41.

Share-based payments

The Group has three share incentive schemes, the EOH Share Trust, the Mthombo Trust and the Share Ownership Plan. Inclusion in the schemes allows directors, executive management and employees to benefit from the EOH share price performance. For the share trusts, the participant needs to be in the employ of the Group in order to exercise vested options. The Mthombo Trust restricts participation to qualifying previously disadvantaged directors, executive management and employees.

Under the terms of the current schemes, up to 18 000 000 shares are reserved for share options. The share options are equity-settled.

The EOH Share Trust

The scheme is governed by a trust deed approved by shareholders and the JSE Limited. The option strike price is equal to the share price at date of the offer less 40% discount. The participant may exercise the option in respect of the shares granted in tranches from time to time as set out below. The share options will lapse 10 years after grant date.

25% after two years
25% after three years
25% after four years
25% after five years.

A reconciliation of the movement of all share options in the EOH Share Trust is detailed below:

  The EOH Share Trust  
  Number of options   Weighted average
strike price (cents)		  
  2019   2018   2019   2018  
Opening balance 8 425 861   7 171 180   59,04   66,48  
Granted during the year 1 000 000   1 769 400   21,08   28,51  
   to management –   1 769 400   –   28,51  
   to directors 1 000 000   –   21,08   –  
Forfeited during the year (1 571 825)   (419 648)   69,24   65,22  
Forfeited in exchange for shares in the Share Ownership Scheme (3 154 745)   –   66,31   –  
Exercised during the year (36 250)   (95 071)   112,58   27,37  
Options granted but shares not issued up to the end of the year 4 663 041   8 425 861   80,28   59,04  
Vesting of share options                
Number of options exercisable at year end 3 395 891   4 077 840   81,35   52,24  
Exercise date within one year 84 797   1 654 362          
Exercise date between two and five years 1 182 353   2 693 659          
  4 663 041   8 425 861          

The Mthombo Trust

The scheme is governed by a trust deed approved by shareholders and the JSE Limited. The option strike price is equal to the share price at date of the offer less 40% discount. The participant may exercise the option in respect of the shares granted in tranches from time to time as set out below. The share options will lapse eight years after grant date.

33,33% after three years
33,33% after four years
33,33% after five years.

A reconciliation of the movement of all share options in the Mthombo Trust is detailed below:

  The Mthombo Trust  
  Number of options   Weighted average
strike price (cents)		  
  2019   2018   2019   2018  
Opening balance 3 078 746   2 577 831   57,48   69,07  
Granted during the year –   864 000   –   29,49  
   to management –   784 000   –   28,51  
   to directors –   80 000   –   39,14  
Forfeited during the year (1 254 833)   (346 419)   59,57   74,40  
Forfeited in exchange for shares in the Share Ownership Scheme (1 078 728)   –   65,24   –  
Exercised during the year –   (16 666)   –   45,34  
Options granted but shares not issued up to the end of the year 745 185   3 078 746   57,71   57,48  
Vesting of share options                
Number of options exercisable at year end 637 184   1 048 684   56,64   44,57  
Exercise date within one year 36 500   576 273          
Exercise date between two and five years 71 501   1 453 789          
  745 185   3 078 746          

The Share Ownership Plan

EOH has reviewed its share option schemes and decided to adopt a new Share Ownership plan which is sustainable, relevant and ensures value in the hands of participants. The scheme awards participants with shares and is determined to be equity settled. Shares granted vest in tranches from time to time as set out below.

25% after two years
25% after three years
25% after four years
25% after five years.

A reconciliation of the movement of all shares in the Share Ownership Plan is detailed below:

  The Share Ownership Plan  
  Number
of shares		   Weighted
average
strike price
(cents)		  
  2019   2019  
Opening balance –   –  
Granted during the year* 6 828 225   34,83  
   to management 6 376 805   34,82  
   to directors 451 420   34,83  
Forfeited during the year (1 075 193)   34,83  
Exercised during the year –   –  
Shares not issued up to the end of the year 5 753 032   104,48  
Vesting of shares        
Exercise date between two and five years 5 753 032      
  5 753 032      

* Shares granted include transfers from the EOH Share Trust and the Mthombo Trust.

