Notes to the consolidated annual financial statements l Note 33

On 28 January 2010 the group introduced the Barloworld Forfeitable Share Plan (FSP).

The scheme allows executive directors and certain senior employees to earn a long-term incentive to assist with the retention and reward of selected employees.

Shares are granted to employees for no consideration. These shares participate in dividends and shareholder rights from grant date.

The vesting of the shares is subject to continued employment for a period of three years or the employee will forfeit the shares.

Shares issued to the executive directors are subject to performance conditions which will be measured over the three-year vesting period.

The performance conditions over the vesting period include a market condition based on total shareholder return and non- market conditions based on return on equity or return on net assets and headline earnings per share.

On resignation, the employee will forfeit any unvested shares. On death or retirement only a portion of the shares will vest, calculated based on the number of days worked over the total vesting period, subject to any performance condition being met.

The scheme is settled in shares and therefore the scheme is equity-settled. In jurisdictions where the delivery of shares is impractical, cash will be paid to employees in lieu of shares. These shares are cash-settled share-based payments.

Fair value estimates

In terms of IFRS 2, the transaction is measured at fair value of the equity instruments at the grant date. The fair value takes into account that the employees are entitled to the dividends from grant date. The fair value of the equity-settled shares subject to non-market conditions is the closing share price at grant date. The estimated fair value of the equity-settled shares subject to market conditions were calculated at grant date using a Monte Carlo simulation model with the following inputs:

Date of grant			19 March 2013			30 March 2012			28 February 2011
Non-market conditions
Number of shares granted			314 516			247 615			241 767
Share price at grant date (R)			90.50			99.98			72.25
Estimated fair value per share at grant date (R)			90.50			99.98			72.25
Market conditions
Number of shares granted			21 084			21 075			47 003
Share price at grant date (R)			90.50			99.98			72.25
Expected volatility (%)			26.4			29.2			41.1
Expected dividend yield (%)			3.5			2.5			3.0
Risk free rate (%)			5.5			6.5			7.4
Estimated fair value per share at grant date (R)			49.58			95.27			62.20
In terms of IFRS 2, liabilities relating to cash-settled share-based payments are adjusted to fair value at financial position date. The estimated fair value of the cash-settled shares was calculated by using the closing share price at the reporting date and discounting future expected dividends.
Number of cash-settled shares granted			23 040			16 420			6 150
Share price at grant date (R)			90.50			99.98			72.25
Risk free rate (%)			6.1			6.1			5.0
Estimated fair value per cash-settled share at grant date (R)			89.02			98.66			71.35
Estimated fair value per cash-settled share at year-end (R)			95.13			98.21			100.15

During 2007 the group introduced the Barloworld Cash-Settled Share Appreciation Right Scheme.

The scheme allows executive directors and certain senior employees to earn a long-term incentive amount calculated based on the increase in the Barloworld Limited share price between the grant date and the vesting and exercise of such rights.During 2011 the scheme rules were amended to change all future awards to be equity-settled.

No shares are issued for share appreciation rights granted before 2011 and all amounts payable will be settled in cash. All share appreciation rights granted from 2011 will be settled in shares. The objective of the scheme is to recognise the contributions of senior staff to the group’s financial position and performance and to retain key employees.

The vesting of the rights are subject to specific performance conditions, based on group headline earnings per share. Rights are granted for a period of six years and vest one-third after three years from grant date, a further one-third after four years
and the final third after five years.

The grant price of these appreciation rights equals the volume weighted average market price of the underlying shares on the three trading days immediately preceding grant date.

On resignation, share appreciation rights which have not yet vested and those vested but not exercised, are forfeited. On death or retirement the Barloworld remuneration committee may permit a portion of unvested rights to be exercised within one year (or such extended period as the committee may decide) of the date of cessation of employment.

It is group policy that employees should not deal in Barloworld Limited shares (and this is extended to the Forfeitable Share Plan, Share Appreciation Right and Share Options Schemes) for the periods from 1 April for half year end and 1 October for year end until 24 hours after publication of the results and at any other time during which they have access to price-sensitive information.

Cash-settled share appreciation rights: Fair value estimates

In terms of IFRS 2, liabilities relating to cash-settled share-based payments are adjusted to fair value at financial position date.

