Remuneration report. Dear shareholder

Transcription

1 Remuneration report Dear shareholder Randgold has overcome some challenges in 2013 to once again deliver record production and strong results. We increased production by 15%, and reduced total cash cost per ounce by 3%. In the year ahead, the group is targeting another big step-up in production of approximately 30% on the back of the work that the group undertook in 2013 and in prior years. This continued growth evidences the success of the company s long term strategy. The final dividend for the 2013 financial year we are proposing is US$0.50 per share, the same as the dividend declared in respect of the 2012 financial year, which considering the volatility of the gold industry over the year demonstrates the long term confidence we have in our business. Randgold again outperformed the Euromoney Global Gold Index (formerly the HSBC Global Gold Index) by 15% during 2013, as well as outperforming its peers (as set out in the graph on page 147 of this annual report). An investment of US$100 in Randgold shares on 1 January 2009 would have been worth US$146 on 31 December 2013 compared with an equivalent investment in the Euromoney Global Gold Index which would have been worth US$66 over the same period. Randgold s remuneration policy has always been based on the objective of ensuring that the company s executive remuneration policy encourages, reinforces and rewards the delivery of sustainable shareholder value, something we believe has helped drive our long term outperformance over the past decade. Our long term plan has been simplified and now has a performance measurement period of four years and requires a holding period of one year beyond that performance measurement period for 100% of the vested award. While our past performance is outstanding we continue to look to the future growing capacity and maintaining quality the company is currently entering a critical development phase in its business, growing capacity through the operation and completion of the construction of the new Kibali gold mine in the Democratic Republic of Congo. Kibali is the largest project undertaken to date by Randgold, with a reserve base at 12Moz and still growing. It ranks as one of the largest gold mines in Africa and will add significant future long term sustainable value to Randgold and to our shareholders. Norborne P Cole Jr Chairman, remuneration committee 146 Annual Report 2013 Randgold Resources

2 This report sets out our remuneration policy for directors to appropriately reward value delivery by our executives and encourage long term sustainable growth for our shareholders. It also comments on the approach to remuneration for other senior executives. In formulating its policy, Randgold has followed international best practice and good corporate governance. The remuneration policy provides for stretching performance targets for the delivery of reward based variable short term and long term incentive plans for Randgold s executive directors. Following extensive shareholder consultation by the remuneration committee, the principal points to note for our director remuneration and awards under the incentive plans for 2014 are as follows: Restricted Share Scheme: three tranches over three, four and five years has been simplified to one tranche over four years with the retention period for vested shares to be one year. Restricted Share Scheme: performance metrics simplified from four to three, namely EPS growth, additional reserves including reserve replacement and absolute TSR. The same performance ranges for each performance metric used for the 2013 awards are to be used for the 2014 awards. We will review the performance metrics and ranges in 2014 and intend consulting with shareholders on any proposed changes for the 2015 awards. Restricted Share Scheme and Co-investment Plan: three year claw back period introduced to reflect similar provisions in respect of the annual bonus. Annual Bonus: addition of malus provisions to allow the remuneration committee discretion based on the overall performance of the company. Chief financial officer: base salary increased by 5% following equivalent salary increases among senior management. The remuneration report has been prepared by the remuneration committee and was approved by the board for the year ended 31 December 2013, in accordance with the relevant requirements of the Listing Rules of the United Kingdom s Financial Conduct Authority. We have increased disclosure in our directors remuneration report this year with some additional disclosures to further align the company with international best practice. In this regard, we have followed and developed the approach that we took in our 2012 directors remuneration report in having three separate sections: this annual statement by the chairman of the remuneration committee, a policy section, and an annual report on remuneration. Further, the board at its January 2014 meeting took the decision to have a one year remuneration policy period and two annual votes for shareholders: one ordinary resolution in respect of the policy section, and one ordinary resolution in respect of the annual report on remuneration. Given Randgold is incorporated in Jersey, voting on the policy section and on the annual report on remuneration shall be advisory rather than on a binding basis, with the policy section becoming effective from 6 May 2014, the date of the company s next annual general meeting. The board will take due notice of shareholder feedback on the policy and it is the board s intention to operate in line with the approved policy. This will allow for ongoing involvement of our shareholders with the company s remuneration policies and practices. We welcome dialogue with our shareholders on the remuneration of our executive directors and appreciate our shareholders continued support. Yours sincerely Norborne P Cole Jr Chairman, remuneration committee Share price performance Rebased to Randgold (US$) Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Randgold US$ Spot gold Newcrest Goldcorp Barrick Gold Newmont Kinross Gold AngloGold Source: Bloomberg Annual Report 2013 Randgold Resources 147

