Note 18

  Group Company
      2006 2005     2006 2005  
      Rm Rm     Rm Rm  

18 

Directors and employees 

        

18.1  

Employment costs 

        
  Salaries, wages, commissions and bonuses   398.3 371.8    
  Retirement benefit costs   35.9 30.9    
  Other employment costs    5.7 3.3    
      439.9 406.0          

18.2

Share-based payments

            
  As the fair value of the services received cannot be measured reliably, the services have been valued by reference to the fair value of shares and options granted. The fair value of such shares and options are measured at the grant date using the Black-Scholes model.
 		            
  On 26 May 2005, the former ultimate holding company GUS plc indirectly sold its controlling interest in the Lewis Group. This sale resulted in a change in control and in terms of the scheme rules, the awards and options vested immediately. The share price at the date of vesting was R34.
 		            
  In terms of IFRS 2, notwithstanding that the awards and options were granted at no cost to Lewis by GUS group, share-based payments are required to be expensed over the vesting period. Any accelerated vesting of the awards and options requires immediate recognition of the unrecognised portion.            
                 
  Value of services provided:            
  Charge relating to grants made at date of listing   58.4 10.8      
 
–  in respect of unvested share awards and options
  1.5 10.8      
 
–  vesting of share awards and options resulting from the disposal of its controlling interest by GUS group on 26 May 2005
   56.9 –       
  Options granted subsequent to 26 May 2005   0.3 –      
  Total share-based payment   58.7 10.8            
        R R          
  Significant assumptions used were:            
 
  Weighted average share price
  41.64 29.85      
 
  Weighted average exercise price (for options only)
  41.60 28.00      
 
  Weighted average expected volatility
  28.0% 28.3%      
 
  Weighted average expected dividend yield
  3.6% 3.9%      
 
  Weighted average risk-free rate (bond yield curve at date of grant)
  7.9% 8.8%      
  The expected volatility for the share awards and options granted at the date of listing was based on a weighted average of the volatilities of similar listed entities. The volatilities for the options granted subsequent to 26 May 2005 were based on the volatility of Lewis's share price from the date of listing to the date of granting the option.                

 18.3 

Share incentive schemes 

            
  The employee share incentive schemes are in operation for employees, executives and directors holding salaried employment office. The aggregate number of shares which may be utilised for these schemes shall not exceed 10% of the issued share capital of the company. 
 		            
  Employees receive their share awards and options if they have been in continued employment with the group until the vesting date. Share awards vest between 2 and 5 years of grant date. In respect of options, these vest between 3 and 5 years and must be exercised within 10 years after been granted. In terms of the scheme's rules, the share awards and options vest immediately, should there be a change in control. 
 		            
  The GUS group made available 4% of its shareholding in the group for no consideration in order to meet the commitment of the share incentive schemes to deliver to the participants as a result of the immediate vesting of the share awards and options as a consequence of the disposal of their controlling interest. 
 		            
      No. of shares and options          
                   
  Lewis All Employee Share Scheme            
  Beginning of year   1 101 254 –      
  Granted   1 888 1 196 379      
  Forfeited   (51 825) (95 125)      
  Vested   (1 051 317) –      
  End of year   – 1 101 254          
               
  Lewis Executive IPO Restricted Share Scheme            
  Beginning of year   1 326 448 –      
  Granted   5 714 1 379 334      
  Forfeited   (32 702) (52 886)      
  Vested   (1 299 460) –      
  End of year   – 1 326 448          
  Lewis Executive Share Option Scheme                
  Beginning of year   807 829 –          
  Granted   188 276 822 850          
  Forfeited   (71 132) (15 021)          
  Exercised by payment of consideration   (83 711) –          
  End of year     841 262 807 829          
        R R     R R  
  Average exercise price of outstanding options                
     Options granted in 2005   28.00 28.00          
     Options granted in 2006     41.60 –          

18.4

Directors' emoluments

                
 
Non-executive directors
                
  Fees as directors                
     D M Nurek           225 000 160 000  
     H Saven           215 000 128 000  
     B van der Ross           130 000 89 000  
     F Abrahams           67 000 –  
     D Tyler (payable to GUS Holdings BV)           43 500 97 000  
 
Executive director – A J Smart (paid by subsidiary) 
           3 555 550 3 362 747  
     Salary           1 690 000 1 536 000  
     Bonuses           1 444 670 1 436 000  
     Contributions to pension scheme           270 400 245 760  
     Contribution to medical aid           32 736 30 939  
     Other material benefits           117 744 114 048  
  Share awards and options granted                
  A J Smart was awarded 219 428 free shares and 219 428 options with an exercise price of R28 on 4 October 2004. These were due to vest evenly in 3, 4 and 5 years from the date of the award. As a consequence of the disposal of its controlling interest by the former holding company, the share awards and options vested immediately. A J Smart agreed in terms of a written undertaking not to dispose of any shares he may become entitled to under these awards prior to 1 October 2007.