for the year ended 30 September

Notes to the annual financial statements

 
      Group   Company
      2011  
Rm  
  2010  
Rm  
  2011  
Rm  
  2010  
Rm  
19.   Share capital and premium                  
  Authorised share capital                  
  235 000 000 ordinary shares of 10 cents each     23,5     23,5     23,5     23,5  
  350 000 5,5% cumulative preference shares of R2 each     0,7     0,7     0,7     0,7  
  31 057 729 redeemable preference shares of 1 cent each     0,3     0,3     0,3     0,3  
      24,5     24,5     24,5     24,5  
           
  Issued share capital     Number of  
shares  
2011  
  Number of  
shares  
2010  
  Ordinary shares of 10 cents each          
  At the beginning of the year     197 824 585     197 185 285  
  Shares issued during the year in terms of:          
  The Reunert 1985 Share Option Scheme     826 000     547 300  
  The Reunert 2006 Option Scheme     650 800     92 000  
  At the end of the year     199 301 385     197 824 585  
             
        Group   Company
    Notes     2011  
Rm  
  2010  
Rm  
  2011  
Rm  
  2010  
Rm  
  Ordinary shares of 10 cents each       19,8     19,8     19,8     19,8  
  350 000 5,5% cumulative preference shares of R2 each       0,7     0,7     0,7     0,7  
        20,5     20,5     20,5     20,5  
  Share premium                    
  At the beginning of the year       120,4     95,5     120,4     95,5  
  Arising on the issue of ordinary shares       59,4     24,9     59,4     24,9  
  At the end of the year       179,8     120,4     179,8     120,4  
  Total issued share capital and premium       200,3     140,9     200,3     140,9  
  Share-based payment reserves                    
  As a result of IFRS 2 – Share Based Payment                    
  At the beginning of the year       732,4     679,6     639,4     637,4  
  Share option reserve arising on the expensing of executive share options   2     21,2     16,5     0,3     2,0  
  Deferred tax on share-based payment expense       (2,6)    2,3     –     –  
  Reserve arising on a BEE transaction       –     34,0     –     –  
  At the end of the year       751,0     732,4     639,7     639,4  
  BEE shares                    
  Reunert shares bought back and held by Bargenel 18 500 000 (2010: 18 500 000)      (276,1)    (276,1)         
  Treasury shares                    
  Reunert shares bought back and held by a subsidiary 19 176 489 (2010: 2 123 372)      (1 253,6)    (125,7)         
       
      Company
      Number of  
shares  
2011  
  Number of  
shares  
2010  
  Unissued ordinary shares          
  Total shares reserved to meet the requirements of the Reunert 1985 Share Option Scheme and the Reunert 1988 Share Purchase Scheme     1 474 600     2 041 900  
  Total shares reserved to meet the requirements of the Reunert 2006 Option Scheme     750 000     500 000  
      2 224 600     2 541 900  
  Shares issued during the year     (1 476 800)    (639 300) 
  Number of shares available for the schemes at year end     747 800     1 902 600  
  The directors have general authority over these shares until the next annual general meeting.          
 

Executive share option schemes

Options to take up Reunert ordinary shares are granted to executives in terms of the Reunert 1985 Share Option Scheme and the Reunert 2006 Option Scheme.

