IGO Interactive Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 Notes to the consolidated financial statements 30 June 2020 (continued) 26 Share-based payments (continued) Service rights - LTI scheme (continued) The number of rights to be granted is determined based on the 5 day VWAP of the Company's shares after the release of IGO Limited's financial statements. Set out below are summaries of movements in service rights during the year: 2020 2019 Number of share rights Weighted average fair value Number of share rights Weighted average fair value Outstanding at the beginning of the year 437,686 4.01 290,202 3.51 Rights issued during the year 338,175 5.88 320,780 4.21 Rights vested during the year (279,978) 3.90 (152,650) 3.51 Rights lapsed during the year (19,795) 4.77 (20,646) 3.87 Outstanding at the end of the year 476,088 5.36 437,686 4.01 The share-based payments expense relating to service rights included in profit or loss for the year totalled $1,614,857 (2019: $1,116,176). Employee Share Ownership Award In accordance with the terms of the EIP, the Employee Share Ownership Award (ESOA) provides for shares to be issued by the Company to employees for no cash consideration. All employees (excluding executive directors, senior management and other employees entitled to participate in the LTI scheme and non-executive directors) who have been continuously employed by the Group for a period of at least three months prior to 1 July are eligible to participate in the ESOA. Under the ESOA, eligible employees may be granted up to $1,000 worth of fully paid ordinary shares in IGO Limited annually for no cash consideration. The number of shares issued to participants in the scheme is the offer amount divided by the weighted average price at which the Company's shares are traded on the Australian Securities Exchange for the 20 days up to and including the date of grant. 2020 Number 2019 Number Number of shares issued under the plan to participating employees 39,240 25,338 Each participant was issued with shares worth $1,000 based on the weighted average market price of $4.58 (2019: $4.85). The share-based payments expense relating to ESOA included in profit or loss for the year totalled $179,719 (2019: $122,889). Employee Salary Sacrifice Share Plan In accordance with the terms of the EIP, the Employee Salary Sacrifice Plan allows for employees, excluding KMP, to purchase up to $5,000 of shares in the Company via salary sacrifice. The Company will match any share purchased with one share, up to a maximum of $5,000 (2019: any two shares purchased were matched with one share, up to a maximum of $2,500). The number of shares acquired on-market by the Company during the year for the purposes of this plan were 159,712 shares with an average price per share of $5.32 (2019: 69,970 shares with an average price per share of $4.50). The share rights issued under the EIP will not be subject to any further escrow restrictions once they have vested to the employees. Share trading policy The trading of shares issued to participants under the Company’s EIP is subject to, and conditional upon, compliance with the Company’s employee share trading policy. Notes to the consolidated financial statements 30 June 2020 (continued) 26 Share-based payments (continued) Non-executive Directors The EIP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not currently intended that non-executive directors will be issued with performance rights under the EIP and any such issue would be subject to all necessary shareholder approvals. (b) Recognition and measurement Equity-settled transactions The fair values of equity settled awards are recognised in share-based payments expense, together with a corresponding increase in share-based payments reserve within equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value is determined with the assistance of a valuation software using a trinomial tree which has been adopted by the Boyle and Law (1994) node alignment algorithm, and takes into account the exercise price, the term of the performance right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the share right and the correlations and volatilities of the peer group companies. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: (i) the extent to which the vesting period has expired, and (ii) the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at the reporting date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award is treated as if it was a modification of the original award, as described in the previous paragraph. 27 Related party transactions (a) Transactions with other related parties During the financial year, a wholly-owned subsidiary paid dividends of $195,000,000 to IGO Limited (2019: $78,000,000). Any such amounts are eliminated on consolidation for the purposes of calculating the profit of the Group for the financial year. Loans were made between IGO Limited and certain entities in the wholly-owned group. The loans receivable from controlled entities are interest-free and repayable on demand. (b) Key management personnel Compensation of key management personnel 2020 $ 2019 $ Short-term employee benefits 5,851,169 5,313,201 Post-employment benefits 305,561 301,780 Long-term benefits 138,450 86,066 Share-based payments 2,614,857 1,901,926 8,910,037 7,602,973 Detailed remuneration disclosures are provided in the remuneration report on pages 53 to 70. 120 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 121