The estimated fair value of the share appreciation rights was calculated using a binomial pricing model, with inputs as set out below.

Date of grant		23 Nov 2009			29 Sept 2008
Number of share appreciation rights granted		3 144 650			2 987 635
Exercise price (R)		51.04			61.01
Share price at grant date (R)		49.90			61.01
Share price at financial position date (R)		95.38			95.38
Expected volatility (%)		26.6			26.4
Expected dividend yield (%)		2.6			2.5
Risk free rate (%)		6.1			5.5
Exercise multiple (share price at exercise date/option exercise price)		1.9			1.9
Estimated fair value per share appreciation right at grant date (R)		14.67			15.64
Estimated fair value per share appreciation right at year-end (R)		45.45			35.41

Equity-settled share appreciation rights: Fair value estimates

In terms of IFRS 2, the transaction is measured at fair value of the equity instruments at the grant date.

The estimated fair value of the share appreciation rights was calculated using a binomial pricing model, with inputs as set out below.

Date of grant			19 March 2013			30 March 2012			28 February 2011
Number of share appreciation rights granted			2 562 990			1 954 860			2 069 990
Exercise price (R)			90.73			96.48			70.83
Share price at grant date (R)			90.50			99.98			72.25
Expected volatility (%)			36.2			37.9			36.6
Expected dividend yield (%)			3.3			2.8			3.9
Risk free rate (%)			6.3			6.4			8.0
Exercise multiple (share price at exercise date/option exercise price)			1.9			1.9			1.9
Estimated fair value per share appreciation right at grant date (R)			30.04			36.85			25.15

The following forfeitable shares, share options and share appreciation rights granted are unexercised:

															Number of options/rights
Date of grant		Date from which exercisable			Expiry date			Contractual life remaining (years)			Original exercise price (R)				Barloworld directors				Barloworld  employees#				Total    unexercised**
9 Sept 2008		29 Sept 2011			29 Sept 2014			1.0			61.01				617 398				1 933 241				2 550 639
23 Nov 2009		30 Nov 2012			22 Nov 2015			2.1			51.04				641 290				1 699 635				2 340 925
Total cash-settled share appreciation rights granted and unexercised															1 258 688				3 632 876				4 891 564
28 Feb 2011		27 Feb 2014			27 Feb 2017			3.4			70.83				273 500				1 597 320				1 870 820
30 Mar 2012		29 Mar 2015			29 Mar 2018			4.5			96.48				248 000				1 629 840				1 877 840
19 Mar 2013		18 Mar 2016			18 Mar 2019			5.5			90.73				293 110				2 256 370				2 549 480
Total equity-settled share appreciation rights granted and unexercised															814 610				5 483 530				6 298 140
17 Mar 2010		17 Mar 2013			30 Nov 2013			0.2			0.00				405 298								405 298
28 Feb 2011		27 Feb 2014			27 Feb 2014			0.4			0.00				193 500				78 900				272 400
30 Mar 2012		29 Mar 2015			29 Mar 2015			1.5			0.00				166 750				101 940				268 690
19 Mar 2013		18 Mar 2016			18 Mar 2016			2.5			0.00				191 660				143 940				335 600
Total equity-settled forfeitable shares granted and unexercised															957 208				324 780				1 281 988
28 Feb 2011		27 Feb 2014			27 Feb 2014			0.4			0.00								6 150				6 150
30 Mar 2012		29 Mar 2015			29 Mar 2015			1.5			0.00								16 420				16 420
19 Mar 2013		18 Mar 2016			18 Mar 2016			2.5			0.00								23 040				23 040
Total cash-settled forfeitable shares granted and unexercised																			45 610				45 610
Total unexercised															3 030 506				9 486 796				12 517 302

The weighted average share price of options exercised during the period was R93.04 (2012: R78.62; 2011: R65.39).

The weighted average share price of share appreciation rights exercised during the period was R84.17.