The terms of both schemes allow the recipient of the options to exercise one third after three years and a further one third each in years four and five. Any options unexercised lapse after 10 years from the date of initial issue or the moment an option holder resigns from the group. Should the option price exceed the market price, option holders may decline to exercise their right to have Reunert shares issued to them.  
    Number  
of options  
unexercised  
at the  
beginning  
of the year  
(thousands) 
Options  
granted  
during  
the year  
(thousands) 
Options  
exercised  
during  
the year  
(thousands) 
Options  
relinquished/  
forfeited  
during  
the year  
(thousands) 
Number   
of options  
unexercised  
at the  
end  
of the year  
(thousands) 
Amount   
received  
for options  
exercised  
Rm  
  2011              
  Exercise price              
  R14,101   52   –   (52)  –   –   0,7  
  R15,801   54   –   (54)  –   –   0,8  
  R17,701   10   –   –   –   10   –  
  R15,991   138   –   (38)  –   100   0,6  
  R41,901   1 221   –   (682)  –   539   28,6  
  R71,302   53   –   (4)  (5)  44   0,3  
  R53,502   210   –   (25)  (25)  160   1,3  
  R39,302   3 606   –   (482)  (190)  2 934   18,9  
  R57,502   200   –   (100)  –   100   5,8  
  R59,062   200   –   –   –   200   –  
  R59,552     1 722   (40)  (33)  1 649   2,3  
  R56,002     190   –   –   190   –  
  R59,702     70   –   –   70   –  
  R60,502     70   –   –   70   –  
    5 744   2 052   (1 477)  (253)  6 066   59,3  
               
  2010              
  Exercise price              
  R14,101   52   –   –   –   52   –  
  R15,801   54   –   –   –   54   –  
  R17,701   20   –   (10)  –   10   0,2  
  R15,991   190   –   (52)  –   138   0,8  
  R41,901   1 726   –   (485)  (20)  1 221   20,3  
  R71,302   53   –   –   –   53   –  
  R53,502   230   –   –   (20)  210   –  
  R39,302   3 808   –   (92)  (110)  3 606   3,6  
  R57,502     200   –   –   200   –  
  R59,062     200   –   –   200   –  
    6 133   400   (639)  (150)  5 744   24,9  
  The weighted average share price, at the dates of exercise, for share options exercised during the year was R62,55 (2010: R57,52).  
 
1 Issued in terms of the Reunert 1985 Share Option Scheme.
2 Issued in terms of the Reunert 2006 Option Scheme.

  Estimated fair value of options granted after 7 November 2002:  
  Share option   Fair value  
per option  
R  
Total option  
value  
Rm  
Share options  
expensed in  
previous  
periods  
Rm  
Share option  
expense for  
the year  
Rm  
Share options  
to be expensed  
in future  
periods  
Rm  
  R15,99   4,7   8,9   8,9   –   –  
  R17,30   5,0   1,0   1,0   –   –  
  R41,90   11,1   28,2   28,2   –   –  
  R71,30   17,4   19,3   14,0   3,8   1,5  
  R53,50   14,6   17,6   12,0   3,9   1,7  
  R39,30   8,9   18,8   6,3   5,5   7,0  
  R57,50   14,79   3,0   0,3   1,7   1,0  
  R59,06   15,69   3,1   0,1   0,8   2,2  
  R59,55   13,18   22,7   –   4,9   17,8  
  R56,00   12,39   2,3   –   0,4   1,9  
  R59,70   13,61   1,0   –   0,1   0,9  
  R60,50   13,43   0,9   –   0,1   0,8  
      126,8   70,8   21,2   34,8  
  These fair values were calculated using a Binomial option pricing model.  
  The inputs into the model were as follows:  
  Option   Share price  
at issue  
R  
Exercise  
price  
R  
Expected  
volitility  
%  
Expected  
option life  
Years  
Expected  
dividend  
yield  
%  
Risk free  
interest rate  
%  
  R15,99   15,99   15,99   25,14   8   5,93   11,75  
  R17,30   17,30   17,30   25,29   8   5,93   10,32  
  R41,90   41,90   41,90   25,25   10   5,67   7,74  
  R71,30   71,30   71,30   22,69   10   4,37   9,70  
  R53,50   53,50   53,50   25,34   10   4,51   9,20  
  R39,30   39,30   39,30   32,09   10   7,45   BEASSA Zero Coupon Swap Curve  
between 6,87% to 8,62% for  
1 and 10 years respectively  
  R57,50   57,50   57,50   32,81   10   4,51   BEASSA Zero Coupon Swap Curve  
between 6,70% to 8,77% for  
1 and 10 years respectively  
  R59,06   59,06   59,06   32,81   10   4,25   BEASSA Zero Coupon Swap Curve  
between 6,44% to 8,09% for  
1 and 10 years respectively  
  R59,55   59,55   59,55   32,60   10   4,80   BEASSA Zero Coupon Swap Curve  
between 5,95% to 8,76% for  
1 and 10 years respectively  
  R56,00   56,00   56,00   32,60   10   5,10   BEASSA Zero Coupon Swap Curve  
between 6,06% to 8,97% for  
1 and 10 years respectively  
  R59,70   59,70   59,70   32,50   10   4,80   BEASSA Zero Coupon Swap Curve  
between 6,02% to 8,68% for 1  
and 10 years respectively  
  R60,50   60,50   60,50   32,50   10   4,80   BEASSA Zero Coupon Swap Curve  
between 5,91% to 8,55% for  
1 and 10 years respectively  
   
