Air New Zealand 2011 Annual Report Download - page 47

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22. ISSUED CAPITAL (CONTINUED)
The general principles underlying the Black Scholes option pricing model have been used to value these options using a Monte Carlo
simulation approach. The key inputs to this model for options granted in that year were as follows:
GROUP AND COMPANY
2011 2010 2009
Weighted average share price (cents) 129 124 114
Expected volatility of share price (%) 37 40 37
Expected volatility of performance benchmark index (%) 17 17 15
Correlation of volatility indices 0.45 0.50 0.45
Contractual life (years) 4.0 5.0 6.0
Risk free rate (%) 4.46 5.50 5.90
Expected dividend yield 5.4 5.2 7.5
Discount to reflect negotiability restrictions (%) 20 25 25
The exercise price has been modelled as a stochastic variable, using the volatility, correlation, dividend yield and risk free rate
assumptions detailed above.
The volatility and correlation estimates were derived from measuring these parameters using historical data over the preceding two to
four years (2010: three to five years). The risk free rate was based on the four year zero bond coupon yield (2010: five year zero bond
coupon yield) implied from short to medium term yields for government bonds.
The expected life used in calculating the value of options was determined by analysis of the attrition rates and early exercise behaviour
of staff in long term incentive programmes in similar large corporates.
Application of treasury stock method
Unallocated shares of the Air New Zealand Staff Share Schemes are accounted for under the Treasury Stock method, and deducted
from Ordinary Share capital on consolidation. The number of unallocated shares as at 30 June 2011 was 93 (30 June 2010: 93).
Kiwi Share
One fully paid special rights convertible share (the Kiwi Share) is held by the Crown. While the Kiwi Share does not carry any general
Voting Rights, the consent of the Crown as holder is required for certain prescribed actions of the Company as specified in the
Constitution.
Voting rights
On a show of hands or by a vote of voices, each holder of Ordinary Shares has one vote. On a poll, each holder of Ordinary Shares has
one vote for each fully paid share.
All Ordinary Shares carry equal rights to dividend and equal distribution rights on wind up.
AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2011