Qantas 2006 Annual Report Download - page 111

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109
Qantas Annual Report 2006
Notes to the Financial Statements
for the year ended 30 June 2006
SHARE-BASED PAYMENT
The DSP Terms & Conditions were approved by shareholders at the 2002 AGM. The DSP governs the provision of equity benefits to Executives within Qantas.
Any modifications to the DSP Terms & Conditions are outlined on page 58.
PERFORMANCE RIGHTS PLAN
The PRP is specifi cally targeted to Senior Executives in key roles or other participants who have been identifi ed as high potential Executives.
Rights granted under this Plan are subject to a Performance Hurdle, being TSR in comparison to a basket of listed global airlines and the largest Australian
listed public companies as measured by the S&P/ASX 100 Index. The TSR will first be tested three years after the Rights are granted and re-tested, if necessary,
at quarterly intervals over the subsequent two-year period. Vesting of the Rights granted under the 2003/04 Award are subject to a Performance Hurdle based
on the achievement of the three year average annual RoTGA targets for the three years to 30 June 2006. If the target is not met, or the Executive ceases
employment prior to vesting, all of the Rights granted will lapse.
All Rights are redeemable on a one-for-one basis for Qantas shares, subject to the achievement of the Performance Hurdle. Dividends are not payable on the Rights.
2006 2005
Number of
Rights
Number of
Rights
PERFORMANCE RIGHTS RECONCILIATION
Rights outstanding at 1 July 3,476,500 1,586,000
Rights granted during the year 1,662,000 1,959,500
Rights forfeited during the year (548,500) (69,000)
Rights exercised during the year – –
Rights expired during the year – –
Rights outstanding at 30 June 4,590,000 3,476,500
Rights exercisable at 30 June 1,351,500 –
All Rights were granted with a nil exercise price. No amount has been paid, or is payable by the Executive, in relation to these Rights. During the year, no
Rights were exercised (2005: nil). 1,351,500 Rights may vest after 28 August 2006, subject to a testing date of 30 June 2006. For more information on the
operation of the PRP, see page 59.
Fair Value Calculation
The estimated value of Rights granted under Plans before 1 July 2004 is calculated at the date of grant using the Black-Scholes Option Valuation Methodology.
The estimated value of Rights granted under Plans post 1 July 2004 is calculated at the date of grant using a Monte-Carlo Valuation Methodology.
The weighted average fair value of Rights granted during the year was $2.44 (2005: $2.37).
Monte-Carlo Valuation
Inputs into the Models 2006 2005
Weighted average share value 3.57 3.50
Expected volatility 16-18% 18-22%
Dividend yield 5.5% 5.1%
Risk-free interest rate 5.2% 5.2%
The volatility range was determined having regard to the historical 1-2 year volatility of Qantas and the implied volatility on exchange traded options. The risk
free rate was the yield on a five year Australian Government Bond. The expected life assumes immediate exercise after vesting.