 

R15,99, R17,30 and R41,90 options  

  Expected volatility was determined by calculating the historical volatility of Reunert’s share price from 30 September 2002 to the issue date of each option. The share price movements prior to 30 September 2002 are considered to be “abnormal” in terms of being a reasonable reflection of the volatility going forward.

The model allowed for early exercises based on rational investor behaviour. A zero forfeiture rate has been used due to the strong performance of the Reunert share and a historic forfeiture rate of 0,9% per annum. This will only affect the timing of the share option expense as opposed to the total expense being recognised in the income statement.

 

R71,30 and R53,50 options  

  Expected volatility was determined by calculating the historical volatility of Reunert’s share price from 23 August 2006 to the issue date of each option. The share price movement from this date was considered to reflect a more normal pattern than the movements prior to that date.

The model allowed for early exercises based on rational investor behaviour. A 6% forfeiture rate has been used due to the performance of the Reunert share of late and a historic forfeiture rate of a similar amount.

 

R39,30 options  

  Expected volatility assumed is a five-year equally weighted volatility of the Reunert share price on the JSE and was estimated using data sourced from iNet.

The model allowed for early exercises based on rational investor behaviour. A 6% forfeiture rate has been used due to the performance of the Reunert share of late and a historic forfeiture rate of a similar amount.

The risk-free interest rate used the BEASSA zero coupon swap curve which ranges from 6,87% (NACC) for one year to 8,62% for 10 years.

3 872 000 options were issued at a strike price of R39,30 per share. 1 757 600 of these options were issued to employees who were also offered the R71,30 and R53,50 options issued in the previous financial year. The new options were granted to those who also received the options previously after the mutual consent between the company and option holder to render the R71,30’s and R53,50’s non-exercisable. This constitutes a modification to the original options in terms of IFRS 2. Under these circumstances, the fair value of the original options will continue to be expensed over the vesting period in terms of the original grant. The granting of the 2 115 000 options to employees who did not receive the R71,30 or R53,50 options amounts to a new issue and the value of this issue is expensed over the vesting period of this new issue.

 

R57,50 and R59,06 options  

  Expected volatility assumed is a five-year equally weighted volatility of the Reunert share price on the JSE and was estimated using data sourced from iNet.

The model allowed for early exercises based on rational investor behaviour. An 8% forfeiture rate has been used due to the performance of the Reunert share of late and a historic forfeiture rate of a similar amount.

The risk-free interest rate used the BEASSA zero coupon swap curve which ranges from 6,44% (NACC) for one year to 8,77% for 10 years as detailed above

 

R59,55; R56,00; R59,70 and R60,50 options  

  Expected volatility assumed is a five-year equally weighted volatility of the Reunert share price on the JSE and was estimated using data sourced from iNet.

The model allowed for early exercises based on rational investor behaviour. A 10% forfeiture rate has been used due to the performance of the Reunert share of late and a historic forfeiture rate of a similar amount.

The risk-free interest rate used the BEASSA zero coupon swap curve which ranges from 5,91% (NACC) for one year to 8,97% for 10 years as detailed above.