Adcock Ingram Integrated Report 2018

113 ADCOCK INGRAM  Integrated Report 2018 Annexure B – Share-based payment plans A GENERAL EMPLOYEE SHARE OPTION PLAN Certain senior employees are entitled to join the general employee share option plan, based on merit and options are issued at least annually at cost by the Adcock Ingram Board of directors. The offer price is determined in accordance with the rules of the scheme, and options vest as follows: • a third after three years; • a third after four years; and • a third after five years. Since January 2006 a cash-settled scheme was in place, with the last tranche issued in January 2013. This was replaced by an equity-settled scheme in June 2014. The following tables illustrates the number and weighted average offer prices (WAOP) of and movements in Adcock Ingram share options during the year: EQUITY-SETTLED 2018 2017 Number WAOP (Rand) Number WAOP (Rand) Outstanding at the beginning of the year 4 860 000 44.97 3 066 000 46.64 Granted 1 945 000 57.73 1 919 000 42.29 Exercised (346 999) 52.20 – – Forfeited (773 000) 47.54 (125 000) 44.81 Outstanding at the end of the year 5 685 001 48.62 4 860 000 44.97 Vested and exercisable at the end of the year 49 000 52.20 401 333 52.20 2018 2017 Weighted average share price of exercised options: R70.33 – Weighted average remaining contractual life for the share options outstanding at reporting date: 7.80 years 8.24 years Range of offer prices for options outstanding at the end of the year: R41.94 – R57.73 R41.94 – R52.20 Average fair value of options granted during the year: R24.23 R17.80 Expense recognised for employee services received during the year (million): R22.43 R20.97 Share options are fair valued using a Black-Scholes model. The expected dividend yield was estimated using a two-year moving average of the dividend yield at the grant date. An annualised standard deviation of the continuously compounded rates of return of the share was used to determine volatility. The risk-free rate was based on a zero-coupon government bond in South Africa with the same expected lifetime of the options.