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Directors’ report

 

Directors’ report

The directors have pleasure in submitting their report and the annual financial statements of Gold Fields Limited (“Gold Fields or the company”) and its subsidiaries (together referred to as “the Group”) for the six-month period ended 31 December 2010.

Profile

Business of the company

Gold Fields is one of the world’s largest unhedged producers of gold with steady state production of approximately 3.6 million attributable ounces per annum from eight operating mines in South Africa, Peru, Ghana and Australia. Gold Fields also has an extensive growth pipeline with both greenfields and near-mine exploration projects at various stages of development. The company has total attributable gold equivalent Mineral Reserves of approximately 77 million ounces and Mineral Resources of 225 million ounces. Gold Fields is listed on the JSE Limited (primary listing), New York Stock Exchange (NYSE), NASDAQ Dubai Limited (NASDAQ Dubai), NYSE Euronext in Brussels (NYX) and the SIX Swiss Exchange (SWX).

Review of operations

The activities of the various Gold Fields operations are detailed on pages 92 to 109 of this report.

Financial results

The information on the financial position of the Group for the period ended 31 December 2010 is set out in the financial statements on pages 194 to 315 of this annual report. The income statement for the Group shows a loss attributable to Gold Fields Limited shareholders of R76 million (US$11 million) for the six-month period ended 31 December 2010 compared with a profit of R3,631 million (US$479 million) for the financial year ended 30 June 2010.

Compliance with financial reporting standards

The company and the consolidated Group annual financial statements comply with International Financial Reporting Standards, the AC500 series as published by the Accounting Practices Board, the South African Companies Act and JSE Limited Listings Requirements (JSE Listings Requirements).

Reporting in united states dollars

To assist international investors, the income statement, statement of comprehensive income, statement of financial position and statement of cash flow of the Group have been translated into United States dollars.

Share captial

Authorised

The authorised share capital of the company is R500,000,010 divided into 1,000,000,000 ordinary par value shares of 50 cents each and 1,000 non-convertible redeemable preference par value shares of 1 cent each.

The following are the movements in the issued and listed ordinary share capital of the company:

Six months ended   Year ended  
    31 December 2010   30 June 2010  
    No of shares   Rand   No of shares   Rand  
  At the beginning of the period 705,903,511   352,951,755.50   704,749,849   352,374,924.50  
  Exercise of options by participants in the Gold Fields incentive schemes 751,630   375,815.00   1,153,662   576,831.00  
  Shares issued to employees under the Employee 13,525,394   6,762,697.00   -   -  
  Share Ownership Plan (ESOP) - (held via the Thusano Share Trust)                
  Shares Issued under the GFIMSA 616,352   308,176.00   -   -  
  empowerment transaction                
  End of period 720,796,887   360,398,443.50   705,903,511   352,951,755.50  

The non-convertible redeemable preference share capital is as follows:

Six months ended   Year ended  
    31 December 2010   30 June 2010  
    No of shares   Rand   No of shares   Rand  
  At the beginning and end of the period 50   0.50   50   0.50  

In terms of the specific authority granted by shareholders at the annual general meeting held on 2 November 2007, 100 of the non-convertible redeemable preference shares were issued to FirstRand Bank on 20 December 2007. The reason for issuing the non-convertible redeemable preference shares was to provide the company with a mechanism to raise costeffective capital equivalent to debt finance as part of a general capital management programme which, in the opinion of the directors, was deemed appropriate for the activities of the company

On 10 October 2008, the company elected to redeem 50 (fifty) preference shares from FirstRand Bank Limited for a consideration of R623,169,470.

On 15 December 2010, Gold Fields declared and paid R133.4 million of the attributable dividend. On the same date, the redemption date of 24 January 2011 was extended to 15 September 2011. The preference shares may be redeemed earlier on a date agreed between the holder and Gold Fields.

In terms of the general authority granted by shareholders at the annual general meeting held on 2 November 2010, the authorised but unissued ordinary share capital of the company representing not more than 20% of the issued share capital of the company from time to time and preference share capital at that date, after setting aside so many ordinary shares as may be required to be allotted and issued pursuant to the share incentive schemes, was placed under the control of the directors. This authority expires at the next annual general meeting where shareholders will be asked to place under the control of the directors the authorised but unissued ordinary share capital of the company representing not more than 10% of the issued share capital of the company from time to time.

In terms of JSE Listings Requirements, shareholders may, subject to certain conditions, authorise the directors to issue the shares held under their control for cash, other than by means of a rights offer, to shareholders. In order that the directors of the company may be placed in a position to take advantage of favourable circumstances which may arise for the issue of such shares for cash, without restriction, for the benefit of the company, shareholders will be asked to consider an ordinary resolution to this effect at the forthcoming annual general meeting.

Repurchase of shares

The company has not exercised the general authority granted to buy back shares from its issued ordinary share capital granted at the annual general meeting held on 2 November 2010. At the next annual general meeting, shareholders will be asked to renew the general authority for the acquisition by the company, or a subsidiary of the company, of its own shares.

Listings

The abbreviated name under which the company is listed on the JSE Limited (JSE) is “GFIELDS” and the short code is GFI. The company also has a secondary listing on the following stock exchanges:

New York Stock Exchange (NYSE); NASDAQ Dubai Limited (NASDAQ Dubai); NYSE Euronext in Brussels (NYX) and the SIX Swiss Exchange (SWX).

At 31 December 2010, the company had in issue, through The Bank of New York Mellon on the New York Stock Exchange (NYSE), 269,715,981 (F2010: 283,262,351) American Depository Receipts (ADRs). Each ADR is equal to one ordinary share.

