PARTNER COMMUNICATIONS CO LTD | CIK:0001096691 | 3

  • Filed: 3/29/2018
  • Entity registrant name: PARTNER COMMUNICATIONS CO LTD (CIK: 0001096691)
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  • SEC filing page: http://www.sec.gov/Archives/edgar/data/1096691/000117891318001012/0001178913-18-001012-index.htm
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    • ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory

    NOTE 21 – EQUITY AND SHARE BASED PAYMENTS

    a.
    Share capital:

    The Company's share capital consists of ordinary shares, which are traded on the Tel Aviv Stock Exchange Ltd. under the symbol "PTNR", and are quoted on the NASDAQ Global Select Market™, in the form of American Depositary Shares ("ADSs"), each representing one of the Company’s ordinary shares, under the symbol "PTNR", according to the dual listing regulations. The ADSs are evidenced by American Depositary Receipts ("ADRs"). Since November 2011, Citibank, N.A. serves as the Company's depository for ADSs. The holders of ordinary shares are entitled vote in the general meetings of shareholders and to receive dividends as declared.

    Under the provisions of the Company's licenses (note 1(d)), restrictions are placed on transfer of the Company's shares and placing liens thereon. The restrictions include the requirement of advance written consent of the Minister of Communications be received prior to transfer of 10% or more of the Company's shares to a third party. The restrictions require that the "founding shareholders or their approved substitutes", as defined in the cellular license, hold at least 26% of the means of control in the Company, including 5% which must be held by Israeli shareholders (Israeli citizens and residents), who were approved as such by the Minister of Communications.

    Through December 31, 2008 the Company purchased its own 4,467,990 shares at the cost of NIS 351 million ("treasury shares"). In accordance with the Israeli Companies Law, the treasury shares are considered dormant shares as long as they are held by the Company, and as such they do not bear any rights (including the right to vote in general meetings of shareholders and to receive dividends) until they are transferred to a third party. Of which 2,850,472 remained as of December 31, 2017. Of which 1,376,381were allocated as of December 31, 2017 to a trustee on behalf of the Company's employees under the Company's Equity Incentive Plan (see (b) below). These shares are under the control of the Company until vested under the plan and therefore are not presented in the financial statements as outstanding shares until vested (restricted shares ("RSAs")).

    In June 2017, the Company issued 10,178,211 shares of the Company to the public and to classified investors, following a tender under a shelf offering, and by way of a private placement. The total net consideration received was approximately NIS 190 million. The offering expenses totaled NIS 7 million.

    b.
    Share based compensation to employees
     
    (1)
    Description of the Equity Incentive Plan
     
    Share options and restricted shares were granted to employees in accordance with Company's Equity Incentive Plan (the "Plan"). It includes allocation of restricted shares ("RSAs") to the Company's employees and officers and determines the right to vote at the general meetings of shareholders and the right to receive dividends distributed with respect to the restricted shares. The committee may set performance targets as a vesting criterion (independently or in combination with other criteria).
     
    The total number of Company's shares reserved for issuance upon exercise of all options or upon the earning of the restricted shares granted under the Plan is 25,917,000, of which 7,816,113 remained ungranted as of December 31, 2017. The vesting of the options and the earning of the restricted shares are subject to vesting/restriction periods. The vesting of the options and the earning of the restricted shares granted after June 2014 are also subject to performance conditions set by the Company's organs. The Company expects that the performance conditions will be met. The Plan's principal terms of the options include:

    -
    Exercise price adjustment: The exercise price of options shall be reduced in the following events: (1) dividend distribution other than in the ordinary course: by the gross dividend amount so distributed per share, and (2)  dividend distribution in the ordinary course: the exercise price shall be reduced by the amount of a dividend in excess of 40% of the Company’s net income for the relevant period per share, or by the gross dividend amount so distributed per share ("Full Dividend Mechanism"), depending on the date of granting of the options.

    -
    Cashless exercise:  Most of the options may be exercised only through a cashless exercise procedure, while holders of other options may choose between cashless exercise and the regular option exercise procedure. In accordance with such cashless exercise, the option holder would receive from the Company, without payment of the exercise price, only the number of shares whose aggregate market value equals the economic gain which the option holder would have realized by selling all the shares purchased at their market price, net of the option exercise price.
     
    (2)
    Information in respect of options and restricted shares granted under the Plan:
     
       
    Through December 31, 2017
    		  
       
    Number of options
    		    
    Number of RSAs
    		  
    Granted
    		    
    31,304,207
    		      
    4,298,768
    		  
    Shares issued upon exercises and vesting
    		    
    (6,430,589
    )
    		    
    (1,617,518
    )
    Cancelled upon net exercises, expiration and forfeitures
    		    
    (16,165,135
    )
    		    
    (1,336,953
    )
    Outstanding
    		    
    8,708,483
    		      
    1,344,297
    		  
    Of which:
    		                
    Exercisable
    		    
    5,190,586
    		      
    26,556
    		  
    Vest in 2018
    		    
    2,502,089
    		      
    891,309
    		  
    Vest in 2019
    		    
    667,254
    		      
    280,115
    		  
    Vest in 2020
    		    
    348,554
    		      
    146,317
    		  

    As of December 31, 2017 the Company expects to record a total amount of compensation expenses of approximately NIS 16 million during the next three years with respect to options and restricted shares.

