Notes to the consolidated financial statements
For the year ended 31 December

Note 55
 
 
    Group  
      2009
Rm		     2008
Rm		  

55.

Share-based payments

            
  During the year, R123 million (2008: R94 million) and R100 million (2008: R49 million) were charged to the statement of comprehensive income in respect of equity-settled and cash-settled share-based payment transactions, respectively.            
  Staff costs            
  The statement of comprehensive income charge for share-based payments is as follows (refer to note 39):            
  Equity-settled arrangements:            
  Absa Group Limited Executive Share Award Scheme   78     6  
  Absa Group Limited Performance Share Plan   19     41  
  Absa Group Limited Share Incentive Trust   26     47  
  Cash-settled arrangements:            
  Absa Group Limited Phantom Executive Share Award Scheme   40     4  
  Absa Group Limited Phantom Joiners Share Award Plan   51     43  
  Absa Group Limited Phantom Performance Share Plan   9     2  
      223     143  
  Total carrying amount of liabilities for cash-settled arrangements (refer to note 20)   143     316  
  The intrinsic value of the liability reflects the difference between the fair value of the options vested and the option exercise price and amounts to R5 million (2008: Rnil).
55.1 Absa Group Limited Share Incentive Trust (Share Incentive Trust)
In terms of the rules of the Share Incentive Trust, the maximum number of shares of the Group that may be issued or transferred and/or in respect of which options may be granted to the participants, shall be limited to shares representing 10% of the total number of issued shares from time to time. This scheme is an equity-settled share-based payment arrangement and options are allocated to employees according to the normal human resources talent management processes. The options issued up to August 2005 (issue 192) had no performance criteria linked to them and vested in equal tranches after three, four and five years respectively. No dividends accrue to the option holder over the vesting period. The options expire after a period of 10 years from the issuing date. Options issued since August 2005 (issue 193) have performance criteria associated with them, which require headline earnings per share to exceed an agreed benchmark over a three-year period from the grant date for the options to vest. Participants need to be in the employment of the Group at the vesting date in order to be entitled to the options.

The number and weighted average exercise prices of share options are as follows:
      Group  
      2009  
      Number 
of 
options 
'000 		 Weighted 
exercise 
price 
R 		  
  Outstanding at the beginning of the year   9 967  74,52   
  Exercised during the year   (3 569) 64,30   
  Forfeited during the year   (100) 88,15   
  Outstanding at the end of the year   6 298  79,09   
  Of which are exercisable   5 016  71,44   
 
      2008  
      Number 
of 
options 
'000 		 Weighted 
exercise 
price 
R 		  
  Outstanding at the beginning of the year   13 618  67,90   
  Exercised during the year   (3 252) 51,16   
  Forfeited during the year   (399) 75,20   
  Outstanding at the end of the year   9 967  74,52   
  Of which are exercisable   5 944  58,61   
  Options exercised during the year resulted in 3 568 819 (2008: 3 252 141) shares being allocated at an average exercise price of R64,30 (2008: R51,16) each. The related weighted average share price at the time of exercise was R115,73 (2008: R102,87). Share options outstanding at the end of the year in terms of the Share Incentive Trust have the following weighted average remaining contractual lives and exercise prices:

        Group    
        2009    
      Average
option
exercise
price
 Weighted
average
contractual
remaining life
 Weighted
average
fair
value
 Number of
options
outstanding		  
  Exercise price ranges (R)   R Years R    
  26,53 – 27,40   26,66 0,51 10,13 144 606  
  28,73 – 37,43   37,37 1,46 14,10 392 314  
  25,16 – 35,97   33,40 2,44 11,58 538 889  
  31,99 – 35,01   35,01 3,43 12,13 434 905  
  44,36 – 68,93   49,45 4,47 26,03 1 671 602  
  72,36 – 94,63   90,73 5,63 29,38 2 385 341  
  100,30 – 113,75   107,59 6,47 38,72 730 834  
 
        2008    
  Exercise price ranges (R)   Average
option
exercise
price
 Weighted
average
contractual
remaining life
 Weighted 
average 
fair value1
 Number of
options
outstanding		  
      R Years R     
  27,68   27,68 0,78 n/a  193 908  
  26,53 – 27,40   26,58 1,47 10,14  192 635  
  28,73 – 37,43   37,35 2,46 14,09  544 909  
  25,16 – 35,97   33,37 3,45 11,61  905 682  
  31,99 – 35,01   34,99 4,42 12,39  931 029  
  44,36 – 68,93   49,41 5,46 22,89  3 095 587  
  72,36 – 94,63   90,68 6,62 29,16  3 336 224  
  100,30 – 113,75   107,65 7,46 39,40  767 500  
  Note
  1There was no requirement under IFRS to value the options prior to 31 March 2005.

