SHARE-BASED PAYMENT PLANS
for the year ended 30 September 2021
The information noted below summarises all key assumptions, valuation inputs and key disclosures relating to the Tiger Brands share-based payment plans.
| 1 | GENERAL EMPLOYEE SHARE-OPTION PLAN Executives and managers of the company and its subsidiaries are offered a weighted combination of:
The scheme is regarded as an equity-settled share-option scheme. Share appreciation rights Allocations of share appreciation rights (SARS) were made to qualifying executive management and other senior managers. SARS vest in three equal tranches on the third, fourth and fifth anniversaries of the date of allocation. The vesting of each tranche is subject to the achievement of performance conditions. The vesting of allocations prior to December 2018 is subject to the company’s HEPS performance, measured against CPI and the growth in GDP (real HEPS growth). For allocations made in December 2018 and thereafter, vesting is subject to real HEPS growth (weighted at 50%) and the performance of the company’s ROIC against its WACC (weighted at 50%). Vested SARS must be exercised on or before the sixth anniversary of the date of allocation. The last allocation of SARS was made in June 2019. The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in share appreciation rights during the year.
Options were valued using a modified Black-Schöles model taking into account the dividend cover, expected exercise pattern and volatility of the Tiger Brands share price. The following inputs were used:
Volatilities are based on the historical volatility of the Tiger Brands share price matching the remaining life of each option. Performance shares Annual awards of performance vesting shares (PVS) are made to executive management, senior management and middle management. PVS vest on the third anniversary of the date of award. Vesting is subject to the performance of the company’s HEPS, measured against CPI and the growth in GDP (50% weighting) and the performance of the company’s ROIC against its WACC (50% weighting). The following table illustrates the number of, and movements in, performance shares during the year.
Options were valued using the Monte Carlo Simulation approach to estimate the price of the options that are subject to TSR market performance conditions using 50 000 simulations taking into account the dividend cover, expected exercise pattern and volatility of the Tiger Brands share price. The following inputs were used:
Volatilities are based on the historical volatility of the Tiger Brands share price matching the remaining life of each option. Restricted shares On an annual basis, subject to remuneration committee approval, senior management and key talent may receive a grant of restricted shares. On vesting, options may be settled in cash or shares on the third anniversary of the grant date. The following table illustrates the number of, and movements in, restricted shares during the year.
Options were valued using a modified Black-Schöles model taking into account the dividend cover, expected exercise pattern and volatility of the Tiger Brands share price. The following inputs were used:
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| 2 | BLACK MANAGERS PARTICIPATION RIGHT SCHEME (EQUITY SETTLED) In terms of the BEE transaction implemented on 17 October 2005, 4 381 831 Tiger Brands shares were acquired by the Tiger Brands Black Managers Trust. The allocation of vested rights entitles beneficiaries to receive Tiger Brands shares (after making capital contributions to the Black Managers Trust) at any time after the lock-in period. In respect of options allocated on or before 31 July 2010, the lock-in period ends on 31 December 2014. In respect of allocations made after 31 July 2010, the lock-in date will be the latter of 31 December 2014 or, in respect of one-third of the allocations, three years after the allocation, the next third, four years and the last third, five years after the allocation. These vested rights are non-transferable. After the lock-in date, the beneficiaries may exercise their vested rights, in which event the beneficiary may:
The expense recognised for employee services received during the year to 30 September 2021 is R6,3 million (2020: R13,8 million). The following table illustrates the number of, and movements in, share participation rights during the year.
Participation rights were valued using the Monte-Carlo simulation approach to estimate the average, optimal payoff of the participation rights using 10 000 permutations. The payoff of each random path was based on: the projected Tiger Brands share price, outstanding debt projections and optimal early exercise conditions. Volatility is measured as the annualised standard deviation of the daily price changes in the underlying share under the assumption that the share price is log normally distributed. Historical daily share price data was used to estimate the expected volatility. The following inputs were used:
The risk-free interest rate was obtained from constructed ZAR swap curves on the valuation dates using key inputs being South African money-market rates and swap rates as published by Bloomberg. |
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| 3 | BLACK MANAGERS TRUST II PARTICIPATION RIGHT SCHEME (EQUITY SETTLED) Black Managers Trust II Over the period of the Tiger Brands Black Managers Trust No II (BMT II) 2 814 149 Tiger Brands shares were allocated to qualifying black managers. The lock-in period for the scheme expired on 31 December 2017. Immediately following this date, Tiger Brands exercised its rights in terms of a repurchase option, and repurchased 1 389 685 shares from the BMT II at a subscription price of 10 cents per share. The remaining shares, 1 424 464, were distributed to the participating black managers, with 130 361 shares subject to a further retention period of three years which expired on 30 September 2020. No expense was recognised during the year ended 30 September 2021 (2020: R6,2 million). |
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