notes to the Consolidated financial statementsfor the year ended 30 June 2015

GROUP     COMPANY
2015 
R’000 		 2014 
R’000 		         2015 
R’000 		 2014 
R’000 
   

31 

Share-based payments

    
     

31.1 

Equity-settled share appreciation rights scheme

    
        – Clover Share Appreciation Rights Plan (2010) (ordinary shares in CIL)

On 31 May 2010 the ordinary and preference shareholders approved the Clover Share Appreciation Rights Plan (SAR) as well as the placement of 16 million unissued ordinary shares under the control of the Directors to fulfil the Group’s potential future obligations in terms of the plan. The main rules of the scheme are as follows:

The Group’s obligations in terms of this plan can at the election of the Group be settled in cash or by the issue of ordinary shares.

New SAR may be exercised at the election of the participants, at any time after they have vested, provided that the participant concerned is still in the employment of Clover. On exercise employees will be awarded shares to the value equal to the difference between the fair market value of ordinary shares on the date of issue of the new SAR in question and the fair market value of the ordinary shares on the date of exercise.

Further details on the scheme are available in the detailed circular issued to shareholders on 7 May 2010 and the Report on Remuneration.

The SAR granted are expensed over their vesting period in terms of IFRS 2. The estimated fair value of these SAR was calculated using the Hull-White Trinomial Lattice valuation model. The following inputs were used for the calculation of the fair value:

Initial allocation – Expected volatility of 30,3%, risk free rate of 8,90% and a dividend yield of 2,34%.

Second allocation – Expected volatility of 14,9%, risk free rate of 8,90% and a dividend yield of 2,34%.

Third allocation – Expected volatility of 19,9%, risk free rate of 8,55% and a dividend yield of 3,33%.

Allocation to new Executive Committee member – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00%.

Fourth allocation – Expected volatility of 17,4%, risk free rate of 7,94% and a dividend yield of 2,00%

Allocation to new Executive Committee member – Expected volatility of 24,3%, risk free rate of 7,94% and a dividend yield of 2,18%.

Fifth allocation – Expected volatility of 24,3%, risk free rate of 6,67% and dividend yield of 1,74%.

Sixth allocation – Expected volatility of 21,4%, risk free rate of 7,01% and dividend yield of 1,80%.

Allocation to new Executive Committee member – Expected volatility of 22,7%, risk free rate of 7,45% and a dividend yield of 2,14%.

Seventh allocation – Expected volatility of 26,9%, risk free rate of 7,37% and dividend yield of 1,92%.

Expected volatility is calculated based on the average share price per day and the intra-day share price movements since listing.		    
           
           
           
           
           
           
           
           
           
           
           
           
           
             
Share appreciation rights
Description Grant date Weighted average remaining contractual life (years) Exercise price SAR granted not yet exercised Estimated weighted average fair value per right at grant date (Adjusted for 2 for 1 share split Vesting period
Clover’s Share Appreciation Rights Plan (2010) – Initial allocation 31 May 2010  *Till employment terminates R4,67  4 970 158
(2014: 10 932 272)		 R2,11  One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015 
Clover’s Share Appreciation Rights Plan (2010) – Second allocation 18 August 2010  *Till employment terminates R0,00  Nil
(2014: 186 667)		 R4,31  One-third on 18 August 2011, a third on
18 August 2012 and final third on 18 August 2013 
Clover’s Share Appreciation Rights Plan (2010) – Third allocation 1 July 2011  Four years R11,00  57 778
(2014: 1 614 939)		 R3,11  Full allocation vest on 1 July 2014 
Clover’s Share Appreciation Rights – Allocation to Executive Committee member ER Bosch 1 June 2012  Five years R13,50  953 620
(2014: 953 620)		 R4,03  One-third on 1 June 2015, one-third on
1 June 2016 and a final third on 1 June 2017 
Clover’s Share Appreciation Rights Plan (2010) – Fourth allocation 1 July 2012  Five years R13,73  2 737 742
(2014: 2 737 742)		 R3,70  Full allocation vest on 1 July 2015 
Clover’s Share Appreciation Rights Plan (2010) – Allocation to Executive Committee member MM Palmeiro 1 October 2012  Five years R14,15  925 500
(2014: 925 500)		 R3,95  One-third on 1 October 2015, a third on
1 October 2016 and a final third on 1 October 2017 
Clover’s Share Appreciation Rights Plan (2010) – Fifth allocation 1 July 2013  Six years R16,83  3 041 063
(2014: 3 041 063)		 R4,97  Full allocation vest on 1 July 2016 
Clover’s Share Appreciation Rights Plan (2010) – Sixth allocation 30 June 2014  Seven years R17,31  3 134 141
(2014: 3 134 141)		 R4,83  Full allocation vest on 30 June 2017 
Clover’s Share Appreciation Rights Plan (2010) – Allocation to Executive Committee member J van Heerden 26 September 2014  Five years R17.55  501 425 (2014:Nil) R5,25  One third on 26 September 2017, one third on 26 September 2018 and a final third on 26 September 2019 
Clover’s Share Appreciation Rights Plan (2010) – Seventh allocation 30 June 2015  Seven years R17,34  3 656 212 (2014: Nil) R5,38  Full allocation vest on 30 June 2018 
GROUP       COMPANY
2015 
R’000 		 2014 
R’000 		     2015 
R’000 		 2014 
R’000 
   