The GF Management Incentive Scheme

At the annual general meeting on 10 November 1999, shareholders approved the adoption of the GF Management Incentive Scheme (the Scheme). This scheme was introduced to provide an incentive for certain officers and employees to acquire shares in the company. No further allocations of options under this scheme are being made in view of the introduction of the Gold Fields 2005 Share Plan (see below) and the scheme will be closed once all options have been exercised or forfeited. Currently, the last date of expiry is 3 March 2014.

The salient features of the scheme are that:

It comprises only share options
A third of the total share option grant vests upon the second, third and fourth anniversaries of the grant date
Share options expire no later than seven years from the grant date

The directors were authorised to issue, allot and grant options to acquire up to a maximum of 22,791,830 ordinary shares in the unissued share capital of the company in terms of the incentive scheme. At 31 December 2010, this represented 3.16% of shares in issue. The unexercised options under the scheme represented 0.14% of shares in issue as at 31 December 2010.

Further details of the scheme are disclosed in note 5 of the financial statements on pages 254 to 256.

The GF Non-executive Director Share Plan

At the annual general meeting on 31 October 2001, shareholders approved a resolution to proceed with the allocation of options to non-executive directors. As a result, each non-executive director has been allocated the options detailed in the Directors' report.

The salient features of the scheme are as follows:

Share options vest one year after allocation
An annual allocation of 10,000 share options were issued to non-executive directors provided the directors in question had attended at least 75% of the Board meetings
A director will forfeit share options 30 days after a director leaves the Board

No further allocations of options under this plan are being made in view of the introduction of the Gold Fields Limited 2005 Non-executive Share Plan (see below) and the plan will be closed once all options have been exercised or forfeited. Currently, the last date of expiry is 13 August 2011.

Further details of the scheme are disclosed in note 5 of the financial statements on pages 254 to 256.

Gold Fields Limited 2005 Share Plan

At the annual general meeting on 17 November 2005, shareholders approved the adoption of the Gold Fields Limited 2005 Share Plan to replace the GF Management Incentive Scheme approved in 1999. The Plan provides for two methods of participation, namely the Performance Allocated Share Appreciation Rights Method (SARS) and the Performance Vesting Restricted Share Method (PVRS). This plan seeks to attract, retain, motivate and reward participating employees on a basis which seeks to align the interests of such employees with those of the company’s share owners.

The salient features of the Plan are:

PVRS and SARS are offered to participants annually during March. Quarterly allocations are also made in June, September and December on a pro rata basis to qualifying new employees. PVRS are performance-related shares, granted at zero cost (the shares are granted in exchange for the rendering of service by participants to the company during the threeyear restricted period prior to the share vesting period).
All PVRS allocations made from 1 March 2006 to 1 March 2008 were conditionally awarded to participants. Based on the rules of the Plan, the actual number of PVRS which would be settled to a participant three years after the original award date is determined by the company’s performance measured against the performance of five other major gold mining companies (the peer group) based on the relative change in the Gold Fields share price compared to the basket of respective US dollar share prices of the peer group. From 1 June 2008, the rules were modified so that two performance measures apply: Firstly, the target performance criterion has been set at 85% of the company’s expected gold production over the three-year measurement period as set out in the business plans of the company approved by the Board. In the event that the target performance criterion is met the full initial target award shall be settled on the settlement date. Secondly, the Remuneration Committee has determined that the number of PVRS to be settled may be increased by up to 300% of the number of the initial target PVRS conditionally awarded, depending on the performance of the company relative to the performance of the peer group based on the relative change in the Gold Fields share price compared to the basket of respective US dollar share prices of the peer group. The above amendments were effected under the ambit of the existing rules as previously approved by the shareholders at the annual general meeting.

The performance of the company that will result in the settlement of shares is to be measured by the company’s share price performance relative to the share price performance of the following peer gold mining companies over the threeyear period:

- AngloGold Ashanti
- Barrick Gold
- Goldcorp
- Harmony Gold
- Newmont Mining

The performance of the company’s shares against the shares of the peer group will be measured for the three-year period running from the first business day of the month preceding the relevant allocation and award date

SARS are share options, granted at the weighted average price over the previous 20 trading days
SARS will vest on the third anniversary of the grant date, but may be exercised between the third and sixth anniversary of the grant date by existing Gold Fields employees

The details of the executive directors’ participation in the above scheme are listed in the Directors' report.

Further details of the scheme are disclosed in note 5 of the financial statements on pages 254 to 256.

Gold Fields Limited 2005 Non-executive Share Plan

At the annual general meeting on 17 November 2005, shareholders approved the adoption of the Gold Fields Limited 2005 Non-executive Share Plan to replace the GF Non-executive Director Share Plan approved in 2001. The 2005 Non-executive Plan provides for the award of restricted shares (shares that have been awarded but cannot be exercised during the restricted threeyear period) to non-executive directors that ordinarily vest after a period of three years from the award thereof.

The salient features of the plan are as follows:

Restricted shares are to be granted annually
Shares will vest and be settled on the third anniversary of the award date

Further details of the scheme are disclosed in note 5 of the financial statements on pages 254 to 256.

Consistent with the King III Report on Corporate Governance and the JSE Listings Requirements, the Board has recommended to the shareholders that the practice of awarding of rights under the Gold Fields Limited 2005 Non-executive Share Plan be immediately discontinued. Allocations awarded before 1 April 2010 will vest according to the rules of the Plan.