3 Remuneration report (continued) Directors remuneration policy Executive remuneration principles and philosophy Background Randgold operates in a variety of international markets and jurisdictions. In formulating its principles, the regulatory requirements of Jersey, the United Kingdom and the United States were taken into account and the company has followed international best practice and good corporate governance. The company s executive remuneration principles provide the underlying standards from which the remuneration policies or goals are based. The remuneration principles are applied across the group and the remuneration policy is applied to the executive and non-executive directors. The principles are reviewed annually by the remuneration committee or at such other times as the remuneration committee considers necessary. Randgold s business strategy for success is enduring, consistent, sustainable and long established, as is the people strategy and the remuneration objective and principles that have been developed to support its business and its corporate culture. Randgold is a unique entrepreneurial company focused on Africa and growing value through discovery and development that has at its heart the creation of value for all stakeholders. Randgold s alignment with shareholder value creation encourages empowerment, energy, ownership and responsibility, as well as a results based growth culture. Randgold s remuneration plans support this through encouraging investment and ownership in the business, as well as setting stretching performance targets for the delivery of reward-based variable short term and long term incentive plans for its executive directors, non-executive directors and senior management. Objective To ensure Randgold s principles on directors remuneration, encourage, reinforce and reward the delivery of sustainable value to the company s shareholders, and its other stakeholders in the host countries where the company operates. Remuneration principles Principles Long term success Building sustainable long term value for shareholders and other stakeholders is the key overriding objective. Accordingly a significant proportion of our remuneration should be aligned to the long term success of the company through both shares and performance related awards. In addition, to support the alignment with shareholders and the desired corporate culture of the company senior executives are encouraged to invest in and hold shares in the company. Randgold s people Randgold s belief is that a key part of that value creation strategy is ensuring the company has the right people in the right places to deliver this value with the appropriate balance and alignment between the interests of shareholders and an attractive and appropriate reward package for its people. Randgold s people are highly motivated and have energy and tenacity to achieve and succeed in delivering Randgold s long term vision. Randgold believes in rewarding highly for delivering value, showing flexibility and mobility, as well as demonstrating a proactive entrepreneurial approach. Randgold rewards high performance and alignment with Randgold s culture when it is consistently delivered, and consequently value to Randgold and its shareholders is seen as increasing from an individual s contribution. Executive directors Competitive total remuneration is used to attract and retain high calibre executive directors, who have the necessary personal attributes, skills and experience to deliver the company s strategy in the environment within which it operates. Randgold operates in the international mining industry and, specifically, the international gold mining industry. Reward packages need to be commensurate with its comparator groups to attract and retain high calibre people with exceptional industry ability in mining and in Africa. As well as being appropriately reflective of the industry, Randgold s pay philosophy is to ensure its entrepreneurial culture and principles are maintained by ensuring leverage through its variable pay plans. Performance related pay Randgold s strategy of delivering value in Africa through its partnerships with other companies (international and local), governments, Randgold s people and the people of Randgold s host countries in Africa is clear and this flows through to Randgold s performance in terms of its KPIs. A significant proportion of total remuneration should therefore vary with performance aligning the executive directors with the interests of the company s shareholders and stakeholders. Randgold s only material element of fixed remuneration will be base pay, supplemented by performance related short term and long term remuneration. A high level of performance, measured with reference to predetermined objective criteria, shall be rewarded with higher levels of remuneration. 148 Annual Report 2013 Randgold Resources

4 Remuneration principles (continued) Principles Performance measures Financial and non-financial KPIs are Randgold s measurement of success and are reflected in its remuneration plans. Randgold believes sustainable long term growth is a fundamental strength of its strategy, its people and its way of working. Consequently, its long term incentive plans reward sustained and exceptional stretching performance over a three to five year period (including the required holding period). The use of stretching performance measures and key performance indicators are crucial to benchmark performance. In terms of comparative performance, Randgold shall use relevant comparator groups. Individual executive director s performance, pay and performance metrics and ranges shall be reviewed annually to ensure alignment with Randgold s business plans and its overriding objective. Risk In addition to the delivery of sustainable value, remuneration arrangements should be aligned with Randgold s approach to sustainability and business risk management which takes into account the company s environmental, social and governance responsibilities. Our culture is to deliver value for shareholders as entrepreneurial agents. Accordingly we reduce long term fixed elements of pay and as such there are no company funded pension plans within the company. However, as a responsible employer, we support our workforce and executives in delivering social benefits related to workplace events or events whilst at work such as ill health and disability. Any expenses incurred in the course of work are reimbursed. Shareholding Ownership of shares in the company is encouraged and executive directors are expected to build a material shareholding in the company which over time will form a meaningful portion of reward