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Notes to the financial statements
continued
for the year ended 30 September 2015
158
Tiger Brands Limited integrated annual report
2015
23 Share-based payment plans
continued
23.3 Black Managers Trust II and Brimstone participation rights schemes (equity settled)
Brimstone
Brimstone is required to hold its shares via Brim Tiger SPV Proprietary Limited (Previously, Business Venture Investments
No 1323 Proprietary Limited) (Brimstone SPV). Brimstone and the Brimstone SPV may not sell or encumber such
shares until 31 December 2017 (the end date). The IFRS 2 charge of R61,9 million relating to Brimstone has been
expensed upfront.
At the end date, Tiger Brands will be entitled to repurchase a certain number of shares from Brimstone at the subscription
price of R7,40. The number of shares will be calculated in terms of a repurchase formula, whose inputs are:
❍❍
the total discounted value of the shares (being an amount equal to R148,07 per share) less the initial equity contribution
by Brimstone, increased over the transaction term by a hurdle rate (being 85% of the prevailing prime rate)
❍❍
an amount equal to 85% of the distributions declared by Tiger Brands but not received by Brimstone SPV as a result
of the condition attaching to the issue of the shares increased over the transaction term by the hurdle rate
❍❍
the market value of a Tiger Brands ordinary share at the end date
❍❍
the subscription price of R7,40 per share.
Black Managers Trust II
Originally allocations of vested rights to these shares were made to a total number of 484 black managers and are
non-transferable.
The effective dates of these allocations were 31 January 2010 and 31 July 2010.
With effect from 31 December 2017, the black managers may elect to take delivery of the full benefit of a portion
of the shares allocated to them in accordance with their vested rights (after Tiger Brands has exercised its right to
repurchase a certain number of the shares from the Black Managers Trust II at the subscription price of 10 cents
per share).
The number of shares to be repurchased by Tiger Brands will be calculated in terms of a repurchase formula, the inputs of
which are similar to those as disclosed under the Brimstone heading above, other than for the fact that 90% of any
distributions declared by Tiger Brands are not received by the Black Managers Trust II (as opposed to 85% in the case of
Brimstone SPV) and the subscription price is 10 cents per share (as opposed to R7,40 in the case of the Brimstone SPV).
Upon termination of the trust on 31 December 2018, the black managers shall take delivery of all benefits due to them,
failing which these will be forfeited, and the Trustees shall transfer those benefits and any unallocated Tiger Brands
ordinary shares, or the net proceeds thereof, to the black managers who are beneficiaries of the Black Managers Trust II
at that time.
In calculating the IFRS 2 charge, the following input parameters were utilised to determine the fair value of the rights
granted to the beneficiaries of the Black Managers Trust II in terms of the BEE Phase II transaction:
❍❍
The allocation date
❍❍
The maturity date of the rights
❍❍
The market price of the underlying equity as at the valuation date
❍❍
The strike price of the rights
❍❍
The expected volatility of the underlying equity over the life of the rights
❍❍
The expected dividend yield on the underlying equity over the life of the rights
❍❍
The risk-free interest rates over the life of the rights
❍❍
The prime interest rates over the life of the rights.
Volatility is measured as the annualised standard deviation of the daily price changes in the underlying share on the
assumption that the share price is log-normally distributed. Historical daily share price data was used to estimate the
expected volatility.
Participation rights were valued using the Monte-Carlo simulation approach with the “market variable” being the Tiger
Brands share price.
The path-dependency of the option results from the relationship between the Tiger Brands share price and the strike price
of the option, by virtue of the impact on the strike price of dividends paid by Tiger Brands during the life of the BEE
Phase II transaction.
The expense recognised for employee services received during the year to 30 September 2015 is R21,6 million
(2014: R19,9 million).