    (3)
    Options and RSAs status summary as of December 31, 2015, 2016 and 2017 and the changes therein during the years ended on those dates:
     
       
    Year ended December 31
    		  
       
    2015
    		    
    2016
    		    
    2017
    		  
       

    Number
    		    
    Weighted average
    exercise price
    		    

    Number
    		    
    Weighted average
    exercise price
    		    

    Number
    		    
    Weighted average
    exercise price
    		  
    Share Options:
    		        
    NIS
    		          
    NIS
    		          
    NIS
    		  
    Outstanding at the beginning of the year
    		    
    8,962,116
    		      
    32.08
    		      
    12,686,317
    		      
    29.52
    		      
    11,285,901
    		      
    29.14
    		  
    Granted during the year
    		    
    5,519,031
    		      
    17.41
    		      
    998,433
    		      
    18.14
    		      
    1,201,358
    		      
    19.45
    		  
    Exercised during the year
    		    
    (32,880
    )
    		    
    13.12
    		      
    (284,251
    )
    		    
    15.74
    		      
    (1,906,991
    )
    		    
    17.38
    		  
    Forfeited during the year
    		    
    (1,459,215
    )
    		    
    28.7
    		      
    (1,219,648
    )
    		    
    20.58
    		      
    (988,566
    )
    		    
    22.91
    		  
    Expired during the year
    		    
    (302,735
    )
    		    
    58.61
    		      
    (894,950
    )
    		    
    38.16
    		      
    (883,219
    )
    		    
    43.10
    		  
    Outstanding at the end of the year
    		    
    12,686,317
    		      
    29.52
    		      
    11,285,901
    		      
    29.14
    		      
    8,708,483
    		      
    29.67
    		  
    Exercisable at the end of the year
    		    
    4,615,076
    		      
    45.97
    		      
    5,912,904
    		      
    37.77
    		      
    5,190,586
    		      
    36.66
    		  
    Shares issued during the year due exercises
    		    
    8,496
    		              
    47,484
    		              
    319,259
    		          
                                                     
    RSAs:
    		                                                
    Outstanding at the beginning of the year
    		    
    1,589,990
    		              
    2,900,626
    		              
    1,955,414
    		          
    Granted during the year
    		    
    1,779,596
    		              
    417,176
    		              
    507,146
    		          
    Vested during the year
    		    
    (6,015
    )
    		            
    (858,397
    )
    		            
    (753,106
    )
    		        
    Forfeited during the year
    		    
    (462,945
    )
    		            
    (503,991
    )
    		            
    (365,157
    )
    		        
    Outstanding at the end of the year
    		    
    2,900,626
    		              
    1,955,414
    		              
    1,344,297
    		          
     
       
    Options granted in 2015
    		    
    Options granted in 2016
    		    
    Options granted in 2017
    		  
    Weighted average fair value of options granted using the
    		                  
        Black & Scholes option-pricing model – per option (NIS)
    		    
    5.37
    		      
    5.02
    		      
    5.43
    		  
    The above fair value is estimated on the grant date based on the following weighted average assumptions:
    		                        
    Expected volatility
    		    
    39.28
    %
    		    
    39.5
    %
    		    
    37.6
    %
    Risk-free interest rate
    		    
    0.54
    %
    		    
    0.54
    %
    		    
    0.53
    %
    Expected life (years)
    		    
    3
    		      
    3
    		      
    3
    		  
    Dividend yield
    		    
    *
    		      
    *
    		      
    *
    		  

    *   Due to the Full Dividend Mechanism the expected dividend yield used in the fair value determination of such options was 0% for the purpose of using the Black & Scholes option-pricing model.
     
    The expected volatility is based on a historical volatility, by statistical analysis of the daily share price for periods corresponding the option's expected life. The expected life is expected length of time until expected date of exercising the options, based on historical data on employees' exercise behavior and anticipated future condition. The fair value of RSAs was evaluated based on the stock price on grant date.
     
    (4)
    Information about outstanding options by expiry dates
     
    Share options oustanding as of December 31, 2017 have the following expiry dates and exercise prices:
     

    Expire in
    		  
    Number of share options
    		    
    Weighted average exercise price in NIS
    		  
    2018
    		    
    371,687
    		      
    25.55
    		  
    2019
    		    
    1,191,771
    		      
    49.77
    		  
    2020
    		    
    2,324,841
    		      
    37.66
    		  
    2021
    		    
    2,947,959
    		      
    21.69
    		  
    2022
    		    
    826,533
    		      
    21.66
    		  
    2023
    		    
    1,045,692
    		      
    19.26
    		  
         
    8,708,483
    		      
    29.67