and will align executive directors to shareholders interests. Randgold will require each executive director to have a minimum shareholding in the company. Recruitment The company shall not offer any more than is necessary to attract and retain executive directors of the right calibre and experience. If this is not available from within Randgold, the company may compensate a new executive director for forfeiture of salary and other remuneration from a previous employer on a comparable basis taking into account performance achieved or likely to be achieved and aligning this new executive director with other executive directors as far as possible. Service contracts and letters of appointment Executive directors service contracts and non-executive directors letters of appointment shall be clear, transparent, and shall be drafted by reference to best practice. Where governance principles vary or conflict across relevant jurisdictions, the board will adopt what it considers to be the appropriate standards that reflect the overriding objective. Termination payments On determining a loss of office payment consideration will be given to any contractual provisions, the circumstances under which an executive director leaves and the executive director s performance. Whether a loss of office payment is made is at the discretion of the remuneration committee. Non-executive chairman and directors To attract and retain a high calibre non-executive chairman and non-executive directors who have the necessary skills, experience and commitment, the company will offer competitive remuneration which recognises the time commitment and work required for the roles of non-executive chairman and non-executive directors. Engaging with shareholders The non-executive directors shall maintain an open transparent dialogue with shareholders and regularly seek their views on the company s remuneration practices and policies. Remuneration policy, practices and outcomes will be clearly explained in the context of performance, to the extent not commercially sensitive, and shareholders will be given the opportunity to vote (by way of ordinary resolution) on Randgold s remuneration policies and practices at least once a year as approval will be sought in relation to the directors remuneration report at each annual general meeting. ** Fairness and judgement Appropriate judgement shall be applied by the remuneration committee in determining remuneration with consideration given to the conditions affecting the company, including the countries where the company operates, and where the executive directors are required to spend their time. ** Given the company is incorporated in Jersey, this approval will be on an advisory rather than on a binding basis. In line with the company s commitment to follow international best practice and good corporate governance, it is the board s intention to operate in line with the remuneration policy and the board will take due notice of shareholder feedback on this policy. Annual Report 2013 Randgold Resources 149

5 Remuneration report (continued) Remuneration structure summary The group s total remuneration together with each element of remuneration is benchmarked against a comparator group of FTSE 100, FTSE mining and comparable international gold mining companies. For 2014, the remuneration of the executive directors will comprise of the following: Base salary. Annual bonus with the requirement to defer one third of any annual bonus earned into the Co-Investment Plan. A Co-Investment Plan rewarding relative performance over three years subject to investment by the executive director. Participation in the Restricted Share Scheme, rewarding operational performance over four years with a further requirement of a one year post-vesting retention period. Remuneration structure The remuneration policy is based on the remuneration principles set out above and remains unchanged from 2013, except as highlighted below. Further details on the company s remuneration policy and remuneration arrangements are contained in this remuneration report. Any commitment made before the remuneration policy takes effect or before an executive becomes a director will be honoured even if inconsistent with this or any future policy. 1 year Base salary Annual bonus Deferred annual bonus Co-Investment Plan 3 years 5 years (including 1 year post vesting period) Restricted Share Scheme Policy table on remuneration payments Purpose Overall To ensure that the company s executive remuneration policy encourages, reinforces and rewards the delivery of sustainable shareholder value. We aim to ensure that our pay arrangements are fully aligned with our approach to risk management and take into account our obligations in respect of environmental, social and governance policies. Base salary Competitive base salaries to attract and retain high calibre executives, based on personal performance and relevant experience. Base salary is the only material element of fixed remuneration. The company does not fund any pension contributions. Operation The remuneration committee reviews the structure of the executive directors arrangements every year. Total remuneration and each element of remuneration is benchmarked periodically against a comparator group of FTSE 100, FTSE mining and comparable international gold mining companies. Base pay levels are reviewed annually by the remuneration committee (with effect from 1 January each year), taking account of company performance, individual performance, changes in responsibility and levels of increase for the broader employee population. Reference is also made to median levels within FTSE 100, FTSE mining and comparable international gold mining companies, as mentioned above. The remuneration committee considers the impact of any base salary increase on the total remuneration package. Maximum opportunity/ performance metrics/changes Maximum opportunity levels for individual pay elements are set out below. Page 155 of this annual report sets out the total opportunity levels for executive directors under different performance scenarios. CEO base salary unchanged. The CFO s base salary was increased from to with effect from 1 January 2014 an increase of 5% which recognises the CFO s continued development and growth in experience. Under normal circumstances, there will be no base salary increases during the oneyear policy period. In exceptional circumstances, the remuneration may, however, need to recognise, for example, development in role, change in responsibility and/or specific retention issues. 150 Annual Report 2013 Randgold Resources

