| 34. |
SHARE-BASED PAYMENTS |
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34.1 |
EQUITY-SETTLED |
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Prior to the unbundling of PPC from Barloworld, executive directors and senior executives were granted equity-settled share options in the ordinary share capital of Barloworld Limited. The salient features of this scheme are that one-third of each allocation becomes exercisable by the participant after three years have elapsed from the date of allocation. A maximum of two-thirds of the original allocation are exercisable after four years, and the full allocation after five years. At the unbundling date, holders of unexercised Barloworld options were entitled to options over PPC shares in the ratio of 1.8555 PPC shares to 1 Barloworld share, the same as the entitlement of ordinary Barloworld shareholders on the unbundling.
Adjustments were made to the strike prices of these options to ensure that option holders were in the same economic position as before the unbundling.
PPC re-imbursed Barloworld R30 million in full and final settlement of the equity-settled incentive scheme liability relating to the number of unexercised Barloworld share options held by PPC executive directors and senior executives. This payment was charged against equity compensation reserves. No new PPC shares were issued to meet the PPC options element from the unbundling.
The expense recognised in the current year amounted to R1 million (2006: R1 million; 2005: R3 million). |
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34.2 |
CASH-SETTLED |
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Executive directors and certain senior employees have been granted cash-settled share appreciation rights in terms of PPC’s Long-Term Incentive Plan. The scheme was implemented during the current year, in recognition of services rendered, to encourage long-term shareholder value creation, and as an incentive for current and prospective employees to benefit from growth in value of PPC in the medium and long term. On 8 August 2007, 3 540 000 share appreciation rights were granted by the remuneration committee at the prevailing PPC market value of R43 per share, and vests in thirds after the third, fourth and fifth anniversary of the grant date. Vesting of the rights granted to the directors and certain senior executives is subject to PPC HEPS growth performance conditions. All share appreciation rights will lapse if not exercised within 10 years from date of grant. |
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Share appreciation rights were priced using binomial option pricing, taking into account the following inputs: |
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Date of grant |
8 August 2007 |
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Grant price of share appreciation right (rand) |
43 |
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Expiry date |
8 August 2017 |
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Market price of PPC shares at grant date (rand) |
43 |
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Expected volatility of stock over remaining life of the option (%) |
28,4 |
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Dividend yield (%) |
3,8 |
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Risk free rate (%) |
8,2 |
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The carrying amount of the liability relating to cash-settled share appreciation rights at 30 September 2007 is R2 million (2006: Nil; 2005: Nil).
The options outstanding at the end of the year had an exercise price of R43 (2006: Not applicable; 2005: Not applicable).
The weighted average remaining contractual life for cash-settled options outstanding as at 30 September 2007 is 10 years (2006: Not applicable; 2005: Not applicable).
No share appreciation rights were forfeited during the year. |
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