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higher. Qualifying participants are awarded a certain value of
LTIPs each year, with the instrument structured as follows:
■ The total LTIP award, plus an additional gearing of
between 100% and 200% of the award amount (2011:
100% to 200%) achieved through a notional loan, is
synthetically “invested” into ABIL shares, i.e. assuming an
award of R50 000 LTIPs, it would result in between
R100 000 and R150 000 being notionally invested in ABIL
shares. The gearing is at the higher end for executives.
■ The entry price is set at the ABIL volume weighted average
price (VWAP) for the three calendar months being
September to November of the year of issue (2011: VWAP
for month of September). The settlement value is
determined with reference to the VWAP for such threemonth
period (September to November) in year of vesting
(2011: month of vesting).
■ Interest is accrued on the notional loan on a semi-annual
basis and the dividends paid on the synthetic ABIL shares
(grossed up at the corporate tax rate) are applied to reduce
the notional loan balance. The interest rate charged on the
notional loan is market related.
■ The value of the LTIP from time to time is the market value
of the synthetic ABIL shares, less the remaining balance on
the notional loan after accruing interest and notional
dividends.
■ The LTIP vests over five years (2011: five years) on the
following ratio 15:20:20:20:25 (2011: unchanged).
Employees will be given the option to roll over a tranche
into the following year or years, which must be done prior
to each vesting period. Any LTIP rolled over will be subject
to the same forfeiture rules in the event the employee
resigns or is dismissed prior to the new vesting date.
■ The LTIP is paid out at market value, based on the ABIL
VWAP for the three calendar months being September to
November of the year of vesting (2011: VWAP for the month
of vesting). Should the individual resign or be dismissed, the
unvested LTIPs will be forfeited and cancelled.
■ There are no further performance criteria attached to
payment of prior year LTIPs. However, this is being
reviewed for members of the group executive and changes
will be made to make a portion of the LTIP payable in
subsequent years subject to further performance criteria.
■ Each year a new LTIP will be created which will run parallel
to existing LTIPs resulting in a maximum of five separate
LTIPs running concurrently.
>annual general meeting
A greater portion of the incentives for the executives are
granted through LTIPs to ensure that their performance is
balanced more towards a longer term sustainable
performance of the group linked to the execution of the
strategy as approved by the board. Performance is also
assessed departmentally using scorecards that assess
performance against predetermined criteria.
Award criteria
The quantum of all short and long term incentives actually
awarded to each individual is determined having regard to the
individual’s own performance against pre-agreed key
responsibility areas (KRAs) which are set and agreed early during
each financial year between the individual and their manager.
Performance assessments are conducted immediately after the
end of the financial year which then determines the performance
rating of the individual. No incentives are paid to employees or
executives where the performance rating reflects below an
agreed expected level for the role employed. An element of the
incentive is also dependent on the business unit/department’s
performance and the company and group’s performance as a
whole so as to encourage teamwork.
In respect of LTIPs and bonuses where the payment is
deferred to future years, subsequent years’ performance of
the individual or group is not taken into account before
payment may be made on the basis that the award was
made for services rendered in a prior year with only payment
being deferred. The amounts payable for the LTIPs are,
however, subject to variation as a result of movements in the
ABIL ordinary share price.
Non-executive directors’ fees
Non-executive directors’ fees are benchmarked against the
market every three to four years having regard to the nature
of the business, complexity, skills needed, qualifications,
experience, time demanded from the individual, etc.
Independent specialist remuneration consultants are used
for this purpose. Annual increases outside of this adjustment
are generally at or slightly higher than that granted to the
executive directors of ABIL. No bonuses or incentives are paid
or awarded to the non-executive directors.
Conclusion
The board, through the group remuneration and transformation
committee, applies the above policies having regard to the
markets in which the group operates and improving them where
necessary to achieve the group’s objectives.
African Bank Investments Limited | Integrated Report for the year ended 30 September 2012 345