6 Policy table remuneration payments (continued) Purpose Annual bonus Designed to encourage and reward superior performance on an annual basis. Deferred bonus Co-Investment Plan The deferral of annual bonus encourages executive share ownership and provides longer term alignment with shareholder interests. To reward sustained performance relative to global peers. Each year, when considering new awards under the plan, the remuneration committee will review and may make adjustments to the metrics and targets to which the vesting of new matching awards granted under the plan will be subject, prior to the grant of such awards, taking into account the strategic objectives of the company for the relevant periods. Operation Target and maximum annual incentives are determined as a percentage of base salary. One third of the annual bonus is compulsorily deferred into the Co-Investment Plan. Subject to malus provision to allow reduced payment at the discretion of the remuneration committee based on the overall performance of the company. Subject to clawback for a three year period from the date of payment in the event of a material misstatement of the company's annual report and accounts on which they were based. One third of any annual bonus is compulsorily deferred into the Co-Investment Plan and paid in shares after three years. Subject to clawback for a three year period from the date of payment in the event of a material misstatement of the company s annual report and accounts on which they were based. Each year an executive director may choose to commit shares into the Co-Investment Plan in addition to the compulsorily deferred bonus. Committed shares must be retained for three years and may be matched, depending on relative Total Shareholder Return (TSR) performance against the Euromoney Global Gold Index (formerly the HSBC Global Gold Index) over three years. Subject to malus provision to allow reduced vesting at the discretion of the remuneration committee based on the overall performance of the company. Subject to clawback for a three year period from the date of vesting in the event of a material misstatement of the company s annual report and accounts on which they were based. Maximum opportunity/ performance metrics/changes The annual bonus payable to the CEO for achieving target performance is 150% of base salary. The maximum bonus payable to the CEO for achieving outperformance is 300% of base salary. The annual bonus payable to the CFO for achieving target performance is 100% of base salary. The maximum bonus payable to the CFO for achieving outperformance is 200% of base salary. The performance metrics used to determine the annual bonus cover the same categories for both the executive directors, weighted as follows: Financial measures (30%). Role-specific operational/ financial performance targets (30%). Role-specific strategic/nonfinancial targets (30%). Safety (10%). Deferred bonuses are compulsorily deferred under the Co-Investment Plan (see below) which, if certain metrics and targets are satisfied, are paid in matched shares after three years. The maximum commitment which may be made into the Co- Investment Plan is 200% of base salary by the CEO and 100% of base salary by the CFO. The extent of the match depends on the performance of the company s TSR compared with the Euromoney Global Gold Index (formerly the HSBC Global Gold Index) over three years. The match will be 0.3 shares for each one share committed for performance equalling the performance of the Euro Global Index. At 10% above the index the match will be 1:1 with stepped changes in between. Annual Report 2013 Randgold Resources 151

7 Remuneration report (continued) Policy table remuneration payments (continued) Restricted Share Scheme performance shares Purpose Rewards sustainable long term performance. Focus on operational and financial performance measures and rewards absolute delivery of key strategic imperatives to build the company for the future. Four year performance period supports sustainability of growth. One year post-vesting retention period further supports long term sustainability. Each year, when considering new awards under the scheme, the remuneration committee will review and may make adjustments to the metrics and targets to which the vesting of new awards granted under the Restricted Share Scheme will be subject, prior to the grant of such awards, taking into account the strategic objectives of the company for the relevant periods. Such adjustments are to ensure stretching performance targets are set. Pension Funded entirely by the executive directors from their base salary. Main benefits funded from base salary by executive directors. Operation Awards of shares are made annually under the Restricted Share Scheme, determined as a percentage of base salary. Awards vest after four years subject to the achievement of stretching operational and financial targets. Subject to malus provision to allow reduced vesting at the discretion of the remuneration committee based on the overall performance of the company. Subject to clawback for a three year period from the date of vesting in the event of a material misstatement of the company s annual report and accounts on which they were based. Executive directors can elect to allocate up to 20% of their base salary to contribute to a defined contribution provident fund. The company does not make any further contributions to the fund. Executive directors can elect to participate in a medical aid scheme funded out of the executive s base salary. Where appropriate, executive directors may be provided with benefits while travelling for work. Life assurance cover is provided by the company through the group life assurance scheme which also provides cover for the company s senior management. Maximum opportunity/ performance metrics/changes The maximum annual award of shares is 200% of salary for the CEO and 100% of salary for the CFO. Three separate measures of business growth, each weighted one third: Additional reserves including reserve replacement. Absolute TSR. EPS growth. The threshold vesting level will be 40%. Awards prior to 2014: Additional reserves including reserve replacement. Additional reserves excluding reserve replacement. Absolute