Remuneration report

Section 1: Background statement

Dear shareholder

I am pleased to present the remuneration report and accompanying implementation report for the year to 31 December 2018 (FY18) for the Exxaro group of companies.

The way Exxaro remunerated its people in the review period reflects the context in which the company operated and the dynamics of the market, as well as its remuneration philosophy.

This report provides an overview of the remuneration policy for all employees, including executive directors, prescribed officers and senior management, as well as non-executive directors.

No changes were made to the remuneration policy in the review period. The remuneration philosophy and policy are available on our website, www.exxaro.com. As its name suggests, the implementation report details how we effected that remuneration policy and related incentive policies.

2017 shareholder vote

The non-binding vote on the 2017 remuneration report was:

• Approval of remuneration policy: 82.9%
• Approval of the implementation of remuneration policy: 83.3%.

The contributions made by shareholders are appreciated as is the positive way in which these interactions are taking place. One written concern was received from a shareholder on performance conditions for our long-term incentives. I, as chairman of the committee and senior managers interacted with this shareholder to understand the reason for the concern and explained Exxaro's position. The committee considered all feedback and has decided to retain current performance conditions which it believes provide an appropriate balance between stakeholder interests and operational focus.

Key remuneration decisions in 2018

Notable matters and key areas of focus for the committee for the review period included:

• In the absence of the revised mining charter, a new equity share option plan (ESOP) for employees was not implemented
• The committee instead implemented an interim cash scheme, equivalent in value to a dividend payment of an ESOP. The base calculation used to determine the dividend payment is equal to 500 units (1 unit representing 1 share) or less (depending on the employees' length of service)
• The conclusion of two-year wage agreements in July 2018 for Exxaro FerroAlloys Proprietary Limited
• Share scheme offers to management for 2018
• Approving the mandate for the 2018 reward allocation
• Approving production-based incentives for tied and commercial mines
• Appointing new directors to the board, necessitated by the replacement black economic empowerment (BEE) transaction and filling vacancies after directors resigned from the board or reached the end of their term of office
• Approving adjustments to the long-term incentive plan (LTIP) and deferred bonus plan (DBP) awards and grants necessitated by the impact of the replacement BEE transaction and the Tronox Limited disposal and subsequent special dividend. More detail is set out below.

The company assisted by Deloitte conducted an impact study on vesting of the 2015, 2016 and 2017 LTIP and DBP awards as well as the planned 2018 LTIP and DBP grants, taking into account two significant corporate transactions:

• The replacement BEE transaction (BEE transaction)
• Tronox Limited disposal and subsequent special dividend (Tronox transaction).

1. The BEE transaction negatively impacted the measurement of performance conditions and recommended amendments to measuring headline earnings per share (HEPS). The measurement of HEPS was affected by the BEE facilitation charge and implementation cost of the BEE transactions being expensed through the income statement in FY17 as well as issuing shares to facilitate the transaction. The environment, social and governance (ESG) and total shareholder return (TSR) measurements were not affected by either the BEE transaction or Tronox distribution.
   

   The committee approved: all BEE transaction costs incurred by Exxaro, including interest paid by Eyesizwe (RF) Proprietary Limited (Eyesizwe), be reversed when calculating HEPS for vesting calculations.

   The accounting treatment of the BEE transaction states that shares held by Eyesizwe in Exxaro should be treated as treasury shares. This implies that Exxaro's issued share capital is reduced by 107 million shares in the HEPS calculation, which is not comparable to the number of shares in the base years.

   The committee approved the impact of treasury shares be added back in calculating HEPS for vesting of the 2015, 2016 and 2017 awards.

2. The Tronox distribution could have a negative impact on the company's future share price, and scheme participants will lose out on the Tronox distribution of their unvested shares. Accordingly, an adjustment was approved for both the LTIP and DBP 2015 to 2017 awards.

The Tronox distribution resulted in a reduction in the share price. This negatively impacted LTIP and DBP participants' 2015 to 2017 value, as a portion of the company's assets had been permanently removed from its asset base. Participants should also be compensated for Tronox distributions on their unvested shares.

Although Tronox Limited's equity-accounted results had a negative impact on HEPS in prior years, which resulted in a lower base HEPS, it was anticipated that the equity-accounted results from Tronox Limited would return to positive territory. As the non-inclusion of Tronox Limited's equity-accounted results would not have a material negative impact on HEPS, it was recommended not to adjust for this in the HEPS vesting calculations.

The committee approved: an additional grant of shares be made to LTIP and DBP participants to compensate for potential loss from the decrease in the Exxaro share price after the Tronox special dividend.

Some 1.5 million additional shares at a cost of R213 million were granted to participants to compensate for offers made in 2015, 2016 and 2017.

The committee was satisfied that the approved adjustments would ensure the impact of the BEE and Tronox transactions did not affect LTIP and DBP participants negatively, while ensuring shareholders were not disadvantaged and permissible in terms of the scheme rules.

Remuneration advice

Exxaro continues to obtain independent and professional advice on remuneration matters. In the review period, we obtained advice from consultants who, in the view of the committee, can be regarded as fully independent:

• Deloitte advised the committee on how the BEE transactions and Tronox distribution impacted the long-term incentive schemes
• Deloitte advised on the structure and content of this remuneration report
• Remuneration benchmark data was procured from various consultants:
  • PwC and Mercer for non-executive, executive and general staff remuneration benchmarks
  • PwC, Mercer, Khokhela, 21st Century and EY for non-executive and executive director benchmarks
  • PwC for remuneration trends in the mining industry
  • Korn Ferry Hay benchmarks on specific positions.