The directors were authorised to issue and allot all or any of such shares required for the plan, but in aggregate with the other schemes, may not exceed 35,309,563 of the total issued ordinary shares in the capital of the company. An individual participant may not be awarded an aggregate of shares from all or any such schemes, exceeding 3,530,956 of the company’s total issued ordinary share capital. The unexercised options and shares under the schemes and plans represented 14,032,789 (1.94% of the total issued ordinary share capital) of shares in issue at 31 December 2010.

Consolidated table of all equity-settled instruments under all the schemes

    Number of equity securities  
  Outstanding at 1 July 2010     15,669,1461  
  Movement during the year        
  Granted during the year     688,185  
  Exercised and released     (774,538)  
  Forfeited     (1,465,004)  
  Conditions for vesting not met     (85,000)  
 
Outstanding at 31 December 2010
    14,032,7892  

1 Included in this number are 81,700 options and 132,578 restricted shares available to non-executive directors under the GF Non-executive Director Share Plan and the Gold Fields Limited 2005 Non-executive Share Plan, respectively
2 Included in this number are 36,700 options and 97,222 restricted shares available to non-executive directors under the GF Non-executive Director Share Plan and the Gold Fields Limited 2005 Non-executive Share Plan, respectively.

Due to the number of prohibited periods to which the company has been subjected as a result of various transactions, the expiry dates of options under the GF Management Incentive Scheme and the GF Non-executive Director Share Plan have been extended so as to not prejudice the individuals affected.

Directorate

Composition of the Board

The Board currently consists of two executive directors and twelve non-executive directors.

The following changes in directorate occurred during the period under review:

  Director Nature of change   Date of change  
  Mamphela Ramphele1 Appointed   1 July 2010  
  Alan Wright2 Retired   2 November 2010  

Mamphela Ramphele joined the Board on 1 July 2010 as an independent non-executive director and Deputy Chair of the Board. She took over as Chair of the Board from Alan Wright who retired at the end of the company’s annual general meeting held on 2 November 2010. Sello Moloko was appointed independent non-executive director on 24 February 2011.

1 Appointed independent non-executive on 1 July 2010 and Chair of the Board on 2 November 2010
2 A J Wright retired at the end of the Annual General Meeting held on 2 November 2010

Rotation of directors

Directors retiring in terms of the company’s articles of association are Mr MS Moloko, Mr K Ansah, Mr DN Murray, Mr CI von Christierson and Ms GM Wilson. Mr von Christierson has indicated that he will not be available for re-election. The remaining directors are eligible and offer themselves for re-election.

The Board of Directors of various subsidiaries of Gold Fields comprise some of the executive officers and one or both of the executive directors, where appropriate.

Interest of directors

For the six-month period ended 31 December 2010, the directors’ beneficial and associate interest in the issued and listed share capital of the company was 0.025% (June 2010: 0.026%) in aggregate. No one director individually exceeds 1% of the issued share capital or voting control of the company.

Beneficial   Associates Interest  
    Direct   Indirect   Direct  
    31 December   30 June   31 December   30 June   31 December   30 June  
  Director 2010   2010   2010   2010   2010   2010  
  Alan Wright² 74,382   71,582   87,635   87,635   5,360   5,360  
  Mamphela Ramphele1 -   -   -   -   -   -  
  Nicholas Holland 2,788   -   -   -   -   -  
  Paul Schmidt -   -   -   -   -   -  
  Alan Hill -   -   -   -   -   -  
  Kofi Ansah -   -   -   -   -   -  
  Cheryl Carolus -   -   -   -   -   -  
  Roberto Danino -   -   -   -   -   -  
  John Hopwood4 -   15,000   -   -   -   -  
  Richard Menell -   -   -   -   -   -  
  Sello Moloko3 -   -   -   -   -   -  
  David Murray -   -   -   -   -   -  
  Donald Ncube -   -   2,118   -   -   -  
  Rupert Pennant-Rea 5,316   2,030   -   -   -   -  
  Chris von Christierson -   3,000   -   -   -   -  
  Gayle Wilson -   -   -   -   -   -  
 
Total
82,486   91,612   89,753   87,635   5,360   5,360  

At the date that this Directors’ Report was prepared, the following directors disposed, on market, some or all of the shares, which settled after 31 December 2010 and before 18 March 2011:

Chris van Christierson – 10,000
Nicholas Holland – 26,726
Paul Schmidt – 18,545
Rupert Pennant-Rea – 7,828

At the date that this Directors’ Report was prepared, the following directors acquired, off market, additional shares, which settled after 31 December 2010 and before 18 March 2011:

Paul Schmidt – 1,000
Rupert Pennant-Rea – 2,172

The company has not entered into any contracts of service, other than the service contract with the executive directors of the company.

1 Appointed independent non-executive on 1 July 2010 and Chair of the Board on 2 November 2010
2 A J Wright retired at the end of the Annual General Meeting held on 2 November 2010
3 M S Moloko was appointed on 24 February 2011
4 J Hopwood deceased 19 March 2010

Directors’ equity-settled instruments

The directors held the following equity-settled instruments at 31 December 2010.