TSR. EPS growth. Not applicable Set at a level that the remuneration committee feel is required for the executive director to carry out their role. Other commitments Recruitment and promotion arrangements To secure the appointment and promotion of high calibre executives. For external appointments the remuneration committee may offer additional cash/ share-based elements where they consider it is in the best interests of the company (and therefore shareholders). Such payments would take account of remuneration relinquished when leaving the former employer and would reflect the nature, time horizons and performance requirements attaching to that remuneration. Full details on any such payments would be announced to shareholders on appointment. Maximum value determined by reference to the policy in relation to each element of pay outlined above (for executive directors) and below (for non-executive directors). In unforeseen and exceptional circumstances, the remuneration committee retains the discretion to make one-off payments which might not otherwise be covered by the remuneration. 152 Annual Report 2013 Randgold Resources

8 Policy table remuneration payments (continued) Purpose Operation Maximum opportunity/ performance metrics/changes Other commitments (continued) Recruitment and promotion arrangements (continued) For appointment of an internal candidate, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms, adjusted as relevant to take account of appointment. In addition, any on-going remuneration obligations existing prior to appointment may continue in place, to the extent they are inconsistent with the policy outlined above, provided that they are put to shareholders for approval at the earliest opportunity. For both external and internal appointments, the remuneration committee may agree that the company will meet certain relocation expenses as appropriate. Chairman fees To attract and retain a highcalibre chairman by offering a market competitive fee. The company s policy on chairman s fees takes into account the need to attract and retain an individual of the right calibre and experience, their responsibilities and time commitment. The decisions on the chairman s arrangements are made by the remuneration committee in consultation with the CEO. The chairman is paid an annual retainer fee, a chairman fee and receives an annual award of shares, which since 2012 are fully vested from grant. The shares are seen as an important element of the company s approach to remuneration policy in relation to the chairman. They encourage share ownership and are provided in lieu of cash. The chairman s fee arrangements are periodically reviewed by the remuneration committee in consultation with the CEO. The chairman receives a retainer fee of: US$ pa The chairman also receives the chairman fee of: US$ (which is paid in lieu of committee fees). The chairman, subject to shareholder approval, will receive an annual award of: shares. The chairman is required to retain and maintain from his vested shares a number of shares in the company at least equal in value (as at the beginning of the financial year) to an amount equivalent to 200% of the annual retainer fee. There is no change to the above fees for the 2014 financial year. Non-executive directors fees To attract and retain a highcalibre of non-executive director by offering market competitive fees. The company s policy on nonexecutive directors fees takes into account the need to attract and retain individuals of the right calibre and experience, their responsibilities and time commitment. The decisions on the arrangements of the nonexecutive directors are the responsibility of the board taking into account the fundamental principle of corporate governance that no individual is involved in the determination of their own remuneration. The chairman, the CEO and the CFO make the decisions on the non-executive directors fees. Each non-executive director receives a retainer fee of: US$ pa. Each non-executive director, subject to shareholder approval, will receive an annual award of: shares. Non-executive directors are required to retain and maintain from their vested shares a number of shares in the company at least equal in value (as at the beginning of the financial year) to an amount equivalent to 200% of the annual retainer fee. Annual Report 2013 Randgold Resources 153

9 Remuneration report (continued) Policy table remuneration payments (continued) Nonexecutive directors fees (continued) Purpose Operation The non-executives are paid an annual retainer fee, a committee membership fee, and subject to shareholder approval receive an annual award of shares which fully vested from grant. The chairmen of the main board committees and the senior independent director are paid an additional fee to reflect their extra responsibilities in lieu of committee fees. The shares are seen as an important element of the company s approach to remuneration policy in relation to non-executive directors. They encourage share ownership and are provided in lieu of cash. Non-executive directors fees are reviewed periodically by the chairman and executive directors. Maximum opportunity/ performance metrics/changes Senior independent director receives a fee of: US$ pa (in lieu of any committee fees). Each committee chairman receives a fee of: US$ pa. Each member of the board s committee receives the following fee: Audit: US$ pa Remuneration: US$ pa Governance and nomination: US$ pa. There is no change to the above fees for the 2014 financial year. Why performance measures were chosen and how targets are set Performance measures are selected by the remuneration committee on the basis of their alignment to the remuneration principles and the company s strategy, and to ensure the measures are key to oversee the operation of the business. Measures are reviewed annually by the remuneration committee taking into account business performance and priorities. Annual bonus The performance metrics for the annual bonus are set annually based upon the business priorities. The remuneration committee is of the view that the metrics for the annual bonus are commercially sensitive and it would be detrimental to the company to disclose them in advance of or during the relevant performance period. The remuneration committee will, where they are no longer commercially sensitive, disclose those metrics at the end of the relevant performance period