Provision against income
    
18 080  17 351    Share-based payment expense    

32

Directors’ remuneration and interests
 

32.1

Directors’ remuneration
  2015 
  Basic salary Fees for services as Director Car
allow-
ance		 Individual 
perform-
ance 
bonus 		 Profit share bonus Retire-
ment 
and 
medical  contrib-
utions 		 Other 
benefits*		 Total  Share  
apprec- 
iation  
rights   exercised**
  R’000  R’000  R‘000  R’000  R’000  R’000  R’000  R’000  R’000  
Executive Directors
                  
JH Vorster 4 204    1 147  1 615  6 446  1 376  55  14 843  53 652 
LJ Botha 2 879    801  1 210  3 406  874    9 170  31 610 
CP Lerm (Dr) 2 524    712  1 059  2 996  762    8 053  12 423 
Total remuneration of Executive Directors
 9 607    2 660  3 884  12 848  3 012  55  32 066  97 685 
Non-executive Directors
                  
WI Büchner   1 111            1 111   
TA Wixley   897            897   
SF Booysen (Dr)   743            743   
JNS Du Plessis (Adv)   512          54  566   
NA Smith   330          5  335   
N Mokhesi   359            359   
B Ngonyama   432            432   
PR Griffin   299            299   
Total remuneration of Non-executive Directors
   4 683          59  4 742   
Total Directors’ remuneration
 9 607  4 683  2 660  3 884  12 848  3 012  114  36 808  97 685 
Other Executives (prescribed officers)
                  
H Lubbe 2 511    714  1 091  2 995  782    8 093   
JHF Botes (Dr) 2 522    716  1 094  3 002  780    8 114  9 856 
ER Bosch 2 515    682  1 039  3 002  830    8 068   
MM Palmeiro 2 070    594  1 259  2 235  626  600  7 384   
J van Heerden 1 463    443  475  915  391    3 687   
Total remuneration of other Executives
 11 081    3 149  4 958  12 149  3 409  600  35 346  9 856 
* Travel and accommodation expenses, fees paid for directorships held in subsidiaries.
** All share appreciation rights excercised by Executives as part of the MPCRE (refer here;–- legacy scheme SARS issues) were settled in shares.
          2014         
  Basic 
salary 		 Fees for 
services  as  Director 		 Car 
allow-
ance 		 Individual 
perform-
ance 
bonus		 Profit 
share 
bonus 		 Retire-
ment  and 
medical 
contrib-
utions 		 Other  
benefits*		 Total  Share 
apprec-
iation 
rights 
exercised 
  R’000  R’000  R‘000  R’000  R’000  R’000  R’000  R’000  R’000 
Executive Directors
                  
JH Vorster 3 945    1 083  1 436    622  52  7 138  4 464 
LJ Botha 2 690    758  797    407  56  4 708  1 338 
CP Lerm(Dr) 2 329    673  913    375  47  4 337  743 
Total remuneration of Executive Directors
 8 964    2 514  3 146    1 404  155  16 183  6 545 
Non-executive Directors
                  
WI Büchner   1 038            1 038   
MG Elliot (resigned 24 November 2013)   144          7  151   
JC Hendriks (Dr) (resigned 13 March 2014)   254            254   
TA Wixley   783            783   
SF Booysen (Dr)   710          15  725   
NP Mageza (resigned 26 November 2013)   203            203   
JNS Du Plessis (Adv)   478          14  492   
NA Smith   340          7  347   
N Mokhesi   254            254   
B Ngonyama   275            275   
PR Griffin   72            72   
Total remuneration of Non-executive Directors
   4 551          43  4 594   
Total Directors’ remuneration
 8 964  4 551  2 514  3 146    1 404  198  20 777  6 545 
Other Executives (prescribed officers)
                  
H Lubbe 2 346    677  913    377  256  4 569  743 
JHF Botes (Dr) 2 357    678  923    380  252  4 590  743 
ER Bosch 2 375    650  1 141    403  84  4 653   
MM Palmeiro 1 934    545  811    355  699  4 344   
Total remuneration of other Executives
 9 012    2 550  3 788    1 515  1 291  18 156  1 486 
* Travel and accommodation expenses, fees paid for directorships held in subsidiaries.
 