        Equity-settled   Equity-settled  
    Equity-settled   instruments   instruments  
    instruments at   granted during   forfeited during  
    1 July 2010   the year   the year  
        Average       Average       Average  
        strike       strike       strike  
        price1       price       price  
  Director Number   (cents)   Number   (cents)   Number   (cents)  
  Mamphela Ramphele2 -   -   -   -   -   -  
  Alan Wright3 50,800   89.00   -   -   10,000   110.03  
  Nicholas Holland 463,290   89.92   139,800   89.76   -   -  
  Paul Schmidt 100,309   101.36   48,600   89.76   -   -  
  Kofi Ansah 18,500   68.59   -   -   -   -  
  Cheryl Carolus 4,100   -   -   -   -   -  
  Roberto Danino 4,100   -   -   -   -   -  
  John Hopwood4 12,600   -   -   -   -   -  
  Richard Menell 4,100   -   -   -   -   -  
  David Murray 9,100   -   -   -   -   -  
  Donald                        
  David Ncube 11,800   -   -   -   -   -  
  Rupert Pennant-Rea 38,700   84.79   -   -   5,000   110.03  
  Chris von Christierson 31,800   99.21   -   -   10,000   110.03  
  Gayle Wilson 4,100   -   -   -   -   -  
  Alan Hill -   -   -   -   -   -  
  Three most highly paid employees who are not Directors            
  Vishnu Pillay5 108,207   109.82   47,925   89.76   -   -  
  Michael Fleischer6 131,130   110.26   47,925   89.76   -   -  
  Tommy McKeith6 190,530   115.4   47,925   89.76   -   -  

        Equity-settled  
    Equity-settled   instruments at  
    Conditions for   instruments exercised   31 December  
    vesting not met   during the year   2010  
        Average       Average           Average  
        strike       strike   Benefit       strike  
        price       price   arising       price  
    Number   (cents)   Number   (cents)   (R million)   Number   (cents)  
  Director                            
  Mamphela                            
  Ramphele2 -   -   -   -   -   -   -  
  Alan Wright3 -   -   26,900   84.79   2.60   13,900   -  
  Nicholas                            
  Holland 8,912   -   2,788   98.93   0.30   591,390   86.09  
  Paul                            
  Schmidt 1,448   -   452   98.93   0.04   147,009   90.55  
  Kofi Ansah -   -   2,700   117.13   0.30   15,800   68.59  
  Cheryl                            
  Carolus -   -   -   -   -   4,100   -  
  Roberto                            
  Danino -   -   -   -   -   4,100   -  
  John                            
  Hopwood4 -   -   12,600   90.48   1.10   -   -  
  Richard                            
  Menell -   -   -   -   -   4,100   -  
  David                            
  Murray -   -   -   -   -   9,100   -  
  Donald                            
  Ncube -   -   2,700   119.50   0.30   9,100   -  
  Rupert                            
  Pennant-Rea -   -   4,600   107.73   0.50   29,100   78.49  
  Chris von                            
  Christierson -   -   2,700   110.50   0.30   19,100   88.38  
  Gayle                            
  Wilson -   -   -   -   -   4,100   -  
  Alan Hill -   -   -   -   -   -   -  
  Three most highly paid employees who are not Directors            
  Vishnu                            
  Pillay5 6,221   -   1,946   98.93   0.20   147,965   107.04  
  Michael                            
  Fleischer6 9,547   -   2,986   98.93   0.30   166,522   107.04  
  Tommy                            
  McKeith6 50,000   -   -   -   -   188,455   106.56  

1 Average strike price is based on SARS granted during the period. PVRS issued at zero-cost
2 Appointed 1 July 2010
3 Retired 2 November 2010. Unvested shares will settle to the participant after the three-year restricted period i.e. 7,600 PVRS on 12 November 2011 and 6,300 PVRS on 04 November 2012
4 Deceased 19 March 2010. Shares held by Mr Hopwood’s estate
5 Resigned 31 December 2010. All unvested shares have been forfeited, 8,000 vested SARS will expire on 31 December 2011
6 Post balance sheet dealings: Messrs Fleischer and McKeith disposed of 18,492 shares each between 31 December 2010 and 18 March 2011

A register of detailed equity-settled instruments outstanding by tranche is available for inspection at the company’s registered office. The equity-settled instrument terms are detailed on pages 256-258.

Directors’ fees

In terms of the articles of association, the fees for services as non-executive directors are determined by the company at a general meeting:

    Board fees                                  
                        Pension              
                        scheme       July to      
    Directors   Committee   Travel           total   Expense   December      
  Director fees   fees   allowance   Salary   Total bonus¹   contributions   allowances   2010²   F2010  
  Executive                                    
  Nicholas                                    
  Holland -   -   -   3,234,725.87   4,779,688.07   547,200.00   441,275.00   9,002,888.94   14,442,797.95  
  Paul Schmidt -   -   -   1,624,351.00   1,367,428.80   191,445.30   110,763.33   3,293,988.43   2,413,782.33  
Three most highly paid employees who are not Directors                  
  Michael                                    
  Fleischer -   -   -   1,985,445.96   2,572,850.28   322,240.02   -   4,880,536.26   6,898,626.65  
  Vishnu Pillay5 -   -   -   2,484,546.28   1,556,467.00   422,778.48   92,545.00   4,556,336.76   6,624,615.75  
  Tommy                                    
  McKeith -   -   -   1,964,153.48   1,242,922.50   83,645.19   -   3,290,721.17   5,985,266.62  
  Non-executive                                    
  K Ansah 137,500.02   95,000.04   76,248.00   -   -   -   -   308,748.06   651,800.00  
  CA Carolus 137,500.02   47,500.02   -   -   -   -   -   185,000.04   379,600.00  
  R Danino 137,500.02   47,500.02   37,098.00   -   -   -   -   222,098.04   682,919.86  
  AR Hill 137,500.02   47,500.02   39,150.00   -   -   -   -   224,150.04   693,642.03  
  RP Menell 137,500.02   182,500.02   -   -   -   -   -   320,000.04   624,200.00  
  DN Murray 137,500.02   122,500.02   76,248.00   -   -   -   -   336,248.04   673,350.00  
  DMJ Ncube 137,500.02   107,500.02   -   -   -   -   -   245,000.04   498,050.00  
  M Ramphele3 308,004.94   96,137.01   -   -   -   -   -   404,141.95   -  
  RL                                    
  Pennant-Rea 137,500.02   107,500.02   76,248.00   -   -   -   -   321,248.04   716,650.00  
  CI von                                    
  Christierson 137,500.02   170,000.04   76,248.00   -   -   -   -   383,748.06   793,950.00  
  GM Wilson 137,500.02   192,500.04   -   -   -   -   -   330,000.06   695,273.87  
  AJ Wright4 446,957.48   -   -   -   -   -   -   446,957.48   1,376,015.00  
    2,129,962.62   1,216,137.27   381,240.00   11,293,222.59   11,519,356.65   1,567,308.99   644,583.33   28,751,811.45   44,150,540.06  