  The EOH Share Trust   The Mthombo Trust  
  2019   2018   2019   2018  
Basis of valuation                
Fair value was determined by using the binomial model. The inputs were as follows:                
Weighted average share price (Rand) 89,52   47,52   59,39   49,29  
Option strike price (Rand) 53,71   28,51   35,63   29,57  
Expected volatility (%) 23,87   33,10   25,10   38  
Expected dividend yield (%) 1,4   1,4   1,4   1,4  
Weighted average expected life (years) 3,7   3,7   4,1   4,1  
Weighted average fair value of options/shares granted (Rand) 21,08   24,24   –   26,68  
Expiry date from giant (years) 10   10   8   8  

The volatility of the share price at grant date was determined using the share trading history of EOH prior to grant date.

The after tax risk-free rate applied was the zero-swaps curve at the grant date of the option.

The Share Ownership Plan does not grant employees options, therefore a binomial option pricing model is not used.

The analysis of share options/shares granted to directors is detailed below:

  Outstanding
at 31 July
2018 or
date of
appointment		 Weighted 
average 
strike price 
(Rand)		 Forfeited Shares 
granted 
during the 
period 		   Weighted 
average strike 
price/share 
price 
(Rand)		 At
31 July
2019		  
Executive directors                
Stephen van Coller – –  – 1 000 000    21,08  1 000 000  
Currently exercisable – –  –     –  –  
Exercisable in one year – –  –     –  –  
Exercisable between two and five years – –  – 1 000 000    21,08  1 000 000  
Megan Pydigadu – –  – 62 021    32,98  62 021  
Currently exercisable – –  –     –  –  
Exercisable in one year – –  –     –  –  
Exercisable between two and five years – –  – 62 021    32,98* 62 021  
Executive directors that resigned during the year                
John King (resigned effective 30 November 2018) 232 500 74,39  (152 500) 189 451      269 451  
Currently exercisable 80 000 54,65  – –    54,65  80 000  
Exercisable in one year 61 250 74,43  (61 250) –    –  –  
Exercisable between two and five years 91 250 91,66  (91 250) 189 451#   34,83* 189 451  
Tebogo Maenetja (resigned 31 March 2019) 30 000 38,40  (85 987) 55 987    –  –  
Currently exercisable – –  – –    –  –  
Exercisable in one year – –  – –    –  –  
Exercisable between two and five years 30 000 38,40  (85 987) 55 987#   –  –  
Zunaid Mayet (resigned 12 July 2019) 396 667 62,95  (186 667) 143 961      353 961  
Currently exercisable 150 000 35,54  – –    40,88  210 000  
Exercisable in one year 60 000 54,23  – –    –  –  
Exercisable between two and five years 186 667 87,79  (186 667) 143 961#   34,83* 143 961  
Non-executive directors that resigned during the year                
Asher Bohbot (resigned 28 February 2019) 1 100 000 47,23  (312 500) –    33,25  787 500  
Currently exercisable 656 250 73,87  – –    33,25  787 500  
Exercisable in one year 175 000 69,43  (43 750) –    –  –  
Exercisable between two and five years 268 750 83,66  (268 750) –    –  –  
Pumeza Bam (resigned 12 July 2019) 52 500 74,03  (15 000) –    66,58  37 500  
Currently exercisable 22 500 63,68  –  –    66,58  37 500  
Exercisable in one year 15 000 70,93  – –    –  –  
Exercisable between two and five years 15 000 92,65  (15 000) –    –  –  

* Weighted average share price.
# Transfer of shares from the EOH Share Trust and the Mthombo Trust into the Share Ownership Plan.