in that year s annual report. Co-Investment Plan The gold mining industry is capital intensive, cyclical and long term. Outstanding performance comes from finding and accessing high quality resources, successfully developing new projects, managing production costs, and maintaining efficient and safe operations. The remuneration committee believes that, against this background, success can best be measured by the company s total shareholder return performance against the Euromoney Global Gold Index (formerly the HSBC Global Gold Index). The Euromoney Global Gold Index is a capitalisationweighted index calculated in US dollars, representing more than 50 mining companies from around 20 countries. The company s performance against its peers is set out in the graph on page 147 of this annual report. Restricted Share Scheme The performance metrics for the Restricted Share Scheme have been selected on the basis that they are among the company s key performance indicators and drive shareholder value. The remuneration committee also believes that executive directors should be focused on delivering absolute returns to shareholders and hence the vesting of some of the shares is linked to this. The remuneration committee further believes that the performance necessary for awards to vest towards the upper end of the performance ranges is stretching. They should not, therefore, be interpreted as providing guidance on the company s expected performance over the relevant periods. EPS growth is measured as a cumulative compound annual growth rate over each performance period. TSR is measured over the three months before the start and the three months before the end of each performance period. Reserve growth includes reserve replacement in respect of ounces mined and is calculated with reference to the change in the declared reserves at the end of the performance period. These measures provide an equal balance between asset growth, profitability and shareholder returns. Awards vest on a straight-line sliding scale for performance between these minimum and maximum performance range for the relevant performance metric. Indicative total opportunity levels for 2014 As a result of the company s remuneration policy, a significant portion of the rewards available to the executive directors is dependent on the performance of the company. The tables below illustrate how the total pay opportunities for the CEO and the CFO vary under three different performance scenarios; maximum, target and minimum. These charts are indicative 154 Annual Report 2013 Randgold Resources

10 as share price movements and dividend accrual have been excluded. The tables are based on the following assumptions: Minimum consists of base salary. Target consists of base salary and incentive awards at 50% of maximum. Maximum consists of base salary and incentive awards at 100% of maximum. The maximum value of the Co-Investment Plan award assumes a maximum investment from the respective executive director. US$ Maximum Target Minimum Maximum Target Minimum Fixed elements Annual variable amount (cash) Annual variable element (deferred shares) Long term variable elements Fixed elements Annual variable amount (cash) Annual variable element (deferred shares) Long term variable elements The above tables do not include any potential increase or decrease as a result of a rise in the share price of share based awards and present the policy and grants made under the directors remuneration policy from Reinvestment of dividends on awards have been excluded. The executive directors service agreements are available for inspection at the company s registered office and at each annual general meeting of the company. The information below provides a summary of the provisions in executive directors service contracts that could give rise to a remuneration or loss of office payment. Salary and Annual bonus Incentive schemes The CEO shall be paid a salary of US$ per annum * and the CFO shall be paid a salary of per annum ** or, in both cases, such other rate as may be agreed between an executive director and the company. The salary shall be reviewed by the board annually with no obligation to award an increase. The service agreements provide that the executive directors are entitled to participate in such pension funds as may be nominated by the executive director and participate in the company s medical aid scheme, in both cases funded entirely by the executive director from their base salary. The company shall provide life assurance against death and disability for each of the CEO and CFO. The executive directors shall be eligible to participate in the annual bonus plan subject to the rules of the plan as amended from time to time. The board consults with each of the executive directors with respect to the setting of performance metrics. The service agreements note that under the rules of the annual bonus plan, where a participant ceases employment as a good leaver or there is a change of control event, a participant shall be entitled to an award based on the extent to which the performance conditions have been satisfied and pro-rated to reflect the shortened performance period. The executive directors are eligible to participate in the Co-Investment Plan and the Restricted Share Scheme subject to the rules of the plans as amended from time to time. The service agreements note that under the rules of the plan and scheme, where the participant is a good leaver or there is a change of control event, a participant shall be entitled to an award based on the extent to which the relevant performance conditions have been satisfied and pro-rated to reflect the shortened performance period. The board consults with each of the executive directors with respect to the setting of performance metrics. * As at 31 December 2013, the annual base salary of the CEO was US$ ** As at 31 December 2013, the base salary of the CFO was The base salary of the CFO was increased to with effect from 1 January Any pension benefit due from contributions made by the executive directors to the company s provident fund will also be paid out on termination or at such other time as the executive director choses. The company does not contribute to the provident fund. Termination policy Both Dr DM Bristow and Mr GP Shuttleworth agreed updated service agreements in June 2011 (which were both varied on 28 January 2013) under which the company and each executive director can terminate their respective service agreement by giving six months notice in writing. The employment relationship can be ended immediately by the company making a payment in lieu of notice, equivalent to the base salary payable for the notice period. The executive directors duty to mitigate will be taken into account on termination. Annual Report 2013 Randgold Resources 155

