares: These are Gold Fields shares that are awarded (or allocated) to qualifying employees, and will be settled at the end of the three-year period, on condition that the Company meets the Corporate Performance Conditions for that particular award.
• Conditional Performance Share Award: Every year, Conditional Performance Shares are allocated to you, based on your salary, job grade and BSC rating. This Conditional Performance Share Award does not mean that the shares are yours yet, and neither are they guaranteed. After three years, you may receive a percentage (between 0% and 200%) of the shares initially awarded to you, based on the extent to which the Company has met the Corporate Performance Conditions for that particular award.
• Conditional Performance Share Settlement: This is the actual number of shares that you receive after the three-year vesting period has been reached and the extent to which the Corporate Performance Conditions have been met. At this point, the shares become yours to sell or retain, depending on your personal decision.
• Corporate Performance Condition: This is a specific measure of the Company’s performance and is a condition that needs to be met at a minimum level for any Conditional Performance Shares to be settled. For the 2016 award there are three Corporate Performance Conditions i.e. Absolute Total Shareholder Return, Relative Total Shareholder Return and Free Cash Flow Margin. Each of these carries an equal one-third weighting in the extent to which they influence the final number of shares that will be awarded to employees.
• Vesting: This takes place when the Conditional Performance Share Scheme reaches maturity, at the end of three years. At vesting, the Conditional Performance Shares are made available to beneficiaries of the Scheme, depending on the extent to which the Company has met the three Performance Criteria of the Scheme.
• Threshold: This is the minimum level of performance that the Company must achieve in order for any shares to be settled to employees. In the Conditional Performance Share Scheme, only the Free Cash Flow Margin performance condition has a threshold. For Absolute Total Shareholder Return and Relative Total Shareholder Return, the Company has to meet its target.
• Target: This is the level of performance that the Company must achieve in order for 100% of the Conditional Performance Shares awarded to be settled to employees.
• Stretch: This is the level of performance over and above the Target that the Company must achieve in order for more than 100% of the Conditional Performance Shares to be settled to employees. For all three Corporate Performance Conditions, the stretch is capped at 200%. This means that the maximum share settlement an employee can receive is 200% of Conditional Performance Shares awarded annually.
• Absolute Total Shareholder Return: This is the percentage return that investors can reasonably expect to get on their Gold Fields shares, given prevailing market conditions. This percentage is determined by our Corporate Finance department using a specific formula.
Exercisable Rights: During the three year restricted period, employees have no exercisable rights to the conditional shares. Employees may not vote on these shares nor will they receive any dividends declared within the restricted period.


• Relative Total Shareholder Return: This compares how much value our share price delivers to Gold Fields shareholders relative to the share price performance of a selected peer group.
• Free Cash Flow Margin (as a Corporate Performance Condition): The Company has to make free cash at a particular margin based on the budgeted gold price.
Volume Weighted Average Price (VWAP): This is the total value of shares sold on a particular day, divided by the number of shares sold on that day.
2. Why does Gold Fields offer employees a Long-Term Incentive Plan?
Gold Fields wants to reward – and retain – its high performing employees over the long term. The SIP is one of the tools that we use to do this. High performers may receive a higher SIP award because they will have a higher BSC rating. Because the SIP runs over a three-year period, these
employees are given an added incentive to remain with the company in the long-term. The long-term share incentive plan creates close alignment between shareholder returns and management rewards.
3. Who is eligible for the Conditional Performance Share Scheme?
D-Band and above employees are eligible to participate in the Conditional Performance Share scheme. In order to qualify to receive the Conditional Performance Shares at vesting you are required to remain in the employ of Gold Fields.
4. What is the difference between Conditional Performance Shares being awarded to me, and Conditional Performance Shares being settled to me?
Every year you may receive a Conditional Performance Share award. These shares have been allocated to you, but they are not guaranteed – this is why we refer to them as ‘conditional’. The scheme requires that certain Corporate Performance Conditions are met before the shares become yours.
At the end of the scheme’s three-year period, the Conditional Performance Shares will be SETTLED to you. This means that they become yours and you can sell or retain them. However, the Conditional Performance Shares will ONLY be settled to you if the Company has met the Corporate Performance Conditions of the scheme – Absolute Shareholder Return, Relative Shareholder Return and Free Cash Flow Margin.
5. Are we guaranteed the performance share settlement?
No. As outlined in the answer to question 4, the Conditional Performance Shares are not guaranteed and will only settle to you if the Company meets the Corporate Performance Conditions of the SIP and in accordance with the Rules of the Amended Gold Fields Limited 2012 Share Plan.
11
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