32.2 

Directors’ remuneration
    Interest of Directors and other Executives in share appreciation rights
  Allocation 
of rights 		 Number of 
rights as at 
30 June 2014 		 Share 
appreciation 
rights 
granted 
during 
the  year 		 Number 
of 
rights 
exercised/
cancelled 
during 
the year 		 Number of 
rights as at 
30 June 2015 		 Share 
price on 
date 
exercised 		 Grant 
price 		 Date from which exercisable
JH Vorster First 4 587 200    3 058 133  1 529 067  R 19,84  R4,67  One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
  Third 821 256    821 256  –  R 19,84  R11,00  All on 1 July 2014.
  Fourth 1 036 716      1 036 716    R13,73  All on 1 July 2015.
  Fifth 879 589      879 589    R16,83  All on 1 July 2016.
  Sixth 906 510      906 510    R17,31  All on 30 June 2017.
  Seventh   975 927    975 927    R17,34  All on 30 June 2018.
CP Lerm (Dr) First 1 636 505    818 253  818 252  R 19,84    One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
  Third 1 119    1 119  –  R 19,84    All on 1 July 2014.
  Fourth 389 123      389 123      All on 1 July 2015.
  Fifth 332 135      332 135      All on 1 July 2016.
  Sixth 342 300      342 300      All on 30 June 2017.
  Seventh   371 109    371 109      All on 30 June 2018.
LJ Botha First 2 443 140    1 628 760  814 380  R 19,84  R4,67  One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
  Second 186 667    186 667  –  R 17,84  R0,00  One-third on 18 August 2011, a third on 18 August 2012 and final third on 18 August 2013.
  Third 404 063    404 063  –  R 19,84  R11,00  All on 1 July 2014.
  Fourth 533 657      533 657    R13,73  All on 1 July 2015.
  Fifth 452 775      452 775    R16,83  All on 1 July 2016.
  Sixth 466 633      466 633    R17,31  All on 30 June 2017.
  Seventh   505 334    505 334    R17,34  All on 30 June 2018.
Total Executive Directors
   15 419 388  1 852 370  6 918 251  10 353 507       
Other Executives (prescribed officers)
                
H Lubbe First 1 351 491      1 351 491    R4,67  One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
  Third 57 778      57 778    R11,00  All on 1 July 2014.
  Fourth 389 123      389 123    R13,73  All on 1 July 2015.
  Fifth 332 135      332 135    R16,83  All on 1 July 2016.
  Sixth 342 301      342 301    R17,31  All on 30 June 2017.
  Seventh   370 992    370 992    R17,34  All on 30 June 2018.
JHF Botes (Dr) First 913 936    456 968  456 968  R 19,84  R4,67  One-third on 31 May 2013, a further third on 31 May 2014 and a final third on 31 May 2015.
  Third 330 723    330 723  –  R 19,84  R11,00  All on 1 July 2014.
  Fourth 389 123      389 123    R13,73  All on 1 July 2015.
  Fifth 332 135      332 135    R16,83  All on 1 July 2016.
  Sixth 342 301      342 301    R17,31  All on 30 June 2017.
  Seventh   372 023    372 023    R17,34  All on 30 June 2018.
E Bosch Allocation of newly appointed 953 620      953 620    R13,50  One-third on 1 June 2015, a third on 1 June 2016 and final third on 1 June 2017.
  Fifth 332 135      332 135    R16,83  All on 1 July 2016.
  Sixth 342 301      342 301    R17,31  All on 30 June 2017.
  Seventh   371 988    371 988    R17,34  All on 30 June 2018.
MM Palmeiro Allocation of newly appointed 925 500      925 500    R14,15  One-third on 1 October 2015, a third on 1 October 2016 and final third on 1 October 2017.
  Fifth 380 159      380 159    R16,83  All on 1 July 2016.
  Sixth 391 795      391 795    R17,31  All on 30 June 2017.
  Seventh   417 246    417 246    R17,34  All on 30 June 2018.
J van Heerden Allocation of newly appointed   501 425    501 425    R17,55  One third on 26 September 2017, a third on 26 September 2018 and final third on 26 September 2019.
  Seventh   271 593    271 593    R17,34  All on 30 June 2018.
Total other Executives
   8 106 556  2 305 267  787 691  9 624 132       
Total
   23 525 944  4 157 637  7 705 942  19 977 639       
Number of shares at 30 June 2015      Number of shares at 30 June 2014 
Direct Indirect Associates       Direct Indirect Associates
       

