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354 NEDBANK GROUP Limited INTEGRATED REPORT 201038 SHARE CAPITAL ... continued38.2 Preference share capital and premium ... continuedThe preference shares are classified as equity instruments by Nedbank Limited and Imperial Bank Limited (the ‘entities’) and have thereforebeen classified as non-controlling interest in the consolidated financial statements.Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to payment of dividendsto any other class of shareholder. The rate is limited to 75% of the prevailing prime rate for Nedbank Limited and 70% of the prevailingprime rate for Imperial Bank Limited on a deemed value of R10 for Nedbank Limited and R100 for Imperial Bank preference shares, and isnever compounded. The dividends, if declared, accrue half-yearly on 30 June and 31 December and are payable within 120 days of thesedates respectively.If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the entities, whether inpreference to payments to any other class of share or otherwise.If, due to any amendment of the Income Tax Act, 58 of 1962, the dividends become taxable in the hands of the shareholders and thepayment of the preference share dividends becomes a deductible expense for the entities, then the 75% of prevailing prime rate will beincreased to the extent that the entities incur a savings on servicing the preference shares. If such an amendment does not result in a savingfor the entities, but a decrease in the returns on the preference share investment, no amendment to the rate is envisaged.Each preference share confers on the holder the right to a return of capital on the winding-up of the entities prior to any payment to anyother class of share, but holders are not entitled to any further participation in the profits, assets or any surplus assets of the entities insuch circumstances.The holders of this class of share are not entitled to be present or vote (even by proxy) at any meeting of the entities, except when adeclared dividend or part thereof remains in arrears and unpaid after six months from the due date or a resolution is proposed that directlyaffects the rights attached to the preference share or the interests of the holder, including resolutions to wind up the entities or in thereduction of their share capital.At every general meeting where the preference shareholder is entitled to vote, the voting rights are restricted to the holder’s nominal valuein proportion to the total nominal value of all shares issued by the entities.No shares in the capital of the entities, in priority to the preference shares, can be created or issued without prior sanction of the holdersof preference shares by way of a resolution passed at a separate class meeting properly constituted in terms of the provisions set out inthe articles of association.38.3 Share options – staff schemesShare options granted under the Nedcor Group (1994) Employee Incentive Scheme and Nedbank Group (2005) Share Option, Matchedand Restricted Share Scheme have an exercise price fixed at the market price of the share on the day prior to the date on which the optionis granted. Options may be exercised at rates determined by the schemes’ trustees and expire at the earlier of termination or at varyingperiods of up to 10 years from the granting of the option. On exercise of the option the schemes will subscribe for shares in Nedbank GroupLimited at the full market price then ruling.See pages 248 and 249 for further detail on share option schemes.