Forfeitable shares, share options and appreciation rights movement for the year			Number of forfeitable shares				Number of appreciation rights				Number of share options				Weighted average exercise price
															R
2013
Unexercised at beginning of year			1 811 888				9 451 603				283 172				55.50
Rights granted in terms of equity-settled share appreciation right scheme							2 562 990								90.73
Forfeitable shares granted			361 560
Forfeitable shares forfeited			(21 210)
Forfeitable shares vested			(824 640)
Appreciation rights forfeited							(175 459)								68.52
Appreciation rights exercised							(649 430)								57.13
Options forfeited											(3 334)				47.50
Options exercised											(279 838)				47.50
Forfeitable shares, options and appreciation rights unexercised at year-end			1 327 598				11 189 704								65.52
Appreciation rights exercisable at year-end							599 230								51.04
Held by:
Directors, employees and ex-employees of Barloworld			1 327 598				11 189 704								65.52
2012
Unexercised at beginning of year			1 542 280				11 121 680				416 809				64.15
Rights granted in terms of equity-settled share appreciation right scheme							1 954 860								96.48
Forfeitable shares granted			288 340
Forfeitable shares forfeited			(18 732)
Appreciation rights forfeited							(3 344 318)								108.30
Appreciation rights exercised							(280 619)								64.18
Options exercised											(133 637)				49.18
Forfeitable shares, options and appreciation rights unexercised at year-end			1 811 888				9 451 603				283 172				55.50
Appreciation rights and options exercisable at year-end							300 783				283 172				40.13
Held by:
Directors, employees and ex-employees of Barloworld			1 811 888				9 451 603				230 851				55.68
Financial institutions											52 321				14.59
2011
Unexercised at beginning of year			1 276 250				9 730 153				842 705				62.76
Rights granted in terms of equity-settled share appreciation right scheme							2 069 990								70.83
Equity-settled forfeitable shares granted			288 770
Forfeitable shares forfeited			(22 740)
Appreciation rights forfeited							(634 936)								71.01
Appreciation rights exercised							(43 527)								64.18
Options exercised											(425 896)				46.77
Forfeitable shares, options and appreciation rights unexercised at year-end			1 542 280				11 121 680				416 809				64.15
Appreciation rights and options exercisable at year-end							491 238				416 809				41.55
Held by:
Directors, employees and ex-employees of Barloworld			1 542 280				11 121 680				393 642				64.24
Financial institutions											23 167				14.59

During 2008 the group implemented a Broad-Based Black Economic Empowerment transaction.

The impact of this transaction, calculated in terms of IFRS 2 Share-based Payment, was a credit to profit or loss in the current year of R5 million (charge; 2012: R4 million; 2011: R7 million) which was determined on assumptions and inputs as set out below.

			Number of shares issued				Weighted average fair value per share
							R
Strategic black partners			12 331 337				10.02
The fair value is based on a Monte Carlo valuation model using an expected average dividend yield of 9.9% and a Barloworld share price volatility of 28.55% over the term of the lock-in period. The strategic black partners are permitted to receive all dividends paid in the lock-in period.
Community service groups			2 153 676				10.02
The fair value is based on a Monte Carlo valuation model using an expected average dividend yield of 9.9% and a Barloworld share price volatility of 28.55% over the term of the lock-in period. The community service groups are permitted to receive all dividends paid in the lock-in period.
Education trust			1 054 058
The shares awarded to the trust are treated as treasury shares.
Black managers trust			3 060 166				1.19
The fair value is based on a valuation model using an expected average dividend yield of 3.5% and a Barloworld share price volatility of 30% over the term of the lock-in period. The trust is not entitled to receive dividends during the lock-in period.
Black non-executive directors trust			108 030				83.31
The fair value is based on the 30-day volume weighted average share price of Barloworld Limited as at 9 July 2008, the date when the shares were donated to the trust. The three beneficiaries of the trust are DB Ntsebeza, S Baqwa and S Mkhabela, who are black non-executive directors of Barloworld Limited. The beneficiaries’ shares are subject to a seven-year lock-in period from 29 September 2008, during which period the beneficiaries will not be entitled to sell, cede, transfer or otherwise dispose of or encumber their Barloworld ordinary shares or their rights in the trust. All the rights for DB Ntsebeza and S Mkhabela vested on 30 September 2013. Following the resignation of S Baqwa, two-thirds of his rights were forfeited.
General staff trust			2 980 829				64.50
The fair value is based on the Barloworld Limited closing share price on 30 September 2008, the date when the shares were allocated to staff members. A total of 36 279 shares were not issued and are treated as treasury shares (note 13).