The following shares and options are available for allocation:
      Group  
      2009  
      Percentage 
of total 
issued shares 		 Number 
of shares 
'000 		  
  Maximum shares and options available   10,0  71 821   
  Shares and options subject to the trust   (0,9) (6 298)  
  Balance of shares and options available   9,1  65 523   
 
      2008  
      Percentage 
of total 
issued shares 		 Number 
of shares 
'000 		  
  Maximum shares and options available   10,0  68 028   
  Shares and options subject to the trust   (1,5) (9 967)  
  Balance of shares and options available   8,5  58 061   
 
55.2 Batho Bonke Capital (Proprietary) Limited
The Group entered into a black economic empowerment (BEE) transaction with Batho Bonke Capital (Proprietary) Limited in July 2004. The shares issued in terms of the transaction vested immediately. Due to the shares issued vesting immediately and also as a result of the issue being before 1 January 2005, the provisions of IFRS 2 Share-based payments were not applicable. In the current period 49,9% of the options were repurchased from Batho Bonke (Proprietary) Limited at a discount to their fair value. Batho Bonke utilised the proceeds to exercise 11 970 536 options. The Group provided bridging finance for the remaining 24 678 764 options. The life of these options was effectively extended for three months, effective 1 June 2009. The modification did not result in an increase in the fair value of these options and therefore, in terms of the provisions of IFRS 2, no cost was recognised in the statement of comprehensive income in the current period.
The bridging finance was redeemed on 1 September 2009 and Batho Bonke Capital (Proprietary) Limited exercised the balance of the options outstanding.



The number and weighted average exercise price of share options are as follows:

          Group  
    Weighted
average		     Number of options  
    exercise price
R		     2009 
'000 		     2008
’000		  
  Outstanding at the beginning of the year 48 – 69     73 152      73 152  
  Exercised during the year 68,30     (36 649)     —  
  Repurchased during the year —     (36 503)     —  
  Outstanding at the end of the year 48 – 69     —      73 152  
  Of which are exercisable 48 – 69     —      73 152  
 
55.3 Absa Group Limited Employee Share Ownership Administrative Trust
As of the implementation date (1 July 2004), all employees of South African wholly owned subsidiaries (excluding executive directors of Absa Group Limited and Absa Bank Limited), were eligible to participate in this one-off equity-settled share-based payment scheme. Each employee who elected to participate was issued and allotted 200 compulsory redeemable cumulative option-holding preference shares against a receipt of the R400,00 subscription price. A maximum of 7 315 200 preference shares were available for allocation to the trust.

On 1 July 2004, 6 085 200 preference shares were issued. The preference shares receive a dividend calculated on the par value of the preference shares at a rate of 72% of the prime overdraft rate. These dividends are compounded and paid semi-annually in arrear on 30 September and 31 March each year. The Group will redeem the preference shares on exercise of the options by the employee or on forfeiture of the options on the final option exercise date. Options vest after three years from the date of issue and are forfeited after five years from the date of issue. Options can be exercised on 1 March, 1 June, 1 September or 1 December each year. Exercise may occur in lots of 100 only and on payment of the option strike price, which will vary between R48,00 and R69,00 dependent on the 30-day volume weighted trading price on the JSE.

The number and weighted average exercise prices of share options are as follows:
 
          Group  
    Weighted
average		     Number of options  
    exercise price
R		     2009 
'000 		     2008 
’000 		  
  Outstanding at the beginning of the year 48 – 69     559      946   
  Exercised during the year 67,23     (539)     (368)  
  Forfeited during the year 48 – 69     (20)     (19)  
  Outstanding at the end of the year 48 – 69     —      559   
  Of which are exercisable 48 – 69     —      559   
 

Options exercised during the year resulted in 539 200 (2008: 367 600) shares being allocated at an average exercise price of R67,23 (2008: R66,87) each. The related weighted average share price at the time of exercise was R98,99 (2008: R102,94).