Looking ahead

With the promulgation of the revised mining charter and implementation guidelines, a replacement ESOP will be developed in 2019. Internal 'smart workforce' initiatives will assist employees in acquiring the relevant knowledge and skills for the new world of work and the impact of digitalisation on the future of work. Smart workforce programmes include programmes on digitalisation and innovation, Microsoft 365, design thinking, data science and data mining, culture and leadership behaviours aligned to Exxaro's workforce of the future journey, creating a bias for action and more critically, job-specific reskilling at operating units and corporate office. These programmes were started and rolled out in 2018 and will be revised as business needs change.

2019 focus areas

In addition to its normal workplan, the committee will specifically focus on the following areas for 2019

• Review metrics for annual incentives to ensure they drive value and are aligned with Exxaro's strategy
• Review incentive plans to confirm they are having the desired impact
• Review fee structure for non-executive directors
• Compliance with revised mining charter and measures to achieve targets
• Ensure human resource policies and relationships stakeholders are fair, consistent and sustainable.

In the view of the committee, Exxaro's remuneration strategy continues to deliver a sound value proposition to employees that drives value creation for stakeholders. Our vision for rewards is to provide simple, integrated, holistic solutions, common messages and a package differentiated from the market for Exxaro to attract, retain and energise talented, high-performing people. Remuneration has been fully integrated into other management processes such as performance management, talent management and human resources policies.

Exxaro understands that remuneration is critical in attracting and retaining high-performing individuals. As such, the committee firmly supports the principle that pay must be aimed at reinforcing, encouraging and promoting superior performance.

In 2018, Dr Con Fauconnier stepped down as non-executive director and chairman of this committee. We are deeply grateful for his guidance and wisdom over the years.

I thank my fellow committee members for their support and wise counsel in the review period. I also thank the executive head of human resources and her staff for their hard work and dedication in ensuring Exxaro remains competitive in the market and an employer of choice for all of its employees.

EJ Myburgh

Chairman

Remuneration and nomination committee

24 April 2019

Section 2: Remuneration overview

2.1 Introduction

This report sets out Exxaro's remuneration policy for non-executive directors, executive directors, prescribed officers, senior management and all other employees.

The remuneration overview and accompanying implementation report are tabled in two separate resolutions every year for non-binding advisory votes by shareholders at the annual general meeting. Shareholders are required to express their views and vote on both the remuneration policy and its implementation.

The non-binding advisory vote provides an opportunity for shareholders to influence Exxaro's perspective on remuneration matters, specifically the structure of total remuneration in terms of policy (ie salary, benefits, short-term and long-term incentives) as well as implementation of the policy and how this translates to actual salaries, incentives and benefits.

The nature of the advisory vote is, therefore, feedback on the remuneration policy (forward-looking) and implementation of the policy (backward-looking).

If either this remuneration policy overview or accompanying implementation report are voted against by 25% or more of the voting rights exercised, the committee will again engage with significant shareholders to ascertain reasons for dissenting votes.

Legitimate objections and concerns are addressed. This can include amending the remuneration policy, as well as clarifying or adjusting remuneration governance and processes.

2.2 Remuneration philosophy, policy and framework

2.2.1 Remuneration philosophy and policy

Operational excellence, continuous improvement and innovation are the cornerstone of Exxaro's philosophy and remuneration.

Exxaro's remuneration philosophy and attendant policies are widely shared with employees and the public.
www.exxaro.com/workplace.

Remuneration policy

Exxaro's remuneration policy addresses the economics and ethics of remuneration, particularly fair and responsible remuneration for executive management in the context of overall remuneration. Cognisance has been taken of the gap between the general workforce and executive pay.

The policy provides for an annual assessment of the wage gap and consideration of any appropriate actions, such as differentiating annual adjustments. In addition, the principles of internal parity, reward for performance and market competitiveness apply (detailed in section 2.2.2). These principles facilitate fair and responsible remuneration.

Exxaro reward practices and outcomes are determined by:

	Strategy and purpose			The way we work			Performance			Market
	Supporting the  business and  people strategy			Prohibiting discrimination as per the constitution  (Republic of South Africa - Act 108 1996, as  amended,  and Employment Equity Act 55 1998,  as amended)  Encouraging employee engagement according to  Exxaro's purpose through the total employee  offering  (financial and non-financial)  Allowing maximum flexibility and choice in  structuring  individuals' rewards  Seeking a balance between affordability and  maximising employees' wellbeing			Inspiring superior  performance (at  organisational, team and  individual level)  Facilitating the enhancement  of skills, knowledge and  experience  Differentiating rewards  appropriately according to our  reward practices			Exxaro makes extensive use of remuneration  benchmarks against appropriate peer groups in chosen  markets. The  remuneration policy defines the market as  country-specific companies, primarily in the mining  industry, as well as functions  attracting premium  remuneration. We participate in a number of salary  surveys to substantiate remuneration data. The ideal  is  for total remuneration to be on the 50th percentile of the  market for full performance

2.2.2 Fair and responsible remuneration principles

The guiding principles on remuneration arrangements for all employees, including executive management, are:

	Internal parity			Exxaro supports the principle of fair and equitable remuneration (equal pay for equal work as per section 6(4) of the Employment Equity Act and code of good practice) Employees are remunerated according to a job-evaluation process. Remuneration differences may occur due to individual performance or other justifying factors as per the code (differentiation is monitored and reported as necessary)
	Market competitiveness			Exxaro manages remuneration to ensure market competitiveness in attracting and retaining individuals with the required knowledge, skills and experience. Remuneration is analysed by annual benchmarking against the appropriate market per job family and grade, applicable to the mining industry and business-related industries (the aim is to be at the 50th percentile for full performance) Where scarce skills are identified, individuals are paid in line with relevant specialist markets
	Remuneration ranges			Role levels, job-evaluation results and market medians form the basis of remuneration range structures (pay scales). Broad-band remuneration ranges with minimum and maximum values allow for flexibility, based on market trends and performance Remuneration ranges are reviewed at least annually to ensure ongoing market competitiveness
	Remuneration packages and benefits			Exxaro manages remuneration on the basis of individual guaranteed total cost to company to determine market competitiveness and guide the design of variable and circumstantial remuneration schemes All employees are entitled to the same range of benefits appropriate to their role level and specific circumstances. Non-bargaining employees have flexibility in structuring their remuneration within certain company and legislative limitations
	Reward for performance			Organisational and individual performance is the basis for all remuneration, supported by a robust performance management process Exxaro remunerates based on organisational and individual actual and expected performance
	Remuneration-setting process			The human resources executive obtains remuneration mandates from the executive committee (exco) and this committee on behalf of line management. Mandates always consider the ethics of remuneration
	Economics and ethics of remuneration			Exxaro acknowledges the importance of monitoring and managing the remuneration range between the workforce and executive pay
	Company performance and affordability			Exco and this committee assess the performance of the organisation with a key focus on sustainability and the consequent affordability of mandates as well as the impact of the total labour bill on the cost profile The committee, at its sole discretion, may overrule any of these principles, if necessary, for the sustainability of the organisation
	Communicating remuneration issues			Remuneration and performance expectations are communicated clearly and frequently to employees and broader stakeholder groups to establish clear reward expectations

2.2.3 Remuneration framework

The framework below depicts the type of remuneration and rewards for applicable employee categories.

Remuneration

Employee category*

Guaranteed remuneration

Variable pay

Short-term incentive schemes (STI)

Long-term incentives (LTI)

Notional cost of employment (NCOE

Salary and benefits

STI

Special performance award (SPR)

LTIP

DBP

ESOP

Executive management

x

x

x

x

x

Senior management

x

x

x

x

x

Middle management

x

x

x

x

Junior management

x

x

Bargaining-unit employees

x

x

x

*	Applicable employee categories (Paterson job gradings):

Executive management

Senior management

Middle management

Junior management

Bargaining-unit employees

F band

E band

DU and DM band

CU and DL band

A-CM band

Management and specialist

Other employees

2.3 Remuneration

2.3.1 Guaranteed remuneration

Exxaro's guaranteed remuneration refers to the notional cost of employment (NCOE, including basic salary and benefits) for management and specialist employees, as well as basic salary for bargaining-unit employees.

The average increase in 2018 was 7.25%. Since Exxaro was formed in 2006, bargaining-unit employees have generally received increases of 0.5 to 1.5% per annum higher than management and specialist-category employees to reduce the wage gap.

Notional cost of employment

NCOE is the guaranteed-remuneration portion of total pay and includes basic salary, benefits and retirement funding.

	NCOE
	Management and specialist employees
	Increase granted to NCOE: 7% Differentiated increases were given to employees based on performance and contribution.
	Annual adjustments based on: Performance External parity Internal parity Affordability

Basic salary

All bargaining-unit employees receive a market-related basic salary as well as benefits (see full list of benefits below). Bargaining-unit employees have received increases of between 0.5% and 1.5% per annum higher than management and specialist-category employees over the years to reduce the wage gap.

	Basic salary
	Bargaining-unit employees
	Increase granted to BS: 7.5% Coastal Coal: July 2017 - June 2019: two-year wage agreement FerroAlloys: July 2018 - June 2020: two-year wage agreement Exxaro Coal, Exxaro Coal Mpumalanga and Ferroland Grondtrust: 2017 - 2020: three-year wage agreement
	Annual adjustments based on: Wage negotiations Mandate on affordability Industry benchmarking

Benefits

All employees are entitled to the same range of benefits appropriate to their role level and specific circumstances. Management and specialist employees have flexibility in structuring their remuneration within certain company and legislative limitations.

Benefits

Executive management, senior management, middle management, junior management, bargaining-unit employees

Retirement funds* All employees are members of one of Exxaro's accredited retirement funds. Retirement fund contributions are determined by specific conditions of employment and fund rules for the different levels and categories of employees. Medical health schemes** Employees may annually elect to belong to any of the accredited medical schemes, as they apply to the relevant employees. Contributions are made by both employer and employee. Exxaro does not provide any post-retirement medical benefits. Group personal accident cover Employees are covered by a policy that provides additional cover for death, disability and dread disease. Other benefits Exxaro provides a range of other market-related conditions-of-service benefits.

The committee annually evaluates benefits to: Ensure all benefits are justified and correctly valued Obtain assurance on the performance of retirement funds Oversee significant changes in employee benefit structures throughout the group Determine the benefits of executive directors.

*	Retirement fund options
Exxaro-accredited retirement funds are defined-contribution funds.

