Adcock Ingram Integrated Report 2018

115 ADCOCK INGRAM  Integrated Report 2018 C BLACK ECONOMIC EMPOWERMENT (BEE) TRANSACTION A scheme with the intention to formameaningful participation for BEE participants and to provide Adcock Ingramwith increased BEE ownership credentials, as part of its continued efforts to embrace broad-based equity participation, was implemented on 15 July 2015 when Adcock Ingram shareholders sold 25 842 960 or approximately 15% of their shares (scheme shares) in proportion to their shareholding, to Ad-izinyosi (RF) Proprietary Limited (Ad-i) in exchange for 25 842 960 securities in AdBEE (RF) Limited (AdBEE). Thus, for every one share contributed to the scheme, a shareholder received one security in AdBEE, entitling the holder to a pro rata portion of the Ad-i indebtness (the obligation to pay the value of an Adcock Ingram share on the JSE calculated on a rolling 30-day traded VWAP immediately preceding the end of the transaction). The Mpho ea Bophelo Trust (Bophelo Trust) and Blue Falcon Trading 69 (Pty) Limited (previous BEE participants) invested R5.4 million and R14.7 million respectively in the scheme. BEE participants The shareholders of Ad-i, the entity which participates on behalf of strategic partners and holds the shares on behalf of the BEE beneficiaries, are as follows: • CIH Projects (Pty) Limited (26.67%) • Dzembe Investments (Pty) Limited (26.67%) • BDH Group Proprietary Limited (26.67%) • Bophelo Trust (20.00%) The following table illustrates the movement in units issued to employees: EQUITY-SETTLED 2018 2017 Outstanding at the beginning of the year 4 094 880 4 024 200 Granted 233 700 285 570 Forfeited (115 710) (214 890) Outstanding at the end of the year 4 212 870 4 094 880 Vested but not exercisable at the end of the year 2 081 070 1 078 440 Available for future distribution to qualifying employees 955 722 1 073 712 KEY TERMS AND CONTRACTUAL OBLIGATIONS The key terms and contractual obligations of the scheme shares and securities are as follows: • the scheme shares will not be entitled to participate in any normal dividend distributions during the transaction period, but are only entitled to special dividends; • AdBEE securities are listed on the main board of the JSE in the“Specialist Securities - Other Securities”sector as an Asset Based Security under the share code “ADE”; • whatever Ad-i may be entitled to receive from Adcock Ingram (other than dividend distributions), as the holder of the scheme shares, is deemed to be renounced to AdBEE and onward renounced by AdBEE to the securities holders; • Ad-i issued one A redeemable preference share and one B redeemable preference share with no par value respectively to Adcock Ingram Holdings Limited and AdBEE; • preference shares are not entitled to vote unless a resolution is proposed for a distribution of any nature to Ad-i shareholders; • if the Adcock Ingram share price is below R36.00 per share during the empowerment period of 4 years, the directors of AdBEE can convene a meeting of the AdBEE securities holders to decide whether they should waive the AdBEE resolutive condition or not; • if the Adcock Ingram share price is below R72,00 per share at the 4th anniversary, the Ad-i indebtedness to the holders of the securities will be calculated using the 30-day VWAP of the Adcock Ingram share price before this date, but not less than a minimum price of R52.00 per share and not more than R72.00 per share; • If the Adcock Ingram share price is above R72.00 per share at the 4th anniversary, the Ad-i indebtedness shall be settled and the remaining Adcock Ingram shares in Ad-i released from the pledge; and • If the Adcock Ingram share price is below R52.00 per share at the 4th anniversary, the scheme will be cancelled and the shares in Ad-i released from the pledge; • AdBEE will assume the obligation of Ad-i to the securities holders to settle the scheme consideration. SHARE CALL OPTIONS • 8 000 000 share call options in Adcock Ingram Holdings Limited were allocated to shareholders in proportion to the scheme shares tendered, entitling the holders thereof to subscribe for Adcock Ingram shares; • call options may be exercised at the strike price of R72.00 per Adcock Ingram share, at any time within the 30-day period prior to the transaction end date; and • On inceptionofthescheme,R20.8millionwas incurredasaonce-offcostforthecalloptions.ThecalloptionswerefairvaluedusingaBlack-Scholes-Merton model taking into account the expected volatility, expected dividend yield, spot and strike price of the option, the exercise date and the risk-free interest rate of the call option. Annexure B – Share-based payment plans continued