55.4 Absa Group Limited Phantom Performance Share Plan (Phantom PSP)
The Phantom PSP is a cash-settled plan and payments made to participants in respect of their awards are in the form of cash. The Phantom PSP shares (and any associated notional dividend shares) are awarded at no cost to the participants. The amount that is ultimately paid to the participants is equal to the market value of a number of ordinary shares, as determined after a three-year vesting period. The vesting of the Phantom PSP awards will be subject to non-market performance conditions which will be measured over a three-year period, starting on the first day of the financial year in which the award is made. The awards will vest after three years to the extent that the performance conditions are satisfied. These awards are forfeited in total if the Group’s performance fails to meet the minimum performance criteria.

Options exercised during the year resulted in 539 200 (2008: 367 600) shares being allocated at an average exercise price of R67,23 (2008: R66,87) each. The related weighted average share price at the time of exercise was R98,99 (2008: R102,94).

      Group  
      Number of options  
      2009 
’000 		     2008 
’000 		  
  Outstanding at the beginning of the year   2 201      2 323   
  Exercised during the year   (982)     —   
  Forfeited during the year   (33)     (139)  
  Granted during the year   —      17   
  Outstanding at the end of the year   1 186      2 201   
 

The options outstanding at the statement of financial position date have no exercise price and a weighted average contractual life of 0,2 years (2008: 1,1 years).

As the terms and conditions of this share scheme dictate that options be exercised immediately on vesting, at any given time there are no options which have vested but have not yet been exercised.

Fair value assumptions of share options granted in the previous year
The fair value of the Phantom PSP awards at grant date is based on the share price at grant date. The Group multiplies the initial fair value by a factor as determined by the rules of the scheme to reflect expectations for the number of shares that will vest based on the performance conditions. At each reporting date the Group adjusts the liability to reflect differences:

  • between the share price at grant date and the share price at valuation date;
  • in expectation of the number of shares that will vest subject to the performance of the Group; and
  • between actual and expected forfeited shares.
55.5 Absa Group Limited Executive Share Award Scheme (ESAS)
The ESAS is an equity-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-cost options, based on the allocation price of ordinary shares. Such an initial allocation is held in trust or in the name of the participant. If the participant is in the employ of the Group after the three-year vesting period, the participant will receive 20% matched options. If the bonus award remains in the ESAS for another two years, the participant receives another 10% matched options. Dividends, in the form of additional shares, are paid to participants on the ordinary shares, awarded on exercise of the options, as if the shares were held from inception. The number of dividend shares awarded is therefore calculated on the initial share allocation and on the 20% and/or 10% matched shares, over the three- or five-year period. Employees that received a performance bonus in excess of a predetermined amount were compelled to place a set percentage of their bonus award into the ESAS. Employees also had the option of utilising more of their bonus award for voluntary ESAS options.

The following number of initial options allocated in terms of the scheme are eligible for the 20% and/or 10% matched options:
      Group  
      Number of options  
      2009 
’000 		     2008 
’000 		  
  Outstanding at the beginning of the year   1 015      37   
  Forfeited during the year   (155)     (41)  
  Granted during the year   1 324      1 019   
  Outstanding at the end of the year   2 184      1 015   
 

The options outstanding at the statement of financial position date have no exercise price and a weighted average contractual life of 3,8 years (2008: 3,1 years). None of these options were exercisable at the statement of financial position date.

Fair value assumptions of share options granted during the current and previous year
The fair value of the ESAS awards at grant date is based on the share price at grant date. The Group considers adjustments to reflect expectations for options that might be forfeited before the shares vest.

For purposes of determining the expected life and number of options to vest, historical exercise and forfeiture patterns were used.