Fund description		Employee contribution range		Employer contribution range		Total contribution range
Sentinel Funds		7.5 - 13.2%		12.5 - 20.52%		20 - 28.02%
Exxaro Pension and Provident Funds		7 - 8%		10 - 15%		17 - 23%
Iscor Employees Umbrella Provident Fund		7 - 8%		10 - 15%		17 - 23%
Mine Workers Provident Fund		8 - 10.7%		12.5 - 15%		20.5 - 24.65%

***	Medical health scheme options

	Employer		Exxaro Coal and Exxaro Coal Mpumalanga		Exxaro Resources Limited (including management and specialist employees in subsidiary companies)		Exxaro (other non-management and specialist employees)
	Fund names		Bonitas		Bonitas		Bonitas
			Discovery		Discovery		Sizwe
			Sizwe		Sizwe		Umvuzo
			Umvuzo		Umvuzo
	Employer contributions		Main member: 60% Dependants: 50%		Included in NCOE package		60% capped at R value
	Employee contributions		Main member: 40% Dependants: 50%				40%

Exxaro does not provide any post-retirement medical benefits. The post-retirement benefit obligation disclosed in the annual financial statements recognises a past practice (in Eyesizwe Proprietary Limited) that was discontinued with the creation of Exxaro in November 2006.

Circumstantial remuneration may be awarded in the following instances: job-specific, skills scarcity and severance payments.

2.3.2 Variable pay

Short-term incentives

Exxaro's short-term incentive schemes are based on individual, business unit, commodity and group-level performance. Exxaro has two short-term incentive schemes: the special performance reward (SPR) and the two-tier short-term incentive (STI).

	Special performance reward (SPR)
	Executive management, senior management and middle management.
	Yearly SPR objectives are set. At the end of the year, a five-point rating scale is used to evaluate achievement of objectives.
	Scoring
	Rating of 2 or below     Does not qualify for SPR     Rating of 3     Qualifies for 90% of base payment according to Paterson grade     Rating of 4 and above     Qualifies for 100% of base payment according to Paterson grade
	Payment factors per job grade:
Paterson grade       Individual SPR factor (% of total remuneration)   F upper       37%   F middle       32%   F lower       32%   E upper       25%   E middle       20%   E lower, D upper       15%   D middle       10%
	Rewards are paid to those who qualify at the end of March of the following year.

	Two-tier incentive scheme (STI)
	Executive management, senior management, middle management, junior management and bargaining-unit employees.
	The two-tier incentive scheme is based on business performance
	Tier one The potential value, provided all budgeted operational targets have been achieved for the year, is a maximum of 8.33% of gross annual remuneration. The graph shows performance target reached versus payout percentage of gross annual remuneration: Performance versus payout (%)
Tier two The second tier is based on exceeding a combination of budgeted consolidated net operating profit and production targets by an improvement percentage at commodity business unit and group level. The potential value, provided all targets have been achieved for the year, is 10% of gross annual remuneration.

Long-term incentives

Exxaro makes general share offers to participants once a year under the LTIP and DBP.

	Long-term incentive plan (LTIP)				Deferred bonus plan (DBP)
	Executive management Senior management Middle management				Executive management Senior management
	Remco can make a conditional award to qualifying employees. Awards vest after three years, subject to fulfilling the following performance conditions: Headline earnings per share (HEPS) 33.33% Total shareholder return (TSR) 33.33% Environmental, social and governance (ESG) targets as per risk dashboard 33.34%				Remco can select participants based on seniority and performance. The after-tax portion of the STI and SPR payments are used to acquire pledged shares. The pledged shares are held in escrow until the vesting date after three years. At the end of the three-year period, these are matched with an award to the participant of shares equal to the market value of pledged shares on the vesting date.

An employee share option scheme, known as Exxaro Mpower 2012* (ESOP), wound up on 31 May 2017; a replacement scheme will be developed in 2019.

*Exxaro Mpower 2012

• The Mpower 2012 scheme was wound up on 31 May 2017. An interim cash scheme, equivalent in value to a dividend payment was introduced. The base calculation used to determine the dividend payment is equal to 500 units (1 unit representing 1 share) or less (depending on the employees’ length of service). There is no other benefit except a value equal to dividend payment.

In 2018, participants who received payments equal to the three dividends paid to shareholders received a total payment of R10 925.

We anticipate that a new ESOP will be introduced in 2019.

Costs of payments made to all participants in 2018

	Active participants		Number of units		Payment before tax		Payment
Special cash dividend (13 February 2018) of 1 255 cents per share	6 004		2 982 560		R37 431 128		R29 944 902
Final cash dividend (6 March 2018) of 400 cents per share	6 019		2 984 320		R11 937 280		R9 549 824
Interim cash dividend (14 August 2018) of 530 cents per share	6 037		2 952 900		R15 650 370		R1 5220 296

 

2.4 Remuneration mix

Below we show the total remuneration pay mix for executive management, applying the remuneration policy under minimum, on-target and maximum performance outcomes:

CEO: pay mix (%)		Prescribed officer (on Paterson band F-lower): pay mix (%)
Finance director: pay mix (%)		Prescribed officer (on Paterson band E-upper): pay mix (%)

2.5 Employment contracts

Executive long-term incentives

Executive employment contracts for management are generally valid for an indefinite period, with a notice period of three to six months or payment in lieu.

The current executive employment contracts do not have a restraint-of-trade clause, but include confidentiality undertakings.

