NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS l NOTE 17
    2013
Rm		   2012
Rm		  
17. Share capital and share premium          
  Authorised share capital          
  394 999 000 (2012: 394 999 000) ordinary shares of 4 cents each 15     15  
  50 000 000 (2012: 50 000 000) deferred ordinary shares of 4 cents each 2     2  
  15 000 000 (2012: 15 000 000) preferred ordinary shares of 4 cents each 1     1  
  1 000 (2012: 1 000) redeemable preference shares of 4 cents each          
  40 000 000 (2012: 40 000 000) non-redeemable, non-participating preference shares of 4 cents each* 2     2  
    20     20  
  Issued and fully paid share capital          
  208 833 715 (2012: 209 843 029) ordinary shares of 4 cents each 8     8  
  12 979 082 (2012: 14 110 992) deferred ordinary shares of 4 cents each 1     1  
    9     9  
  Share premium          
  Balance at beginning of year 13        
  Ordinary shares issued during the year 360     13  
    373     13  
  Share capital and premium 382     22  

  *For non-redeemable, non-participating preference shares in issue refer to note 21.
  Directors’ authority to issue ordinary shares and non-redeemable preference shares

The directors have been given general authority until the next annual general meeting to issue:

– not more than five percent of the issued ordinary share capital at 30 June 2012;
– not more than five million of the non-redeemable, non-participating preference shares.

Ordinary shares

The ordinary shares carry one vote per share and are entitled to an ordinary dividend.

Deferred ordinary shares

The deferred ordinary shares convert to ordinary shares when certain predetermined growth rates in headline earnings are achieved during the period July 2004 to June 2018.

To the extent that the deferred ordinary shares have not converted by 2018 then 500 000 deferred ordinary shares will convert annually until the converted deferred ordinary shares equate to 10,1% of total ordinary shares in issue net of shares repurchased.

The deferred ordinary shares carry one vote per share and are not entitled to dividends.

The salient features of the conversion are:

For the financial years ended up until 30 June 2018:

Deferred ordinary shares will convert on a non-cumulative basis as follows:

If headline earnings per share growth over the previous financial year equals or exceeds:

–10% then 500 000 deferred ordinary shares will convert into ordinary shares
–11% then 750 000 deferred ordinary shares will convert into ordinary shares
–12% then 1 000 000 deferred ordinary shares will convert into ordinary shares
–13% then 1 250 000 deferred ordinary shares will convert into ordinary shares

If headline earnings per share growth over the previous financial year is lower than 10% there will be no conversion of deferred ordinary shares into ordinary shares.

Thereafter:

To the extent that there are deferred ordinary shares that have not converted into ordinary shares, 500 000 of the remaining deferred ordinary shares will convert annually until the converted deferred ordinary shares equate to 10,1% of the total ordinary shares in issue net of shares repurchased.

To the end of the current financial year 9 776 307 (2012: 8 644 397) deferred ordinary shares have been converted into ordinary shares.

A maximum of 1 250 000 shares would have converted in July 2013, however, as the company has repurchased shares the conversion is limited to 1 122 377 shares.

Group share schemes
    Number of rights  
  Total rights authorised and currently allocated in terms of group share schemes 2013   2012    
  Share Appreciation Rights Scheme 11 216 355   11 631 363    
  Deferred Bonus Plan 119 363   111 930    
  Total rights currently allocated in terms of group share schemes 11 335 718   11 743 293    

    2013 2012  
  Share scheme details are as follows: Number
of rights		   Weighted
average
exercise price
(Rand)		     Number
of rights		   Weighted
average
exercise price
(Rand)		  
  Share Appreciation Rights Scheme                  
  Rights granted at beginning of year 11 631 363   102,01     18 503 389   63,15  
  Rights allocated during the year 3 933 387   195,20     3 016 508   170,57  
  Rights exercised during the year (3 900 620)   55,32     (9 575 863)   49,46  
  Rights forfeited during the year (447 775)   127,96     (312 671)   61,01  
  Unexercised rights at end of year 11 216 355   148,05     11 631 363   102,01  