12
Frequently Asked Questions
6.My annual SIP letter quotes a specific number of Conditional Performance Shares that have been awarded to me. Is this the number of shares that I am going to get at the end of the three-year period?
Not necessarily. You will get a percentage of the shares quoted in your SIP letter, depending on the extent to which the Company has met the Corporate Performance Conditions of the SIP.
7. Under what scenario will I get all of the Conditional Performance Shares quoted in my SIP letter?
Only if we reach the target for all 3 of the Corporate Performance Conditions. Under those conditions 100% of the Conditional Performance Shares for each of the three Corporate Performance Conditions will be settled to you.
8. Under what scenario will I get double the number of the Conditional Performance Shares quoted in my SIP letter?
Only if we reach the stretch for all 3 of the Corporate Performance Conditions. Under those conditions 200% of the Conditional Performance Shares for each of the three Corporate Performance Conditions will be settled to you.
9. Under what scenario will I get none of the Conditional Performance Shares quoted in my SIP letter?
Only if we fail to meet the minimum criteria for all 3 of the Corporate Performance Conditions. Under those conditions 0% of the Conditional Performance Shares for each of the three Corporate Performance Conditions will be settled to you.
10. Are 0%, 100% and 200% the only percentages that I could be awarded?
No. It is possible to receive a percentage between 0% and 200% because linear vesting occurs, on a sliding scale, for performance above the threshold.
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


11. Could I receive more than 200% of the shares quoted in my SIP letter?
No, the SIP is capped at 200%.
12. Will the Conditional Performance Shares be taxed when they are settled to me?
Yes – for South Africa, Ghana and Peru – it will be taxed at your income tax rate. However, it is possible to sell your shares to cover the cost of this tax, and then retain the remaining shares or retain the money you get from selling the remaining shares. For Australia, shares are not taxed on
settlement. Rather the full share sales proceeds are paid to the employee and tax is dealt with when you file your annual income tax return at the end of the tax year (30 June) – this may be a minimum of 4 months after ‘settlement’.
13. What has happened to the cash-based Long-Term Incentive Plan that was introduced in 2014?
The cash-based LTIP will have two more vestings – in 2017 and 2018. At this point, you will receive a percentage of the cash amount quoted in the LTIP letter you received in March 2014 and 2015 – depending on how well the Company has met the Corporate Performance Conditions of that
cash-based LTIP.
These will be the last and only vestings of the cash-based LTIP. No more awards will be made under this plan.
14. What if I only joined the company part of the way through 2016? Am I still eligible for the SIP?
Yes you are. However, you will receive a pro-rated Conditional Performance Share award for the year that you joined, depending on the number of months you have worked for the company in that year.
15. Will I be able to monitor how well the SIP is performing during the three-year cycle?
Yes you will. Twice a year – in March and August – you will be able to log on to an Investec- managed website that shows how the SIP is performing.
13
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


14
Frequently Asked Questions
16. What formula is used to work out Absolute Total Shareholder Return?
The formula used is based on 7% per annum compounded over the three-year performance period (including dividends), as follows:
[(SHARE PRICE X 1.07 x 1.07 X 1.07) / SHARE PRICE] – 1 + dividends x 100 = % increase in share price over the three-year period
In a hypothetical example, if the Share Price was US$4.00 at the beginning of the period:
[(4.00 x 1.07) x 1.07 x 1.07] = 4.9 / 4.00 = 1.23 – 1
= 0.23 X 100
= 23% increase in share price over the three-year period
17. I see that Relative Total Shareholder return is worked out using the relative position of our share price performance to ‘a group of 10 of our peer companies’. Which 10 companies make up this peer group list?
• AngloGold Ashanti • Goldcorp
• Barrick
• Eldorado Gold
• Randgold Resources • Yamana
• Agnico Eagle
• Kinross
• Newmont • Newcrest
18. Does everyone get the same Conditional Performance Share award?
No. Your individual annual Conditional Performance Share award is based on the following: • Your salary
• Your job grade
• Your annual BSC rating
(See page 3 of this guide for further details on how each of these influences your SIP award)
GOLD FIELDS Long-Term Share Incentive Plan (SIP)


19. How can I influence the final Conditional Performance Share settlement that I will receive?
You can influence your own Conditional Performance Share settlement in two ways:
Firstly, you can ensure that you deliver the highest level of performance in your own job, so that you achieve a higher BSC rating. This will influence the annual Conditional Performance Share award you receive.
Secondly, by working together as a team you can help the company to achieve its strategic objectives, which make up one of the Corporate Performance Conditions of the SIP.
20. If the SIP runs over a three-year period, will the Conditional Performance Shares from all three years be settled to me when the scheme vests?
No. The Conditional Performance Share award from each year will settle to you in the March following the end of the three-year vesting period.
For example:
• The 2016 Conditional Performance Share award will settle to you, based on the achievement of Corporate Performance Conditions, in March 2019.
• The 2017 Conditional Performance Share award will settle to you, based on the achievement of Corporate Performance Conditions, in March 2020.
• The 2018 Conditional Performance Share award will settle to you, based on the achievement of Corporate Performance Conditions, in March 2021.
(See the infographic on page 8 of this booklet for a detailed picture of how and when the SIP vests in the three-year cycle).
21. What happens if I leave the company?
If you resign or abscond from the company, or you are dismissed, your Conditional Performance Share award will be forfeited.
If you retire, die, have to stop working due to disability or are retrenched, there will be an early vesting of your Conditional Performance Share award and you will receive a pro-rated Conditional Performance Share settlement (if the Company has met the Corporate Performance Conditions of the scheme).
22. What happens if I resign from the company, but then return at a later date?
When you resign, your Conditional Performance Share award will be forfeited. When you are re-employed, you will join the SIP again, but you will not carry over any of the Conditional Performance Shares that you were previously awarded.
15
GOLD FIELDS Long-Term Share Incentive Plan (SIP)



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