Employment contracts provide for the following payments on termination:

• Any amounts due in terms of participating in the LTIP and DBP
• Termination benefits are payable whenever employment is terminated before the normal retirement date by Exxaro, or when the employee accepts voluntary redundancy.

Note that there are no special agreements in place on severance packages for executive employees.

Non-executive directors' remuneration

Fees for non-executive directors are reviewed annually, and independent data is used for benchmarking.

Fees are paid as a combination of retainer and fee per meeting in line with emerging market practice and company culture.

Section 3: Implementation report

3.1 Introduction

This implementation report discloses remuneration outcomes for non-executive directors, executive directors and prescribed officers. This includes a single, total figure of remuneration received and receivable for the review period and all constituent remuneration elements at fair value.

In addition, details of all awards made under the Exxaro variable compensation schemes are disclosed under sections for short-term and long-term incentives. This includes reference to awards in current and prior years that have not yet vested, vesting and expiry dates where applicable, the fair value at the end of the review year, as well as the cash value of awards settled. The performance measures used and their weighting is disclosed.

In the review period, implementation complied fully with the remuneration policy.

3.2 Remuneration of executive management

Total remuneration is summarised below by name and role for FY18 and FY17. We disclose the performance rating for each executive director and prescribed officer supporting the SPR, as well as tier-one and tier-two factors achieved under the STI scheme. We also disclose the outcome of the 2015 and 2016 conditional LTIP awards that vested in 2018. Vesting in that period was subject to the following performance metrics:

• Retention: 50%
• HEPS: 50%

In FY18, 100% of conditional awards made to participants vested because the HEPS target was achieved. No further performance conditions apply to the DBP scheme, other than continued employment at the time of vesting.

MDM Mgojo: Chief executive officer		PA Koppeschaar: Finance executive.
Remuneration outcomes (Rm)		Remuneration outcomes (Rm)

	SPR objectives			Rating
	Implement ESD strategy as per plan			4
	Signed agreement for Arnot BEE transaction			4
	Implement business excellence initiatives and adopt lean practices			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

	SPR objectives			Rating
	Ensure a plan is in place to monetise remaining Tronox shareholding			4
	Implement business excellence initiatives and adopt lean practices			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

V Balgobind: Executive head of human resources

Remuneration outcomes (Rm)

	SPR objectives			Rating
	Implement culture initiative			4
	Strategy finalised and implement workforce of the future			4
	Implement business excellence initiatives and adopt lean practices			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

AW Diedericks: Executive head of business development		JG Meyer: Executive head of projects and technology
Remuneration outcomes (Rm)		Remuneration outcomes (Rm)

	SPR objectives			Rating
	Implement business excellence initiatives and adopt lean practices			4
	Value-chain analyses completed for top 3 materials			4
	Divest from Arnot according to plan			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

	SPR objectives			Rating
	Implement business excellence initiatives and adopt lean practices			4
	Large and mega project dashboard – digitalised and real-time			4
	Exxaro lakeside development project and change management (incl Belfast)			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

MI Mthenjane: Executive head of stakeholder affairs

Remuneration outcomes (Rm)

	SPR objectives			Rating
	Full implementation of project to diversify Exxaro shareholder base by geography and investment theme (mining versus non-mining)			3
	Roll out ESD strategy using innovative solutions			4
	Implement business excellence initiatives and adopt lean practices			4
	Achieved 100% of Q2 maturity assessment target for business excellence – lean enablement			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

N Tsengwa: Executive head of coal operations		M Veti: Executive head of sustainability
Remuneration outcomes (Rm)		Remuneration outcomes (Rm)

	SPR objectives			Rating
	Coal strategy implementation			4
	Contractor optimisation			4
	Visibility ‘ops eye’ at two business units			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

	SPR objectives			Rating
	Resolve dispute for transfer/relinquishment of 720 000Mt to Marubeni IPP in favour of Exxaro			4
	Licence approved for NBC transaction condition precedent			4
	Implement business excellence initiatives and adopt lean practices			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

SE van Loggerenberg: Company secretary

Remuneration outcomes (Rm)

	SPR objectives			Rating
	Implement business excellence initiatives and adopt lean practices			4
	Replacing BoardPad with Diligent			4
	Overall rating			4
	STI tier-one factor (max 8.33%)			8.33%
	STI tier-two factor (max 10%)			2.58%
	LTIP As above, awards vested in 2018

The table alongside outlines the detailed remuneration of executives. Please note that:

• NCOE is the guaranteed remuneration portion and includes basic salary, benefits, allowances and retirement funding
• Short-term incentives include payments received from SPR and two-tier STI
• Long-term incentive gains consist of those from the Exxaro LTIP and DBP
• Total remuneration is the sum of NCOE, short-term incentives and long-term incentive gains
• Other payments include long-service awards, zero-fatality and LTIFR rewards, and leave encashment.

