Qantas 2002 Annual Report Download - page 34

p32 THE SPIRIT OF AUSTRALIA
directors’ report continued
for the year ended 30 June 2002
Share entitlements
On 6 December 2001, Qantas awarded 350,000 entitlements to be issued shares in Qantas to a number of senior executives
under the Qantas Long-Term Executive Incentive Plan . These entitlements may vest and be convertible to shares between three
and five years following award date, conditional on the executive remaining a Qantas Group employee and on the
achievement of specific performance hurdles set by the Board. These hurdles are set by reference to the percentile
performance of Qantas (based upon average relative total shareholder return) within a modified S&P ASX 200 Index and
within an international airline “peer group”.
To the extent that any entitlements vest, they may be converted into shares within eight years of award in proportion to the
gain in share price from the date the entitlements are awarded to the date they are converted to shares. Entitlements not
converted to shares within eight years of the vesting date will expire.
No entitlements have vested or expired (other than by way of eligible employees leaving Qantas) as yet under the Plan, nor
have any shares been issued. Entitlements will be included in remuneration once they have vested.
None of the entitlements awarded under the Plan during the year were granted to Executive Directors or the five most highly
remunerated executive officers of Qantas and the Qantas Group.
Total entitlements outstanding at 30 June 2002 under the Plan are as follows:
Exercise Number of Entitlements2,3 Value per Entitlement4
Price 2002 2001 2002 2001
Expiry Date $ $$
17 November 2007 4.99 5,901,500 8,115,500 1.32 0.48
24 November 2008 3.44 30,590,000 35,250,000 1.85 0.89
24 November 2008 3.62 760,000 760,000 1.79 0.84
6 December 200913.25 350,000 – 1.93 –
1These entitlements were granted during the financial year. No entitlements have been granted since the end of the financial year.
2These entitlements do not allow the holder to participate in any share issue of Qantas or the Qantas Group.
3The market price of Qantas shares at 30 June 2002 was $4.60 (30 June 2001: $3.50).
4The estimated value per entitlement disclosed above is calculated at 30 June 2002 using an actuarial simulation methodology, taking into account the
performance hurdles and the possibility of conversion of vested entitlements before the expiry date.
In addition to the amounts noted above, $500 of Qantas shares were issued on 7 December 2001 for nil consideration under
the Qantas Profitshare Scheme to each eligible employee (excluding Non-Executive Directors). This equated to 126 shares per
eligible employee at an average price at date of issue of $3.95.
Environmental obligations
The Qantas Group’s operations are subject to a range of Commonwealth, State, Territory and international environmental
legislation. The Qantas Group is committed to a high standard of environmental performance and the Board places particular
focus on the environmental aspects of its operations through the Safety, Environment & Security Committee, which is
responsible for monitoring compliance with these regulations and reporting to the Board.
The Directors are satisfied that adequate systems are in place for the management of the Qantas Group’s environmental
exposures and environmental performance. The Directors are also satisfied that all relevant licences and permits are held
and that appropriate monitoring procedures are in place to ensure that those licences and permits are complied with. Any
significant environmental incidents are reported to the Board.
The Directors are not aware of any breaches of any environmental legislation or of any significant environmental incidents during
the financial year which are material in nature.
Derivatives and other financial instruments
The Qantas Group’s activities expose it to changes in interest rates, foreign exchange rates and fuel prices. It is also exposed
to credit risks from its operations. The Qantas Group manages these risk exposures using various financial instruments, based
upon a set of policies approved by the Board. Compliance with these policies is strictly monitored by management and
reported to the Board.
It is the Qantas Group’s policy not to enter, issue or hold derivative financial instruments for speculative trading purposes.