11 Remuneration report (continued) The provisions contained in the executive directors service agreements, as summarised in the above table, reflect Randgold s termination policy including in respect of notice periods, the principles for calculating each element of a termination payment, and whether circumstances of termination are taken into account. Consideration of conditions elsewhere in the company in developing policy Given the geographic spread of the company s workforce, the remuneration committee does not consider that consulting directly with employees on the remuneration policy for executive directors is the most appropriate use of resources, although executive directors pay is carefully considered in the context of pay and conditions across the company as a whole. The remuneration committee has oversight of remuneration policies for the senior managers below the main board, and applies the principles of transparency, clarity and alignment of reward with performance. To support the alignment of interests with those of shareholders, the company has in the past granted share options to senior managers below the board instead of annual incentives, although no new share options have been granted since September Instead the remuneration committee, recognising the size and growth of the company, has extended a form of the Restricted Share Scheme to senior managers below the main board. Awards of restricted shares are not made annually, but rather on an ad hoc basis as and when key events warrant it or when new senior managers are recruited. Vesting of restricted share awards for senior managers is conditional on satisfactory individual performance. Further, the board has extended the Co-Investment Plan to senior managers below the main board, in line with the existing rules of the plan, with effect from 1 January This will further enhance the link between pay and long term value creation and recognises the significant value the senior management team as a whole has created over the years. Consideration of shareholder views in developing policy The remuneration committee, following the practice of previous years, has engaged extensively during the year with its larger institutional shareholders and the voting guidance services on pay, and have made certain changes to reflect their views. The remuneration committee acknowledge and listen to the views of the company s shareholders and have taken account of their opinions in formulating the remuneration principles, the remuneration policy and this remuneration report. Payments already agreed and in exceptional circumstances Where unforeseen or exceptional circumstances arise, the remuneration committee retains the discretion to make payments which might not otherwise be set out in the remuneration policy. Any such event and resultant payments will be announced on a timely basis to shareholders in the usual way via the stock exchange information service and on the company s website. The remuneration committee will continue to honour all existing arrangements under existing contracts and any payments already agreed with shareholders. CEO Mark Bristow and CFO Graham Shuttleworth at the London Stock Exchange for a quarterly results presentation. 156 Annual Report 2013 Randgold Resources

12 Annual report on remuneration Executive directors remuneration single The figures contained in the table below reflect the base salary and annual bonuses actually paid during the period and the value of awards that vested under the Restricted Share Scheme, CEO performance shares and Co-Investment Plan where the performance period ended in the year under review (with such value determined by reference to the market price of the vested award shares on the relevant vesting date, as detailed Executive directors remuneration single figure Director (US$) Year Total salary Pension Total Annual bonus 1 LTI award value Total variable pay Total DM Bristow n/a n/a n/a n/a GP Shuttleworth n/a n/a n/a n/a Mr GP Shuttleworth's salary is paid in GBP. The effective exchange rate used to convert this pay to US dollars in the above table is GBP1: US$ For detail of the portion of bonus deferred and performance measures met, see page 159 of this annual report. Executive directors remuneration accounting charge on pages 166 and 167 of this annual report), in accordance with the United Kingdom s The Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations In the annual report for the previous year, this figure was calculated with reference to awards that vested during the period, and as such the figures below for 2012 have been restated to reflect the new regulations applicable in Where a share award or part of a share award has vested on 1 January 2013, it has been included in the 2012 figure and where a share award has vested on 1 January 2014 it has been included in Base salary Annual bonus remuneration Other payments * Total Director (US$) DM Bristow GP Shuttleworth Total * Other payments include expenses for restricted share awards, performance share awards and Co-Investment Plan awards which are costed in accordance with IFRS 2, based on the valuation at the date of grant rather than the value of the awards that vested in the year. Vesting is subject to a number of vesting conditions which may or may not be achieved. Non-executive directors remuneration single figure Total fees Restricted Share award value Total Director (US$) P Lietard NP Cole Jr CL Coleman K Dagdelen RI Israel^ n/a J Kassum^^ n/a n/a n/a n/a n/a n/a n/a n/a J Mabunda Lioko^^^ n/a n/a n/a AJ Quinn K Voltaire Non-executive directors remuneration accounting charge Fees Other payments Total Director (US$) * P Lietard NP Cole Jr CL Coleman K Dagdelen RI Israel^ n/a J Kassum^^ n/a n/a n/a n/a n/a n/a J Mabunda Lioko^^^ n/a n/a n/a AJ Quinn K Voltaire Total * Pursuant to the authority granted at the May 2011 AGM, each non-executive director who was a director at that time, was awarded restricted shares (US$80.03 per share) effective 23 June 2011, with the chairman receiving an additional restricted shares (US$80.03 per share). One-third of these restricted shares vested on 1 January 2012, one-third vested on 1 January 2013 and the final one-third vests on 1 January These restricted share award grants have been costed in full in accordance with IFRS within the 2012 financial year. In addition, each non-executive director was awarded shares pursuant to the approval granted at 2012 AGM on 30 April 2012, which vested immediately and have also been fully costed. In 2013, other payments consisted only of the annual award to each non-executive director approved at the AGM (US$78.79 per share). ^ Mr RI Israel did not stand for reappointment as a director and resigned at the 2012 AGM on 30 April ^^ Mr J Kassum was appointed to the board on 31 January ^^^ Mrs J Mabunda Lioko was appointed to the board on 28 January Annual Report 2013 Randgold Resources 157