Executive	Year		NCOE		Short- term incentives		Long- term incentives		Total remuneration		Year-on-year increase		Other payments
MDM Mgojo	2018		6 933 519		3 321 854		15 701 939		25 957 312		104.6%		200 240
Chief executive officer	2017		6 503 463		3 598 366		2 585 196		12 687 025				2 530
PA Koppeschaar	2018		5 163 873		2 215 820		4 057 988		11 437 681		41.3%		10 760
Finance executive	2017		4 520 625		2 275 231		1 301 286		8 097 142				2 530
V Balgobind	2018		3 135 624		1 126 004		1 669 362		5 930 990		37.6%		6 956
Executive head: human resources	2017		2 908 065		1 260 065		143 678		4 311 808				32 730
AW Diedericks	2018		3 818 186		1 371 114		4 700 652		9 889 952		55.9%		5 260
Executive head: business development	2017		3 688 623		1 598 280		1 058 546		6 345 449				60 323
JG Meyer	2018		3 895 210		1 398 774		4 670 528		9 964 512		56.9%		5 260
Executive head: projects and technology	2017		3 688 623		1 598 280		1 063 570		6 350 473				60 330
MI Mthenjane	2018		3 747 913		1 345 878		3 874 158		8 967 949		47.8%		6 260
Executive head: stakeholder affairs	2017		3 612 482		1 565 289		889 223		6 066 994				2 530
Dr N Tsengwa	2018		4 070 181		1 746 518		3 770 366		9 587 065		47.1%		69 942
Executive head: coal operations	2017		3 842 326		1 933 844		741 789		6 517 959				2 530
SE van Loggerenberg	2018		2 092 998		646 948		698 287		3 438 233		34.5%		21 310
Company secretary	2017		1 791 590		615 239		149 382		2 556 211				7 030
M Veti	2018		3 696 666		1 327 476		4 364 615		9 388 757		55.7%		6 260
Executive head: sustainability	2017		3 571 190		1 547 397		910 083		6 028 670				2 530

3.4 Awards under short-term incentive schemes

The following incentives were paid in 2018 under the SPR and STI. In the table below, we disclose the performance rating for each executive director and prescribed officer supporting the SPR as well as tier-one and tier-two factors achieved under the STI scheme. All payments were made as per policy, and there were no deviations.

		SPR				STI
Name	NCOE R	Rating	SPR factor	Actual R		Tier one factor	Tier two factor	Total factor	Actual R	Total short-term incentive R	Short-terml incentive as % rating of NCOE
MDM Mgojo	6 933 519	4	37.0%	2 565 402		8.33%	2.58%	10.9%	756 447	3 321 854	47.9%
PA Koppeschaar	5 163 873	4	32.0%	1 652 439		8.33%	2.58%	10.9%	563 379	2 215 820	42.9%
V Balgobind	3 135 624	4	25.0%	783 906		8.33%	2.58%	10.9%	342 097	1 126 004	35.9%
AW Diedericks	3 818 186	4	25.0%	954 547		8.33%	2.58%	10.9%	416 564	1 371 114	35.9%
JG Meyer	3 895 210	4	25.0%	973 803		8.33%	2.58%	10.9%	424 967	1 398 774	35.9%
MI Mthenjane	3 747 913	4	25.0%	936 978		8.33%	2.58%	10.9%	408 897	1 345 878	35.9%
Dr N Tsengwa	4 070 181	4	32.0%	1 302 458		8.33%	2.58%	10.9%	444 057	1 746 518	42.9%
SE van Loggerenberg	2 092 998	4	20.0%	418 600		8.33%	2.58%	10.9%	228 346	646 948	30.9%
M Veti	3 696 666	4	25.0%	924 167		8.33%	2.58%	10.9%	403 306	1 327 476	35.9%
Total	36 554 170									14 500 386

For the two-tier STI, the 2018 results of tier one and two are shown below, resulting in the performance bonuses noted above as well as at various business units.

A business unit will qualify for tier one and/or tier two on a sliding scale between a threshold of 90% and 100% performance against targets. Modifiers apply where stated.

Tier one (max)	8.33%
Commercial business units	Total FY18 achievement
Grootegeluk	8.33%
Leeuwpan	8.33%
NBC*	4.77%
Mafube	8.00%
Operating commodity businesses	8.33%
FerroAlloys	8.33%
Corporate and services	8.33%
Ferroland	7.47%
Belfast	8.33%
Closure
Arnot	8.33%
Coastal Coal - Durnacol and Hlobane	8.13%
Coastal Coal - Tshikondeni	7.80%

*	NBC divestment effective 1 November 2018.

Tier two (max)
Commercial business units	Total FY18 achievement
Grootegeluk	2.58%
Leeuwpan	2.58%
NBC*	1.48%
Mafube	2.48%
Operating commodity businesses	2.58%
FerroAlloys	2.58%
Corporate and services	2.58%
Ferroland	2.38%
Belfast	2.58%
Closure
Arnot	2.58%
Coastal Coal - Durnacol and Hlobane	2.52%
Coastal Coal - Tshikondeni	2.42%

*	NBC divestment effective 1 November 2018.

Exxaro Coal Central:

Employees do not participate in STI and SPR. A different incentive applies. On average, employees received incentives totalling 27.7% of annual remuneration.

3.5 Awards made under long-term incentive schemes

Below we detail our two long-term (share-based) incentive schemes:

LTIP

Conditional LTIP awards made between April 2015 and March 2016 vested in FY18. Vesting was subject to the following performance metrics:

• Retention: 50%
  Participants had to be employed by the company for the vesting period, which ended in April 2018, for 50% of their conditional awards to vest.
• HEPS: 50%
  50% of the conditional awards granted to participants is based on a HEPS improvement calculated as the consumer price index (CPI) + 2% per annum, compared to HEPS of the base year of December 2014. A 30% to 100% sliding scale between minimum and maximum will apply when calculating the portion of shares to vest.

