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Annual Report 2014 | S P SETIA BERHAD GROUP | 171

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 October 2014

V. FINANCIAL STATEMENTS

22. SHARE CAPITAL (CONT’D)

The fair values of the shares and share options granted under the ESGP and ESOS to which FRS 2 applies were determined using the

binomial model. The significant inputs into the model were as follows:

ESGP

ESOS

Offer 1

Offer 2

Offer 3

Offer 1

Offer 2

Offer 3

Exercise price

*

*

*

RM3.07

#

RM3.03

#

RM3.02

Date of grant

6 May 19 August

31 October

6 May 19 August

31 October

2013

2013

2014

2013

2013

2014

Fair value at grant date

RM3.15

RM3.14

RM3.13

RM0.51

RM0.52

RM0.53

Vesting period / Option life

2 years

2 years

2 years

3 years 6 3 years 6 2 years 6

months

months

months

Weighted average share price

at grant date

RM3.42

RM3.37

RM3.35

RM3.42

RM3.37

RM3.35

Expected dividend yield

4.1% 4.2% 3.3% 4.1% 4.2% 3.3%

Risk free interest rates

3.21% 3.67% 3.71% 3.21% 3.67% 3.71%

Expected volatility

18.62% 18.82% 18.51% 18.62% 18.82% 18.51%

* The shares under the ESGP will vest with the grantee at no consideration on the vesting date

# Adjusted for effect of DRP

The expected life of the shares and share options are based on historical data and is not necessarily indicative of the exercise patterns that may

occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily

be the actual outcome. No other features of the shares and/or share options granted were incorporated into the measurement of fair value.

23. PERPETUAL BOND

On 13 December 2013, the Company issued a total of RM609 million in nominal value of unrated subordinated Islamic Perpetual Notes

(“Sukuk Musharakah”) via private placement on a best effort basis without prospectus pursuant to a Sukuk Musharakah Programme

(“Perpetual bond”) of up to RM700 million in nominal value. The Perpetual bond is established to raise funds as and when required to be

utilised for Shariah-compliant purposes which include the Company’s investments and working capital.

The salient features of the Perpetual bond are as follows:

(i) The Perpetual bond is issued under the Islamic principle of Musharakah, while the principle of Commodity Musawamah will be

employed to effect the deferral of the periodic distributions, if any;

(ii) Perpetual in tenure, where the Company has a call option to redeem the Perpetual bond at the end of the fifth year and on each

periodic distribution date thereafter;

(iii) The Company also has the option to redeem the Perpetual bond if there is a change in accounting standards resulting in the

Perpetual bond no longer being classified as equity;

(iv) The expected periodic distribution up to year 5 is 5.95% per annum payable semi-annually. If the Company does not exercise its

option to redeem at the end of the 5th year, the periodic distribution increases by 1% per annum subject to a maximum rate of 20%;

(v) Deferred periodic distribution, if any, will be cumulative but will not earn additional profits (i.e. there will be no compounding);

(vi) Payment obligations on the Perpetual bond will at all times, rank ahead of other share capital instruments for the time being outstanding, but

junior to the claims of present and future creditor of the Company (other than obligations ranking pari passu with the Perpetual bond); and

(vii) The Perpetual bond is not rated and is unsecured.