NOTES TO THE FINANCIAL STATEMENTS — NOTE 25

25. Employee remuneration
 

Equity-settled share-based employee remuneration

On 1 January 2014, the group implemented a long-term employee incentive scheme (the conditional share plan (CUP)), which consists of two components – performance shares and retention shares. Both the performance and the retention components of the scheme are settled in Hyprop shares.

Performance shares

In terms of the CUP, fully paid awards are made on an annual basis, comprising performance shares and retention shares. The split between performance shares and retention shares is 70%:30% for all participants.

The performance conditions for the shares allocated as performance shares are as follows:

  • Growth in distribution per share relative to the peer group (weighting 40%)
  • Share price performance relative to the peer group (weighting 40%)
  • Strategic component, which is determined by the remuneration committee in line with the prevailing circumstance and projects at the time of the award (weighting 20%).

Each of the performance conditions will be measured over a three-year performance period. Participants must be employed until the end of the vesting period to be eligible for the award.

Retention shares

Retention shares vest after five years, provided the participant is still employed by the group.

Reconciliation of shares allocated in terms of the CUP

   Number of 
performance 
shares 
   Number of 
retention 
shares
 
  
Unvested at 30 June 2015  214 617     91 981    
Granted  78 282     33 549    
Forfeited  (7 955)    (3 757)   
Vested  (1 356)    (234)   
Unvested at 30 June 2016  283 588     121 539    
Granted  86 961     36 063    
Forfeited  (3 368)    (405)   
Vested  (106 370)    (3 591)   
Unvested at 30 June 2017  260 811     153 606    

Unvested share allocations by tranche Performance
shares
  Retention
share
 
Tranche 1        
Grant date     1 January 2014  
Vesting period ends     31 December 2018  
Fair value of shares at grant date     R54,77  
Share price at grant date     R76,50  
The inputs used in the measurement of the fair value at grant date were as follows:        
Expected life     5 years  
Risk-free rate after taxation     5,8%  
Dividend yield (historic)     5,8%  
Tranche 1 of the performance shares vested during the current financial year at a fair value of R123,46 per share.        
Tranche 2        
Grant date 1 July 2014   1 July 2014  
Vesting period ends 30 June 2017   30 June 2019  
Fair value of shares at grant date R65,55   R58,12  
Share price at grant date R79,51   R79,51  
The inputs used in the measurement of the fair value at grant date were as follows:        
Expected life 3 years   5 years  
Risk-free rate after taxation 5,9%   5,9%  
Dividend yield (historic) 6,0%   6,0%  
Tranche 3        
Grant date 1 July 2015   1 July 2015  
Vesting period ends 30 June 2018   30 June 2020  
Fair value of shares at grant date R105,76   R96,68  
Share price at grant date R121,00   R121,00  
The inputs used in the measurement of the fair value at grant date were as follows:        
Expected life 3 years   5 years  
Risk-free rate after taxation 6,0%   6,0%  
Dividend yield (historic) 4,5%   4,5%  
Tranche 4        
Grant date 1 July 2016   1 July 2016  
Vesting period ends 30 June 2019   30 June 2021  
Fair value of shares at grant date R112,56   R102,32  
Share price at grant date R129,89   R129,89  
The inputs used in the measurement of the fair value at grant date were as follows:        
Expected life 3 years   5 years  
Risk-free rate after taxation 6,3%   6,3%  
Dividend yield (historic) 4,8%   4,8%  
Tranche 5        
Grant date 1 January 2017   1 January 2017  
Vesting period ends 31 December 2019   31 December 2021  
Fair value of shares at grant date R100,11   R90,07  
Share price at grant date R117,31   R117,31  
The inputs used in the measurement of the fair value at grant date were as follows:        
Expected life 3 years   5 years  
Risk-free rate after taxation 6,4%   6,4%  
Dividend yield (historic) 5,3%   5,3%  

The executive directors were allocated the following percentages of the total shares allocated:

   Pieter Prinsloo 
(CEO)
   Laurence Cohen 
(FD)
  
Tranche 1             
Retention shares  19%     10%    
Tranche 1 of the performance shares vested during the current financial year             
Tranche 2             
Performance shares  20%     11%    
Retention shares  20%     11%    
Tranche 3             
Performance shares  20%     11%    
Retention shares  20%     11%    
Tranche 4             
Performance shares  21%     11%    
Retention shares  21%     11%    
The charge to the statement of profit or loss and other comprehensive income for the year ended 30 June 2017 amounted to R12,7 million (2016: R9,9 million). As the above are equity-settled shared-based payments, the accounting treatment recognises the share-based payments in profit and loss on a straight-line basis over the vesting period, with a corresponding credit to equity.

NOTES TO THE FINANCIAL STATEMENTS — NOTE 25