32.3 

Interest of Directors and other Executives of the Company in ordinary share capital

      
          Executive Directors      
8 346 599  –  398 315      JH Vorster 7 575 496  –  398 315 
3 294 122  –  –      CP Lerm (Dr) 2 919 804  –  – 
2 318 014  –  –      LJ Botha 1 568 707  –  – 
13 958 735  –  398 315        12 064 007  –  398 315 
         
Non-executive Directors
      
–  628 400  –      WI Büchner* –  710 400  – 
–  997 586  –      NA Smith –  1 227 586  – 
47 619  –  –      TA Wixley 47 619  –  – 
53 245  –  –      PR Griffin 95 000  –  – 
–  –  –      MG Elliot* (resigned 24 November 2013) 241 689  –  – 
–  –  –      JC Hendriks (Dr)* (resigned 13 March 2014) 1 112 892  –  – 
–  –  –      NP Mageza (resigned 26 November 2013) 5 977  –  – 
100 864  1 625 986  –        1 503 177  1 937 986  – 
14 059 599  1 625 986  398 315     
Total Directors’ interests in ordinary share capital
 13 567 184  1 937 986  398 315 
         
Other Executives (prescribed officers)
      
459 712  –  –      H Lubbe 752 222  –  – 
951 998  –  –      JHF Botes (Dr) 738 543  –  – 
1 411 710  –  –     
Total interest of other Executives in ordinary share capital
 1 490 765  –  – 
          There have been no changes in directors’ interests in the share capital of the Company between the end of the financial year and the date of the approval of the annual financial statements.      
         
* These Directors are trustees of the Clover Milk Producer Trust that holds 22 553 000 (2014: 21 932 000) ordinary shares in the Company.
     
GROUP   COMPANY
2015 
R’000 		 2014 
R’000 		     2015 
R’000 		 2014 
R’000 
   

33 

Long-service bonus

    
     

33.1 

Introduction

    
        The Group rewards employees with long service by remunerating them with a lump sum after a specific number of service years. Assumptions and valuation methods are as follows:    
     

33.2 

Background

    
        The long-service bonuses which employees receive differ between employees whose employment date were before 1 January 2001 and employees whose employment date was after 1 January 2001. The benefit is as follows:    
        Employees with an employment date before 1 January 2001     
        Employees receive a bonus of three times their monthly basic salary after 15 years service and one time their monthly basic salary every five years thereafter.    
        Employees with an employment date after 1 January 2001     
        Employees receive a bonus of 10% of their monthly basic salary after 10 years’ service, 15% after 15 years’ service, 20% after 20 years’ service, 25% after 25 years’ service, etc.    
   

33.3 

Valuation method

    
        The projected unit credit method is used in the calculations. The values of the past service liabilities and the future service liabilities are given separately. The past service liability is the value of the accumulated liability as at the calculation date in respect of service already rendered. The future service liability is the value of the liability from service after the calculation date until the next date the employee is entitled to receive a bonus payment. The total liability is evenly distributed over the period since service inception until the date when the benefit is payable.    
   

33.4 

Valuation results

    
        Past service liability    
        The total past service liability in respect of long-service bonuses is set out as follows:    
22 963  24 906      Employees with employment date before 01/01/2001     
1 905  1 470      Employees with employment date after 01/01/2001     
24 868  26 376     
Total past service liability
    
        The valuation results as at 30 June 2015 are based on best estimate assumptions. The valuation is very sensitive to the real return rate assumed. For every 1% variance in the assumed rate of return, the liability varies by approximately R1 million. The results as at 30 June 2014 are based on the previous best estimates.    
GROUP     COMPANY
2015 
%		 2014 
%		       2015 
%		 2014 
%
     

33.5 

Past service liability build-up

    
        The build-up of the total past service liability for the past year, using the best estimate assumptions are as follows:    
9,0  8,5      a) The following discount rate per annum was used for the calculation of interest cost    
8,2  8,3      b) The following salary escalation rate per annum and merit increases were used    
        c) For current service cost an assumption is made that there are no withdrawals during the financial year    
        d) For benefits paid it is assumed that all benefits were paid as estimated by Clover    
             
R’000  R’000        R’000  R’000 
       
The increase in the past service liability is summarised as follows:
    
       
Past services liability build-up
    
26 376  28 909      Opening balance    
2 394  2 370     
Plus: Interest cost
   
1 252  1 608     
  Current service cost
   
(10 653) (7 747)    
Less: Benefits paid
   
5 500  1 236     
  Actuarial loss
   
24 869  26 376     
Closing balance
    

34 

Events after the reporting period
  No significant events occurred subsequent to the year-end that would require disclosure or amendment of these financial statements.