    Number of rights  
  Share scheme details are as follows: 2013   2012    
  Deferred Bonus Plan          
  Rights granted at beginning of year 111 930   223 072    
  Rights exercised during the year (111 930)   (150 706)    
  Rights forfeited during the year     (68 715)    
  Prior year rights carried forward     3 651    
  Rights allocated during the year 119 363   108 279    
  Unexercised rights at end of year 119 363   111 930    

  Share Appreciation Rights Scheme – details of rights by year of grant Number
of rights		   Average
exercise price
(Rand)		   Expiry date
  Grant date              
  June 2008 557 233   49,46   May 2015    
  June 2009 315 837   55,32   June 2016    
  June 2010 2 362 869   96,71   June 2017    
  June 2011 1 300 662   116,59   June 2018    
  June 2012 2 746 367   170,57   June 2019    
  June 2013 3 933 387   195,20   June 2020    
  Total unexercised rights at end of year 11 216 355            
  Total weighted average price     148,05        
  Upon exercise by participants the group will settle the value of the difference between the exercise and grant price by delivering shares, alternatively as a fall-back provision only by settling the value in cash.

The company purchased 2 123 775 ordinary shares in 2010 as a hedge against the company’s obligation to deliver shares in terms of the Share Appreciation Rights Scheme and Deferred Bonus Plan (Share Schemes). Upon vesting of the 2009 allocation of the Share Appreciation Rights in terms of the rules of the Share Schemes, shares repurchased have been issued for settlement of the company’s obligations. The remaining rights are fully hedged.

  Deferred Bonus Plan – details of rights still unexercised by year of grant# Number of rights   Expiry date  
  Grant date          
  June 2013 119 363   September 2016    
  Total unexercised rights at end of year 119 363        

  Deferred Bonus Plan – details of rights taken up and not vested# Number of rights   Expiry date  
  Rights taken up          
  August 2010 187 541   September 2013    
  September 2011 135 632   September 2014    
  September 2012 109 061   September 2015    
  # Rights entitle participants to invest a portion of their after-tax bonus in Imperial shares, which, if held for three years, will be matched by the company on a one-for-one basis by the allocation of an equal number of Imperial shares for no consideration.

The fair values for the share-based payment reserve is calculated using a Black-Scholes pricing model.

The inputs into the model established at the grant dates and which have not changed were as follows:
    2013 2012   2011   2010  
  Share Appreciation Rights Scheme                  
  Volatility (%) 29,50     30,80   33,30   33,00  
  Weighted average share price (Rand) 195,20     170,57   116,59   96,71  
  Weighted average exercise price (Rand) 195,20     170,57   116,59   96,71  
  Weighted average fair value (Rand) 47,02     43,24   36,14   33,23  
  Expected life (years) 4,32     4,26   3,24   3,29  
  Average risk-free rate (%) 6,50     5,85   7,13   7,44  
  Expected dividend yield (%) 3,89     3,28   3,60   2,76  
  Deferred Bonus Plan                  
  Volatility (%) 29,50     30,80   33,30   33,00  
  Weighted average share price (Rand) 195,20     170,57   116,59   96,71  
  Weighted average exercise price (Rand)                  
  Weighted average fair value (Rand) 171,89     153,56   103,17   88,31  
  Expected life (years) 3,27     3,20   3,24   3,29  
  Average risk-free rate (%) 6,50     5,85   7,13   7,44  
  Expected dividend yield (%) 3,89     3,28   3,60   2,76  
  The volatilities were determined by calculating the historical volatility of the company’s share price over the previous five years. The expected life is determined by the rules of the schemes which dictate the final expiry date.

The current year’s movement charged to profit or loss is reflected in note 29.

Directors’ and prescribed officers’ interests in issued share capital

At year-end the aggregate shareholdings of the directors and prescribed officers in the issued ordinary share capital of the company are outlined in the remuneration committee report on page 17.