1 Bonuses are for F2010 performance, paid in the financial period July to December 2010
2 These amounts reflect the full directors’ emoluments in rand for comparative purposes.
The portion of executive directors’ emoluments payable in US dollars is paid in terms of agreements with the offshore subsidiaries for work done by directors offshore for offshore companies. The total US dollar amounts paid for July to December 2010 were as follows:
NJ Holland US$322,992.00 and P Schmidt US$62,763.72
3 Appointed 1 July 2010
4 Retired 2 November 2010
5 Resigned 31 December 2010

Remuneration policy

The company’s remuneration policy is determined by the Remuneration Committee of the Board. The policy has been aligned to and now complies with the guidelines of the King III Report on Corporate Governance. The remuneration policies and practices are reviewed regularly to align them with Gold Fields’ strategic objectives. The aim is to ensure that executives create long-term value for the company in a sustainable manner.

Gold Fields’ remuneration philosophy is aimed at attracting and retaining motivated, high-calibre executives aligned with the interests of shareholders. Such alignment is achieved through an appropriate mix of guaranteed and performance-based remuneration (variable pay), which provides for differentiation between high, average and low performers.

Gold Fields endeavours to reward its people fairly and consistently according to their role and individual contribution to the company. To achieve external equity and a competitive total remuneration position, Gold Fields surveys the relevant markets continuously. The benchmark for guaranteed remuneration is the market median. The company’s intent is to position remuneration, including short-term incentives, at the 75th percentile of the market for exceptional performance.

The pay mix of guaranteed and variable remuneration differs according to the level of the individual in the company. Generally, more senior employees’ remuneration will consist of a higher portion of variable pay as a percentage of their total package. Executives are paid guaranteed remuneration packages (GRP), which include all fixed elements of remuneration and 24 working days’ leave per annum, with the company having no contingent retirement or medical liabilities. A portion of the fixed remuneration of executives with international responsibilities is paid in US dollars. Increases are determined, usually effective January each year, by the Remuneration Committee informed by remuneration surveys, to which the company subscribes, and, where necessary, independent advice.

The Short Term incentive is an annual incentive bonus in terms of which the executive directors are able to earn bonuses of 50% of their GRPs for on-target performance. This incentive bonus could increase above 50% due to stretch target achievement. Incentive bonuses are based on targets approved in advance by the Remuneration Committee, comprising of a combination of safety, corporate, operational and personal objectives. In the case of the Chief Executive Officer 70% of the incentive is based on corporate objectives and the remaining 30% on personal performance. For the other executive positions, corporate and operational objectives (where applicable) comprise 35% to 70% of the incentive with personal objectives making up the balance. Based on the bonus accrued for F2010, the weighted average incentive bonus and retention bonus paid to members of the executive team (excluding executive directors, details of which are shown on the previous page) in August 2010 was 27.7% of annual GRP.

The corporate objectives for the year under review comprise four elements with an equal weighting of 25% each:

Safety achievements
Relative performance of the Gold Fields share price against its peers
Notional cash expenditure per ounce produced
Total gold production

Operational objectives are measured against the operational plans approved by the Board and cover safety, production, costs and progress in developing long-term ore reserves. Personal objectives are developed every year for each executive based on key performance areas and are approved at the beginning of the year by the Remuneration Committee. Performance against these objectives is reviewed by the Remuneration Committee at the end of the year.

The Long Term Incentive share plan consists of a number of share mechanisms that have been established as share incentive arrangements for senior employees of Gold Fields. Long Term Incentive awards are made annually to senior and key staff to incentivise their continued commitment to the future of Gold Fields. These awards, a form of variable pay, have been designed to:

Encourage senior and key employees to identify closely with the long-term objectives of Gold Fields
Align their interests with the continuing growth of the company and delivery of value to its shareholders
Allow participants of the schemes to participate in the future financial success of Gold Fields

The fees for non-executive directors are dealt with by a special non-executive directors Remuneration Committee comprising the CEO and independent external parties. No changes have been made since the AGM in November 2010 and the non-executive directors’ fees for C2011 remain unchanged apart from proposals to increase the fee for members of the Audit Committee.

Directors’ and officers’ disclosure of interests in contracts

During the period under review, no contracts were entered into in which directors and officers of the company had an interest and which significantly affected the business of the Group.

Related party information is disclosed on pages 297 to 298.

Financial affairs

Dividend policy

The company’s dividend policy is to declare an interim and final dividend in respect of each financial year, based on 50% of the earnings for the year before taking account of investment opportunities and after excluding impairments.