55.6 Absa Group Limited Phantom Joiners Share Award Plan (JSAP)
The JSAP is a cash-settled share-based payment arrangement that enables the Group to attract and motivate new employees by buying out the ‘in the money’ portion of a participant’s shares or options under their previous employers’ share scheme by offering the employees Absa Group Limited phantom shares. There is no consideration payable for the grant of an award and the vesting of the award is not subject to performance conditions. Dividends accrue to the participant over the vesting period which can be over two, three, five or six years.
      Group  
      Number of options  
      2009 
’000 		     2008 
’000 		  
  Outstanding at the beginning of the year   954     312   
  Exercised during the year   (246)     (127)  
  Forfeited during the year   (90)     (19)  
  Granted during the year   305      788   
  Outstanding at the end of the year   923      954   
 

The options outstanding at the statement of financial position date have no exercise price and a weighted average contractual life of 2,5 years (2008: 2,9 years).

As the terms and conditions of this share scheme dictate that options be exercised immediately on vesting, at any given time there are no options which have vested but have not yet been exercised.

Fair value assumptions of share options granted during the current and previous year
The fair value of the JSAP awards at grant date is based on the share price at grant date. The Group considers adjustments to reflect expectations for options that might be forfeited before the shares vest. At each reporting date the Group adjusts the liability to reflect differences:

  • between the share price at grant date and the share price at valuation date; and
  • between actual and expected forfeited shares.
55.7 Absa Group Limited Phantom Executive Share Award Scheme (Phantom ESAS)
The Phantom ESAS is a cash-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-cost options, based on the allocation price of ordinary shares. If the participant is in the employ of the Group after the three-year vesting period, the participant will receive 20% matched phantom options. If the bonus award remains in the Phantom ESAS for another two years, the participant receives an additional 10% bonus phantom options. Dividend phantom shares are paid to participants on the ordinary phantom shares as if the shares were held from inception. The number of dividend phantom shares awarded is therefore calculated on the initial allocation and on the 20% and/or 10% bonus phantom shares, over the three- or five-year period. Employees that received a performance bonus in excess of a predetermined amount were compelled to place a set percentage of their bonus award into the Phantom ESAS. Employees also had the option of utilising more of their bonus award for voluntary ESAS options.

The following number of initial options allocated in terms of the scheme are eligible for the 20% and/or 10% matched options:
      Group  
      Number of options  
      2009 
’000 		     2008 
’000 		  
  Outstanding at the beginning of the year   554     456   
  Exercised during the year   (111)     —   
  Forfeited during the year   (13)     (26)  
  Granted during the year   25      124   
  Outstanding at the end of the year   455      554   
  Of which are exercisable   38      —   
 

The options outstanding have no exercise price and a weighted average contractual life of 2,1 years (2008: 3,0 years).

Fair value assumptions of share options granted during the current and previous year
The fair value of the Phantom ESAS awards at grant date is based on the share price at grant date. The Group considers adjustments to reflect expectations of options that might be forfeited before the shares vest. At each reporting date the Group adjusts the liability to reflect differences:

  • between the share price at grant date and the share price at valuation date; and
  • between actual and expected forfeited shares.
55.8 Absa Group Limited Performance Share Plan (PSP)
The PSP is an equity-settled share-based payment arrangement. Participants are awarded a number of nil-cost options. These options will be converted into Absa Group Limited shares after a three-year vesting period and on achieving performance conditions attached to the award. The vesting of the PSP awards will be subject to non-market and market-related performance conditions which will be measured over a three-year period, starting on the first day of the financial year in which the award is made. The awards will vest after three years to the extent that the performance conditions are satisfied. These awards are forfeited in total if the Group performance fails to meet the minimum performance criteria.
 
      Group  
      Number of options  
      2009 
’000 		     2008 
’000 		  
  Outstanding at the beginning of the year   2 008      —   
  Forfeited during the year   (180)     (126)  
  Granted during the year   1 589      2 134   
  Outstanding at the end of the year   3 417      2 008   
 

55.8

Absa Group Limited Performance Share Plan (PSP)

The options outstanding at the statement of financial position date have no exercise price and a weighted average contractual life of 1,8 years (2008: 2,2 years). None of these options were exercisable at the statement of financial position date. 

Fair value assumptions of share options granted during the current and previous year

The fair value of the PSP awards at grant date is based on the share price at grant date. The Group considers adjustments to reflect expectations for options that might be forfeited before the shares vest. For purposes of determining the expected life and number of options to vest, historical exercise and forfeiture patterns were used.