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Share-Based Payments | 12 Months Ended
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Jun. 30, 2019
Share-based payment arrangements [Abstract] |
Share-Based Payments | SHARE-BASED PAYMENTS
ACCOUNTING POLICY The group operates the following employee share incentive plans where the group granted share options to certain employees in exchange for services received:
• | the 2006 equity-settled share-based payments plan; and
• | the equity-settled Sisonke Employee Share Ownership Plan (ESOP) awarded in 2019.
Equity-settled share-based payments are measured at fair value that includes market performance conditions but excludes the impact of any service and non-market performance conditions of the equity instruments at the date of the grant. The share-based payments are expensed over the vesting period, based on the group's estimate of the shares that are expected to eventually vest. The group used an appropriate option pricing model in determining the fair value of the options granted. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the estimates of the number of options that are expected to become exercisable are revised. The impact of the revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity. The proceeds received (if any) net of any directly attributable transaction costs are credited to share capital and premium when the options are exercised.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The fair value of options granted under the 2006 plan was determined using a Monte Carlo valuation model. The significant inputs into the model are: vesting period, risk free interest rate, volatility, price on date of grant and dividend yield. There were no options granted under the 2006 plan in the current financial period. The fair value of the options granted under the Sisonke ESOP was based on the Harmony spot share price of R28.29 at grant date as there were no market condition attached to the grant.
EMPLOYEE SHARE-BASED PAYMENTS The objective of these schemes is to recognise the contributions of employees to the group's financial position and performance and to retain key employees. The total cost relating to employee share-based payments is made up as follows:
| SA rand
Figures in million | 2019 |  | 2018 |
2006 share plan | 197 |  | 363 |
Sisonke ESOP | 33 |  | — |
Total employee share-based payments | 230 |  | 363 |
The directors are authorised to issue up to 60 011 669 ordinary shares to participants who have received awards in accordance with Harmony's employee share incentive schemes. Subsequent to the annual general meeting held on 1 December 2010, 37 546 904 shares have been issued in terms of the various share schemes. At 30 June 2019, 27 720 640 share option awards are outstanding in terms of the authorisation and relate to the 2006 share plan. In December 2018, the board approved the new Total Incentive Plan for management which includes share options. The first allocations under the new plan is expected to occur in October 2019.
33 | SHARE-BASED PAYMENTS continued
EMPLOYEE SHARE-BASED PAYMENTS continued Options granted under the 2006 share plan The 2006 share plan consists of share appreciation rights (SARs), performance shares (PS) and restricted shares (RS). The share plan is equity-settled.
Award | Vesting | Performance criteria
SARs | SARs will vest in equal thirds in year three, four and five, subject to the performance conditions having been satisfied. The SARs will have an expiry date of six years from the grant date and the offer price equals the closing market prices of the underlying shares on the trading date immediately preceding the grant. | 2012 to 2014 allocation: The group's headline earnings per share must have grown since the allocation date by more than the South African Consumer Price Index (CPI).
PS | The PS will vest after three years from the grant date, if and to the extent that the performance conditions have been satisfied. | 2015 to 2017 allocation: • 50% of the number of rights awarded are linked to the total shareholder return of the group on an absolute basis. • 50% of the number of rights awarded are linked to the total shareholder return of the group as compared to that of the South African gold index. 2014 allocation: • the number of the rights awarded are linked to the group's performance in comparison to the South African Gold Index.
RS | The RS will vest after three years from grant date. | The participant is still employed within the group.
Termination of employees' participation in the share plan is based on "no fault" and "fault" definitions.
• Fault | All unvested and unexercised SARs and all PS and RS not yet vested are lapsed and cancelled.
• No fault | Accelerated vesting occurs and all unvested and unexercised share options are settled in accordance with the rules of the plan
Executive management is encouraged to retain performance shares when they vest and a minimum shareholding requirement has been introduced to achieve this. This shareholding is meant to align shareholder and executive objectives to grow total shareholder return.