Interim dividend

Due to a change in the financial year end of the Company from June to December, there was no interim dividend declared for the six-month period under review. The Board declared a final dividend as detailed below.

Final dividend

On Wednesday, 16 February 2011, the company declared a final cash dividend of 70 SA cents per ordinary share (June 2010: 70 SA cents) to shareholders reflected in the register of the company on Friday, 11 March 2011. The dividend was declared in the currency of the Republic of South Africa. This dividend was paid on Monday, 14 March 2011.

The dividend resulted in a total dividend of 70 SA cents per share for the six-month period ended 31 December 2010, with the final dividend being accounted for in C2011.

Borrowing powers

In terms of the provisions of article 12.1 of the articles of association, the borrowing powers of the company are unlimited. As at 31 December 2010, the company’s borrowings totalled R9,438 million (US$1,398 million) compared to total borrowings of R8,487 million (US$1,121 million) in the year ended 30 June 2010.

Fixed assets

Capital expenditure

Capital expenditure for the six-month period amounted to R4,640 million compared to R7,742 million for F2010. Estimated capital expenditure for C2011 is R9 billion and is intended to be funded from internal sources and, to the extent necessary, borrowings.

Investments

Acquisitions

Investment purchases decreased from R97 million in F2010 to R66 million in the six-month period ended 31 December 2010.

The major investment for the six-month period ended 31 December 2010 were loans of R31 million advanced to GBF Underground Mining Company as well as purchase of a shareholding in Atacama Pacific Gold Corporation for R31 million.

Disposals

Proceeds from the disposal of investments declined from R2,831 million in F2010 to R3 million in the six-month period ended 31 December 2010.

There were no major investments sold during the six-month period ended 31 December 2010.

Significant announcements

5 August 2010
Gold Fields Limited announced that the Department of Mineral Resources (DMR) of South Africa has executed the new order mining right for its South Deep gold mine.

17 September 2010
Moody’s Investor Services (“Moody’s”) assigned Gold Fields Limited a first-time ‘Baa3’ senior unsecured issuer rating. This investment grade rating comes with a stable outlook.

1 October 2010
Gold Fields Limited opened a new employee housing project in the Glenharvie community near its Kloof Gold Mine as part of its R550 million, five year housing programme. The new Grootkloof complex, representing an investment of R25 million, will offer housing accommodation to approximately 100 Kloof employees and their families.

1 October 2010
Gold Fields Limited announced the pricing of an offering of 10-year, US$1 billion of Notes consisting of 4.875% Notes due in 2020. Subject to customary conditions, the offering is expected to close on October 7th, 2010.

8 October 2010
Gold Fields Limited announced that the 10-year, US$1 billion bond offer to international investors was successfully completed by the close of the previous day’s closing in New York, 7 October 2010.

2 November 2010
Gold Fields Limited held its AGM and a subsequent general meeting to vote on the black economic empowerment transactions. The BEE transactions were approved by an overwhelming majority of 99.8% of the 85% of shareholders who voted.

12 November 2010
Gold Fields Limited announced that it was ranked joint first in the JSE Top 100 Carbon Disclosure Leadership Index (CDLI), which rates companies listed on the Johannesburg Stock Exchange in South Africa on their disclosure of carbon emissions.

1 December 2010
Gold Fields Limited announced a three-year investment in the mining engineering faculty of the University of Johannesburg (UJ) as part of the R26 million, three-year sponsorship of the mining engineering faculties of UJ and the University of the Witwatersrand.

24 February 2011
Sello Matthews Moloko, Chair of Alexander Forbes Ltd, was appointed independant non-executive director of Gold Fields Limited.

18 March 2011
Gold Fields Corona (BVI) Limited (“Gold Fields”) a wholly owned subsidiary of Gold Fields Limited announced a voluntary public purchase offer in Peru to acquire the outstanding common voting shares and investment shares of Gold Fields La Cima S.A.A. (La Cima) it does not already own.

Gold Fields offered 4.20 Peruvian Nuevos Soles for each La Cima common or investment share. The price would be adjusted after the dividend registration date for any dividends distributed pursuant to a resolution by the La Cima shareholders meeting on 31 March 2011. The offer opened on 21 March 2011, at 9am, and was open for 20 subsequent trading days on the Lima Stock Exchange.

Going concern

The financial statements have been prepared using appropriate accounting policies, supported by reasonable judgements and estimates. The directors have reasonable belief that the company and the Group have adequate resources to continue as a going concern for the foreseeable future.

Dematerialisation of the shares

Shareholders are reminded that as a result of the clearing and settlement of trades through STRATE, the company’s share certificates are no longer good for delivery for trading. Dematerialisation of the company’s share certificates is a prerequisite when dealing in the company’s shares.

Property

The register of property and mineral rights is available for inspection at the registered office of the company during normal business hours.

Occupational healthcare sevices

Occupational healthcare services are made available by Gold Fields to employees in South Africa from its existing facilities. There is a risk that the cost of providing such services could increase in the future depending upon changes in the nature of underlying legislation and the profile of employees, such as a posthumous ruling by the Constitutional Court in February 2011 against AngloGold Ashanti in favour of a claimant, who suffered from silicosis. Increased costs, should they transpire, are currently indeterminate. The company is monitoring developments in this regard.

Environmental obligations

The company has made provision in the financial statements for environmental rehabilitation costs amounting to R2,271 million (June 2010: R2,296 million). Cash contributions of R95 million (June 2010: R60 million) have been paid during the period to a dedicated trust fund created to fund these provisions. The total amount invested at 31 December 2010 amounted to R1,138 million (June 2010: R1,013 million). The unfunded portion of the environmental rehabilitation costs will be funded as the obligations are incurred.