13 Remuneration report (continued) Non-executive directors remuneration The figures contained in the table on the previous page reflect the fees actually paid during the period and the value of share awards that vested under the Restricted Share Scheme and other shares issued and allotted to the non-executive directors during the period (with such value determined by reference to the market price of the vested award shares on the relevant vesting date, as detailed on pages 166 and 167 of this annual report). However, in order to be broadly consistent with the approach taken in respect of executive directors single figure remuneration (in accordance with the UK Regulations), where a share award or part of an award has vested on 1 January 2013, it has been included in the 2012 figure and where a share award has vested on 1 January 2014, it has been included in Additional details on elements of pay in single Fixed remuneration Fixed remuneration comprises only of base salary. No pension contributions are funded by the company. In 2014, fixed remuneration represents less than 22% for the CEO and 33% for the CFO of the total remuneration package (based on target performance). Base salary The CEO's and CFO's base salaries are determined by the remuneration committee, taking into account the performance of the individual. The company also benchmarks each element of its remuneration and the total remuneration package in comparison to FTSE 100, FTSE mining and comparable international gold mining companies. When setting base salaries, the remuneration committee also takes into consideration the requirement for extensive travel and time spent at the company s operations in Africa. This is considered critical to the effective management of the company s business. At 31 December 2013, the annual base salaries of the executive directors were as follows: CEO: Dr DM Bristow US$ CFO: Mr GP Shuttleworth Following a review of all aspects of the remuneration packages of the executive directors, it has been decided that the CFO s base salary be increased from to with effect from 1 January 2014, which represents an increase of 5% of base salary. In line with the Randgold s remuneration philosophy Mr GP Shuttleworth was brought into the CFO role in 2007 on a relatively low salary compared to the market to allow for movement and growth in pay, once his value added to the company was demonstrated. The CFO has proved to be a valuable addition to the board and to the management team and the company has increased his salary over time including in 2011, 2012, 2013 and now in The remuneration committee believes this is reflective of his considerable contribution and positions his salary appropriately within the market. As is the remuneration committee's usual practice, the remuneration committee sought the views of our larger institutional shareholders and voting guidance services before deciding on this increase. The base salary increase for the CFO also took account of the increases within the broader Randgold employee population. These increases took effect in October 2013 and ranged from 0% to 15%. The average increase of employee salaries was approximately 4%. Retirement benefits Executive directors can elect to sacrifice up to 20% of their base salary to contribute to a defined contribution provident fund. The provident fund is offered to all senior management within the company. The company does not make any contribution to the provident fund. Other benefits Executive directors can elect to receive other benefits including medical aid, funded out of their base salary. Where appropriate, executive directors may be provided with benefits while travelling for work and the cost of membership of professional associations. Life assurance cover is provided to the executive directors by the company through the group life assurance scheme which is also made available to the company s senior management. Variable remuneration Variable remuneration represents the major proportion of each executive director s remuneration package. In 2013, variable remuneration of the executive directors comprised: An annual bonus opportunity, coupled with the requirement to defer a third of annual bonus earned. Participation in a Co-Investment Plan rewarding performance over three years. Performance shares awarded under the Restricted Share Scheme, rewarding performance over three, four and five years, with a further one year post-vesting retention requirement for 50% of the vested award. In 2014, the Restricted Share Scheme has been simplified, following feedback from shareholders, and now consists of performance being measured over four years, a further one year post vesting retention requirement for 100% of the vested award annual bonus The annual bonus encourages and rewards superior performance on an annual basis. Executive directors are eligible to receive an annual bonus, subject to the achievement of stretching performance criteria. The performance metrics are intended to reward the achievement of challenging strategic and financial targets that contribute to the creation of sustainable shareholder value. Each year, the remuneration committee reviews and may make adjustments to the criteria used for measuring performance taking into account the strategic objectives of the company for the year, before the metrics and targets are agreed for the annual remuneration cycle. CEO The annual bonus payable to the CEO for achieving target performance in 2013 was 150% of base salary. The maximum 158 Annual Report 2013 Randgold Resources