33 | SHARE-BASED PAYMENTS continued
EMPLOYEE SHARE-BASED PAYMENTS continued Options granted under the 2006 share plan continued Activity on share options
| SARs | PS | RS
Activity on options and rights granted but not yet exercised | Number of options and rights |  | Weighted average option price (SA rand) |  | Number of rights |  | Number of rights |
For the year ended 30 June 2019 |  |  |  |
Balance at beginning of year | 9 847 860 |  | 50.20 |  | 42 427 284 |  | 550 996 |
Options exercised | (1 564 486 | ) | 27.50 |  | (20 166 093 | ) | (550 996 | )
Options forfeited and lapsed | (1 570 330 | ) | 56.29 |  | (1 253 595 | ) | — |
Balance at end of year | 6 713 044 |  | 26.45 |  | 21 007 596 |  | — |
| SARs | PS | RS
Activity on options and rights granted but not yet exercised | Number of options and rights |  | Weighted average option price (SA rand) |  | Number of rights |  | Number of rights |
For the year ended 30 June 2018 |  |  |  |
Balance at beginning of year | 12 476 697 |  | 32.60 |  | 37 848 573 |  | 701 412 |
Options granted | — |  | — |  | 14 406 437 |  | — |
Options exercised | (794 351 | ) | 24.37 |  | (3 873 467 | ) | (120 000 | )
Options forfeited and lapsed | (1 834 486 | ) | 52.86 |  | (5 954 259 | ) | (30 416 | )
Balance at end of year | 9 847 860 |  | 50.20 |  | 42 427 284 |  | 550 996 |
| SARs | PS and RS
Options and rights vested but not exercised at year end | 2019 |  | 2018 |  | 2019 |  | 2018 |
Options and rights vested but not exercised | 5 692 965 |  | 5 331 335 |  | — |  | — |
Weighted average option price (SA rand) | 27.89 |  | 36.26 |  | n/a |  | n/a |
33 | SHARE-BASED PAYMENTS continued
EMPLOYEE SHARE-BASED PAYMENTS continued Options granted under the 2006 share plan continued Activity on share options continued
List of options and rights granted but not yet exercised (listed by grant date) | Number of options and rights |  | Award price (SA rand) |  | Remaining life (years)
As at 30 June 2019 |  |  |
Share appreciation rights |  |  |
15 November 2013 | 3 652 807 |  | 33.18 |  | 0.4
17 November 2014 | 3 060 237 |  | 18.41 |  | 1.4
| 6 713 044 |  |  |
Performance shares |  |  |
29 November 2016 | 7 944 126 |  | n/a |  | 0.4
15 November 2017 | 13 063 470 |  | n/a |  | 1.4
| 21 007 596 |  |  |
Total options and rights granted but not yet exercised | 27 720 640 |  |  |
| SA rand
Figures in million | 2019 |  | 2018 |
Gain realised by participants on options and rights traded during the year | 484 |  | 164 |
Fair value of options and rights exercised during the year | 489 |  | 181 |
Options granted under the Sisonke ESOP In December 2017 Harmony approved the establishment of the Sisonke ESOP with the aim to facilitate beneficial interest and ownership by non-managerial employees in South Africa (the beneficiaries) of Harmony shares in order to:
• | facilitate economic empowerment of Harmony’s employees;
• | incentivise Harmony’s employees, so as to promote the shared interests of employees and shareholders in the value growth of Harmony; and
• | further align the interests of the Harmony shareholders and those of the employees of Harmony.
The shares were issued to the Harmony ESOP Trust (the Trust) on 15 January 2019 which is also the date on which the required service period of three years commenced. Each beneficiary under the scheme was awarded 225 Participation Units (PU). The Sisonke ESOP is equity-settled.
Award | Vesting | Performance criteria
PU* | The PU will vest after three years from the date on which the service period commenced | The participant is still employed within the group
*The term Participation Units means the vested rights of a beneficiary to an equal number of Harmony shares held by the Trust. Termination of employees' participation in the share plan is based on "no fault" and "fault" definitions.
• Fault | All unvested and unexercised PU not yet vested are lapsed and cancelled.
• No fault | Accelerated vesting occurs and all unvested and unexercised PU are settled in accordance with the rules of the plan
33 | SHARE-BASED PAYMENTS continued
EMPLOYEE SHARE-BASED PAYMENTS continued Options granted under the Sisonke ESOP continued Activity on share options
| Number of PU
Activity on PU granted but not exercised | 2019 |  | 2018 |
Balance at beginning of year | — |  | — |
PU granted | 6 974 500 |  | — |
Options vested | (107 100 | ) | — |
Options forfeited and lapsed | (48 375 | ) | — |
Balance at end of year | 6 819 025 |  | — |
| 2019 |  | 2018
Gain realised by participants on options exercised during the year (R'million) | 3 |  | n/a
Weighted average share price at the date of exercise (SA rand) | 27.16 |  | n/a
Remaining life (years) | 2.5 |  | n/a
OTHER SHARE-BASED PAYMENTS On 20 March 2013 Harmony signed transaction and funding agreements to give effect to an empowerment transaction to dispose of 30% of its Free State based Phoenix operation (Phoenix) to BEE shareholders, which includes a free-carry allocation of 5% to a community trust that has been created and is currently controlled by Harmony. The transaction closed on 25 June 2013, following the fulfilment of the last condition precedent. In terms of the agreements Phoenix was transferred to a newly incorporated subsidiary; 'PhoenixCo' which subsequently changed its name to Tswelopele Beneficiation Operation (TBO). The awards to the BEE partners have been accounted for as in-substance options as the BEE partners will only share in the upside, and not the downside of their equity interest in TBO until the date the financing provided by Harmony is fully repaid. On this date the options will be exercised and a non-controlling interest in TBO will be recognised. The award of the options to the BEE partners is accounted for by the group as an equity-settled share-based payment arrangement. The in-substance options carry no vesting conditions and the fair value of the options of R23 million was expensed on the grant date, 25 June 2013.

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