Notes to the Group annual financial statements | Note 5.1

During the year, 14 611 406 (2020: 17 636 695) forfeitable shares were granted to Executive Directors and qualifying employees (participant). The participant will forfeit the forfeitable shares if he/she ceases to be an employee of an employer company before the vesting date or if the specified performance conditions have not been met, unless otherwise specified by the rules or determined by the Board. In the event that the participant is not in the employ of the Group, or the performance conditions are not met, the shares allocated to the participant will be forfeited and will either be sold on the open market by the escrow agent and the proceeds will be returned to the participating employer, or may be retained by the Group for future awards.

Dividends declared in respect of these forfeitable shares are held in escrow until such time as the performance conditions are met and the shares have vested. Shares forfeited during the vesting period will forfeit any dividends pertaining to such shares. No dividend was declared on 26 August 2020. (No dividends were declared in the prior year.)

The performance condition of Executive Directors/senior managers respectively for the tenth award which vested on 31 August 2020 were as follows:

• 33.33%/40% for retention (three years from date of award); and
• 66.67%/60% financial (33.34%/30% for growth in core headline earnings per share and 33.33%/30% based on shareholder returns).

The 33.34%/30% for growth in core headline earnings per share is based on the following achievements:

• if growth is 5% above CPI compounded annually over three years, then 20% of the 33.34%/30% will vest;
• if growth is 10% above CPI compounded annually over three years, then an additional 50% (i.e. a total of 70%) of the 33.34%/30% would vest. If growth is between 5% and 10% above CPI over the three years, then the additional 50% will be reduced on a pro rata basis; and
• if growth is 25% above CPI compounded annually over three years, then a further 30% (i.e. a total of 100%) of the 33.34%/30% will vest. If growth is between 10% and 25% above CPI over the three years, then the additional 30% will be reduced on a pro rata basis.

The 33.33%/30% for shareholder return is based on a 10% compounded growth in the share price over the three-year vesting period, measured with reference to the weighted average price per share during the month of the commencement of the allocation plus dividends over the three-year period against the weighted average share price for the month during which the vesting takes place.

The performance criteria for senior managers will be measured at subsidiary level.

The performance condition for Executive Directors/senior managers respectively for the eleventh award grant vesting on 31 August 2021 are as follows:

• 33.33%/40% for retention (three years from date of award); and
• 66.67%/60% financial (33.34%/30% for growth in core headline earnings per share and 33.33%/30% based on shareholder returns).

The 33.34%/30% for growth in core headline earnings per share is based on the following achievements:

• if growth is 5% above CPI compounded annually over three years, then 20% of the 33.34%/30% will vest;
• if growth is 10% above CPI compounded annually over three years, then an additional 50% (i.e. a total of 70%) of the 33.34%/30% would vest. If growth is between 5% and 10% above CPI over the three years, then the additional 50% will be reduced on a pro rata basis; and
• if growth is 25% above CPI compounded annually over three years, then a further 30% (i.e. a total of 100%) of the 33.34%/30% will vest. If growth is between 10% and 25% above CPI over the three years, then the additional 30% will be reduced on a pro rata basis.

The 33.33%/30% for shareholder return is based on a 10% compounded growth in the share price over the three-year vesting period, measured with reference to the weighted average price per share during the month of the commencement of the allocation plus dividends over the three-year period against the weighted average share price for the month during which the vesting takes place.

The performance criteria for senior managers will be measured at subsidiary level.

The performance conditions for the twelfth and thirteenth award grant vesting on 31 August 2022 and 31 August 2023 respectively are as follows:

Critical accounting estimates and assumptions

In determining the number of forfeitable shares that will vest due to performance conditions being met, management assesses the attrition rates of staff based on the grades of staff that have been granted awards as well as the historic staff turnover.

Movements in the number of forfeitable shares outstanding during the year are as follows:

Refer to note 5.2 for the expense recognised in the income statement relating to the equity compensation benefits.

The fair value of the shares is based on the open market closing price at grant date.

The total number of forfeitable shares issued to Executive Directors during the period is 3 847 014 (2020: 4 827 626).

The share-based payment expense in relation to these Executive Directors is R6.9 million (2020: -R0.5 million). Refer to note 5.3 for details of awards per Director.