Special resolutions adopted by subsidiary companies

The following special resolutions were passed by subsidiary companies during the six-month period ended 31 December 2010 and related to capital structures, borrowing powers, the objects clause contained in the memorandum of association or other material matters that affect the understanding of the company and its subsidiaries:

Special resolution passed by the shareholders of Gold Fields Operations Limited (“GFO”) approving the acquisition by GFO of the GFO shares held by GFL Mining Services Limited (“GFLMS”) in terms of section 85 of the Companies Act, 61 of 1973, as amended, (“the Old Act”)
Special resolution passed by the sole shareholder of GFLMS approving and authorising the Board of Directors of GFLMS to implement, in terms of section 228 of the Old Act, the sale to GFO of the GFO shares (share buyback)
Special resolution passed by the sole shareholder of GFI Mining South Africa (Pty) Ltd (“GFIMSA”) approving and authorising the Board of Directors of GFIMSA to implement, in terms of section 228 of the Old Act, the sale of GFO and GFI Joint Venture Holdings (Pty) Ltd (“GFIJVH”) to Newshelf 899 (Pty) Ltd (“Newco”)
Special resolution passed by the sole shareholder of GFO sanctioning the terms of the provision of the financial assistance to be given by GFO to Invictus Gold (Pty) Ltd (“Invictus”) and the South Deep Community Trust (“the Community Trust”) for the purposes of the subscription by Invictus for the Invictus “B” shares and the subscription by the Community Trust for the Community Trust “B” shares in terms of section 38(2A) of the Old Act
Special resolution passed by the sole shareholder of GFIJVH sanctioning the terms of the provision of the financial assistance to be given by GFIJVH to Invictus Gold (Pty) Ltd (“Invictus”) and the South Deep Community Trust (“the Community Trust”) for the purposes of the subscription by Invictus for the Invictus “B” shares and the subscription by the Community Trust for the Community Trust “B” shares in terms of section 38(2A) of the Old Act
Special resolution passed by the shareholders of Gold Fields Limited sanctioning the terms of the provision of the financial assistance to be given by GFIMSA to Invictus and the Community Trust for the purposes of the subscription by Invictus for the Invictus Transformation shares and the subscription by the Community Trust of the Community Trust Transformation shares in terms of section 38(2A) of the Old Act
Special resolution passed by the shareholders of GFIMSA sanctioning the terms of the provision of the financial assistance to be given by GFIMSA to Invictus and the Community Trust for the purposes of the subscription by Invictus for the Invictus Transformation shares and the subscription by the Community Trust of the Community Trust Transformation shares in terms of section 38(2A) of the Old Act
Special resolution passed by the shareholders of Newco sanctioning the terms of the provision of the financial assistance in terms of section 38(2A) of the Old Act to be given by Newco (in a form of a guarantee) to FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”) in connection with the subscription by RMB for the Preference Shares (as such term is defined in the preference share subscription agreement entered into between RMB and Gold Fields Limited (Registration No. 1968/004880/06) (“GFL”) on or about 20 December 2007 (“Preference Share Subscription Agreement”))

The following special resolutions by Newco:

- SPECIAL RESOLUTION NUMBER 1 - Sub-division of the authorised share capital of the Company from R1 000.00 (one thousand rand), divided into 1 000 (one thousand) ordinary par value shares of R1.00 (one rand) each into 100 000 (one hundred thousand) ordinary par value shares of R0.01 (one cent) each and simultaneously converted into “A” ordinary par value shares of R0.01 (one cent) each.
- SPECIAL RESOLUTION NUMBER 2 – An increase of authorised share capital of the Company, being R1 000.00 (one thousand rand) divided into 100 000 (one hundred thousand) “A” ordinary par value shares of R0.01 (one cent) to R1 000 000.00 (one million rand) by the creation of –
  (a) 89 900 000 (eighty nine million nine hundred thousand) “A” ordinary shares having a par value of R0.01 (one cent) each, having the rights, privileges and conditions as set out in the Company’s New Articles of Association (see special resolution number 3 below); and
  (b) 10 000 000 (ten million) “B” ordinary shares having a par value of R0.01 (one cent) each, having the rights, privileges and conditions as set out in the Company’s New Articles of Association (see special resolution number 3 below).
  The authorised share capital clause in the Newco’s Memorandum of Association is amended as follows -
  - 90 000 000 (ninety million) “A” ordinary shares having a par value of R0.01 (one cent) each; and
  - 10 000 000 (ten million) “B” ordinary shares having a par value of R0.01 (one cent) each.
- SPECIAL RESOLUTION NUMBER 3 – Abrogation and replacement of the existing Articles of Association of Newco.

Litigation

On August 21, 2008, Gold Fields Operations Limited (formerly known as Western Areas Limited) a subsidiary of Gold Fields Limited (“WAL”), received a summons from Randgold and Exploration Company Limited (“R&E”), and African Strategic Investment (Holdings) Limited. The summons claims that during the period that WAL was under the control of Brett Kebble, Roger Kebble and others, WAL assisted in the unlawful disposal of shares owned by R&E in Randgold Resources Limited (“Resources”) and Afrikander Lease Limited, now known as Uranium One. WAL’s assessment remains that it has sustainable defenses to these claims and, accordingly, WAL’s attorneys have been instructed to vigorously defend the claims. The claims have been computed in various ways. The highest claims have been computed on the basis of the highest prices of Resources and Uranium One between the dates of the alleged unlawful acts and March 2008 (approximately R11 billion). The alternative claims have been computed on the basis of the actual amounts allegedly received by WAL to fund its operations (approximately R519 million). The claims lie only against WAL, which holds a 50% stake in the South Deep Mine. This alleged liability is historic and relates to a period of time prior to Gold Fields purchasing the company. The plaintiffs have failed, to date, to prosecute their claims and the action remains in abeyance. Other than the summons described above, Gold Fields is not a party to any material legal or arbitration proceedings, nor is any of its property the subject of pending material legal proceedings.