The minimum performance condition is that Exxaro's HEPS for FY17 is equal to HEPS for FY14. The table summarises HEPS performance:

	HEPS1
Base: December 20142	1 371
Target: December 20173	1 689
Actual: December 20174	1 881
Lower target met	Yes
Upper target met	Yes

1	HEPS is measured in cents per share.
2	Based on actual HEPS achieved for FY14.
3	Based on a targeted performance for FY17 (base multiplied by a cumulative increase of 123.3%).
4	Based on actual HEPS achieved for FY17.

100% of conditional awards made to participants vested because the HEPS target was achieved.

DBP

No further performance conditions apply to this scheme other than continued employment at the time of vesting.

LTIP

The table below illustrates the rights held by each participant as well as options exercised and shares forfeited due to performance conditions not being met in the review period.

2018	Rights held at 31 December		Exercisable period		Pre-tax gain if exercisable at 31 December1		Modification during the year2		Options exercised during the year		Shares forfeited3		Sale price/ market price		Pre-tax gain		Date exercised
MDM Mgojo			01/04/2018				6 105		74 925				106.43		7 974 268		03/04/2018
			01/05/2018				5 667		69 556				111.10		7 727 672		04/05/2018
	206 388		01/04/2019		28 454 714		16 816
	139 908		01/04/2020		19 289 116		11 399
	152 820		01/04/2021		21 069 293
	499 116				68 813 123		39 987		144 481						15 701 940
PA Koppeschaar			01/04/2018				2 940		36 077				106.43		3 839 675		03/04/2018
	51 770		01/04/2019		7 137 530		4 218
	36 287		01/09/2019		5 002 889		2 957
	60 728		01/04/2020		8 372 569		4 948
	71 749		01/04/2021		9 892 035
	220 534				30 405 023		15 063		36 077						3 839 675
V Balgobind			01/04/2018				170		2 085		4 468		106.43		221 907		03/04/2018
			01/04/2018				1 063		13 045				106.43		1 388 379		03/04/2018
	41 655		01/04/2019		5 742 975		3 394
	21 760		01/04/2019		3 000 051		1 773
	27 336		01/04/2020		3 768 814		2 228
	30 331		01/04/2021		4 181 735
	121 082				16 693 575		8 628		15 130		4 468				1 610 286
AW Diedericks			01/04/2018				3 051		37 438				106.43		3 984 526		03/04/2018
	53 725		01/04/2019		7 407 066		4 378
	34 553		01/04/2020		4 763 822		2 816
	36 500		01/04/2021		5 032 255
	124 778				17 203 143		10 245		37 438						3 984 526

2018	Rights held at 31 December	Exercisable period	Pre-tax gain if exercisable at 31 December1	Modification during the year2	Options exercised during the year	Sale price/ market price	Pre-tax gain	Date exercised
JG Meyer		01/04/2018		3 051	37 438	106.43	3 984 526	03/04/2018
	53 725	01/04/2019	7 407 066	4 378
	34 553	01/04/2020	4 763 822	2 816
	37 475	01/04/2021	5 166 678
	125 753		17 337 566	10 245	37 438		3 984 526
MI Mthenjane		01/04/2018		2 966	36 401	106.43	3 874 158	03/04/2018
	52 237	01/04/2019	7 201 915	4 256
	33 916	01/04/2020	4 675 999	2 764
	35 828	01/04/2021	4 939 606
	121 981		16 817 520	9 986	36 401		3 874 158
Dr N Tsengwa		01/04/2018		2 566	31 488	106.43	3 351 268	03/04/2018
	45 187	01/04/2019	6 229 932	3 682
	26 964	01/05/2019	3 717 527	2 197
	51 117	01/04/2020	7 047 501	4 165
	55 441	01/04/2021	7 643 651
	178 709		24 638 611	12 610	31 488		3 351 268
SE van Loggerenberg		01/04/2018		535	6 561	106.43	698 287	03/04/2018
	9 414	01/04/2019	1 297 908	767
	6 191	01/04/2020	853 553	505
	7 198	01/10/2020	992 388	587
	15 272	01/04/2021	2 105 551
	38 075		5 249 400	2 394	6 561		698 287
M Veti		01/04/2018		2 953	36 244	106.43	3 857 449	03/04/2018
	52 013	01/04/2019	7 171 032	4 238
	33 452	01/04/2020	4 612 027	2 726
	35 338	01/04/2021	4 872 050
	120 803		16 655 109	9 917	36 244		3 857 449

1	Based on a share price of R137.87 on 31 December 2018.
2	A modification made to the LTIP scheme in 2018 resulted in a top-up in the number of rights employees are entitled to. This was to provide for the Tronox disposal and subsequent special dividend (Tronox distribution) which would have a negative impact on the value of the company’s future share price and scheme participants who would lose out on the Tronox distribution on their unvested shares.
3	Shares forfeited due to performance conditions not being adequately met.

DBP

The table below illustrates the rights held by each participant as well as options exercised and shares forfeited as a result of resignations in the review period.

2018	Rights held at 31 December		Exercisable period		Pre-tax gain if exercisable at 31 December1		Modification during the year2		Options exercised during the year		Sale price/ market price		Pre-tax gain		Date exercised
MDM Mgojo	6 314		04/03/2019		870 511		515
	11 444		31/03/2019		1 577 784		933
	1 507		31/08/2019		207 770		123
	1 140		31/08/2020		157 172		93
	4 124		09/03/2021		568 576
	10 509		31/03/2021		1 448 876
	946		31/08/2021		130 425
	35 984				4 961 114		1 664
PA Koppeschaar			31/03/2018				119		1 456		149.94		218 313		09/05/2018
	690		31/08/2021		95 130
	690				95 130		119		1 456				218 313
V Balgobind			31/08/2018				33		394		149.94		59 076		11/09/2018
	1 836		04/03/2019		253 129		150
	2 040		31/03/2019		281 255		167
	386		31/08/2019		53 218		32
	994		09/03/2020		137 043		81
	1 784		31/03/2020		245 960		146
	285		31/08/2020		39 293		24
	1 027		09/03/2021		141 592
	1 773		31/03/2021		244 444
	238		31/08/2021		32 813
	10 363				1 428 747		633		394				59 076
AW Diedericks			06/03/2018				58		707		125.15		88 481		14/03/2018
			31/03/2018				321		3 939		106.43		419 228		04/04/2018
			31/08/2018				114		1 390		149.94		208 417		05/09/2018
	3 650		04/03/2019		503 226		298
	5 339		31/03/2019		736 088		435
	869		31/08/2019		119 809		71
	2 270		09/03/2020		312 965		185
	4 121		31/03/2020		568 162		336
	649		31/08/2020		89 478		53
	2 343		09/03/2021		323 029
	4 044		31/03/2021		557 546
	525		31/08/2021		72 382
	23 810				3 282 685		1 871		6 036				716 126
JG Meyer			06/03/2018				55		669		125.15		83 725		15/03/2018
			31/03/2018				307		3 757		106.43		399 858		04/04/2018
			31/08/2018				110		1 350		149.94		202 419		03/09/2018
	875		31/08/2019		120 636		72
	2 276		09/03/2020		313 792		186
	4 127		31/03/2020		568 989		337
	649		31/08/2020		89 478		53
	7 927				1 092 895		1 120		5 776				686 002
MI Mthenjane	1 230		09/03/2020		169 580		101
	632		31/08/2020		87 134		52
	1 269		09/03/2021		174 957
	2 199		31/03/2021		303 176
	5 330				734 847		153
Dr N Tsengwa			06/03/2018				80		976		125.15		122 146		16/03/2018
			31/03/2018				161		1 973		106.43		209 986		12/04/2018
			31/08/2018				48		580		149.94		86 965		10/09/2018
	2 596		31/03/2019		357 911		212
	439		31/08/2019		60 525		36
	1 234		09/03/2020		170 132		101
	373		31/08/2020		51 426		31
	250		31/08/2021		34 468
	4 892				674 462		669		3 529				419 097
M Veti			06/03/2018				37		453		125.15		56 693		14/03/2018
			13/05/2018				229		2 810		118.05		331 721		23/05/2018
			31/08/2018				65		792		149.94		118 752		11/09/2018
	470		31/08/2019		64 799		39
	1 199		09/03/2020		165 306		98
	348		09/03/2020		47 979		29
	1 251		31/08/2020		172 475
	2 183		31/03/2021		300 970
	284		31/08/2021		39 155
	5 735				790 684		497		4 055				507 166

1	Based on a share price of R137.87 on 31 December 2018.
2	A modification to the DBP scheme in 2018 resulted in a top-up in the number of rights employees are entitled to. This was to provide for the Tronox disposal and subsequent special dividend (Tronox distribution) which would have a negative impact on the value of the company’s future share price and scheme participants who would lose out on the Tronox distribution on their unvested shares.

3.2 Non-executive director fees and basis for fee-setting

Details are provided by name and role for the review period and 2017, with explanations where necessary.

		2018				2017
Non-executive directors	Fees for  services  R	Benefits and   allowances6 R	Total  R		Fees for  services  R	Benefits and   allowances6 R	Total  R
S Dakile-Hlongwane1	44 731		44 731		553 756	4 190	557 946
Dr CJ Fauconnier2	365 317	7 105	372 422		1 124 340	30 044	1 154 384
GJ Fraser-Moleketi3	452 448	6 164	458 612
MW Hlahla4	430 791		430 791		387 528	3 931	391 459
Dr D Konar2	608 524		608 524		1 783 803		1 783 803
D Mashile-Nkosi5	351 335	1 100	352 435
S Mayet2	168 215	1 100	169 315		372 034	1 100	373 134
L Mbatha5	454 453	9 641	464 094
VZ Mntambo4	582 452		582 452		498 967		498 967
MJ Moffett3	429 745		429 745
LI Mophatlane3	618 419	4 841	623 260
EJ Myburgh	818 481	17 503	835 984		501 061	9 887	510 948
V Nkonyeni	767 230	18 275	785 505		532 156		532 156
MF Randera1	80 534	3 159	83 693		486 834	10 764	497 598
J van Rooyen (chairman)	1 494 465		1 494 465		748 806		748 806
A Sing5	566 327	2 410	568 737
PCCH Snyders	751 525	70 633	822 158		556 462	31 286	587 748
D Zihlangu1	91 633		91 633		482 848	10 963	493 811
Total	9 076 625	141 931	9 218 556		8 028 595	102 165	8 130 760

1	Resigned 6 March 2018.
2	Retired 24 May 2018.
3	Appointed 23 May 2018.
4	Resigned and reappointed 6 March 2018.
5	Appointed 6 March 2018.
6	Includes travelling and subsistence allowance.