Black economic empowerment

On 5 August 2010 Gold Fields announced a series of empowerment transactions to meet its 2014 Black Economic Empowerment (“BEE”) equity ownership requirements. The BEE deal comprised three transactions of which all were successfully completed before the end of 2010 as envisaged by the Company:

Transaction 1

An Employee Share Option Scheme (ESOP) in respect of an effective 10.75% stake in GFIMSA (the holding company which controls Gold Fields’ South African assets) was successfully established, and is housed and administered through the Thusano Share Trust. The holding in GFIMSA is equivalent to about 13.5 million unencumbered Gold Fields Limited shares with full voting rights, which were issued to and are held by the trust at par value of R0.50 which represents a 99.5% discount to the 30 days VWAP price at 30 July 2010. This represents approximately 1.91% of the current Gold Fields shares in issue.

Transaction 2

The issue to a broad-based BEE consortium as described below (BEECO) of 616,352 Gold Fields Limited shares at par value of R0.50 which represents a 99.5% discount to the 30 days VWAP price at 30 July 2010. This represents about 0.08% of the current Gold Fields shares in issue. These shares will carry no restrictions.

Transaction 3

BEECO has also subscribed for a 10% holding with full voting rights directly in South Deep with a phased in participation over 20 years. Transaction 3 is below the JSE transaction threshold of 5% and is not with related parties as defined as per the JSE Limited Listings Requirements and is therefore included for information purposes only.

These deals are central to the company’s objective to make every current employee at the South African operations an owner, while at the same time expanding opportunities for historically disadvantaged persons to benefit from the exploitation of the country’s mineral resources by promoting broad-based ownership, employment, and the advancement of social and economic welfare generally.

Details of the ESOP scheme:

About 47,000 GFIMSA employees in the Paterson Grade A to C categories have been granted approximately 13.5 million unencumbered new Gold Fields Limited shares through the Thusano Share Trust.
About 12.6 million of the shares were allocated to HDSA employees, an effective 10% stake in GFIMSA.
The approximate 13.5 million Gold Fields Limited shares in the ESOP scheme are held by the Gold Fields Thusano Share Trust for 15 years.
The Thusano Share Trust has 14 trustees comprising ten trade union representatives, two Gold Fields trustees and two independent trustees, of whom one will be the Chair.
The Thusano Share Trust will exercise full voting rights on behalf of the employees.
The share allocation to employees was based on an employee’s length of service with Gold Fields, ranging from 100 shares for one year service to 480 shares for 20 years service.
The shares were allocated free of charge to the employees (the total consideration for Gold Fields shares was funded through a donation from GFIMSA)5 but have to be held for 15 years. The employees will receive dividend payments during those 15 years. Based on historical dividend yields the dividend payments will total R20 million a year.
  Details of the BEE Consortium (BEECO)

The newly formed BEECO will comprise:

- A Broad-Based Education Trust, to facilitate and promote education, youth and skills development for the mining industry. The majority of the Trustees will be independent and the Trust will hold a 54% beneficial interest in BEECO.
- A selected number of black business and community leaders, who will not be related parties as defined by the JSE Listings Requirements and will hold a combined 36% beneficial interest in BEECO.
- A Broad-Based Community Trust. The majority of the Trustees will be independent and the Trust will hold a 10% beneficial interest in BEECO.

The acquisition of the BEECO’s 10% stake in South Deep will be facilitated through a unique vendor financed phased participation scheme that will see the shareholding acquired at no cost to the BEECO.

The BEECO will hold 10% of South Deep in the form of B-class Shares with full ownership and voting rights. As holders of the B-class Shares the BEECO will be entitled to a cumulative preferential dividend of R20 million per annum for the first 10 years, R13.3 million per annum for the next five years and R6.7 million for the next five years (R2.00 per B-class Share) payable out of profits of South Deep. After 20 years the preferential dividend ceases.

The B-class Shares’ right to participate in other distributions over and above the preferred dividend will initially be suspended. The suspension will be lifted on a phased-in basis, resulting in the B-class Shares having the same rights as the A-class Shares, as follows:

After 10 years, in respect of one-third of the B-class Shares;
After 15 years, in respect of another one-third of the B-class Shares; and
After 20 years, in respect of the remaining one-third of the B-class Shares.

The BEECO must retain ownership of South Deep for 30 years which is the term of the new-order mining right granted to South Deep.

Financial year end

At a meeting held on Wednesday, 4 August 2010 the Board resolved to change the financial year-end of the company and its subsidiaries from June to December to align the financial reporting period to its peers in the mining industry.

Administration

The office of Company Secretary of Gold Fields Limited was held by Cain Farrel for the period under review.

Computershare Investor Services (Pty) Limited is the company’s South African transfer secretaries and Capita Registrars is the United Kingdom registrars of the company.

Auditors

It has been recommended that KPMG will continue in office in accordance with section 270(2) of the Companies Act, or in terms of section 90(1) of the Companies Act, whichever is applicable.

Subsidiary companies

Details of major subsidiary companies in which the company has a direct or indirect interest are set out on pages 310 and 311.