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77 ANNUAL REPORT 2010
for the year ended 30 June 2010
Notes to the Financial Statements continued
The Deferred Share Plan (DSP) Terms and Conditions were approved by shareholders at the 2002 AGM. The DSP governed equity bene ts
to Executives within the Qantas Group. There have been no modi cations to the DSP Terms and Conditions during the year.
Eligible employees may be awarded equity bene ts under the Qantas Pro tshare Scheme.
Further details regarding the operation of equity plans for Executives are outlined in the Directors’ Report.
The total equity settled share-based payment expense for the year was $21 million (2009: $59 million).
(A) LONG TERM INCENTIVE PLAN (LTIP)
The LTIP is speci cally targeted to Senior Executives in key roles or other participants who have been identi ed as high potential Executives. 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.
Number of Rights
Performance Rights Reconciliation 2010 2009
Rights outstanding as at 1 July 6,916,092 6,121,033
Rights granted 3,925,000 3,117,000
Rights lapsed (865,690) (1,301,362)
Rights expired (242,400) –
Rights vested (888,116) (1,020,579)
Rights outstanding as at 30 June 8,844,886 6,916,092
Rights exercisable as at 30 June 510,902 1,311,949
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.
Based on the performance hurdle tested as at 30 June 2010, 108,114 Rights will expire from the 2005/2006 award (2009: 242,400 Rights from
the 2004/2005 award).
During the year, 888,116 Rights were exercised (2009: 1,020,579).
At 30 June 2010, 26,271 Rights are available to be exercised at the request of the Executive under the 2004/2005 award, 96,040 Rights under the
2005/2006 award and a further 388,591 Rights under the 2006/2007 award (2009: 27,535 Rights under the 2004/2005 award and 143,733 Rights
under the 2005/2006 award). For more information on the operation of the LTIP, see page 35.
FAIR VALUE CALCULATION
The estimated value of Rights granted with the TSR performance hurdle component was determined at grant date using a Monte Carlo model.
A Black Scholes model was used to value the Rights with the EPS performance hurdle. The weighted average fair value of Rights granted during
the year was $2.05 (2009: $1.64).
Inputs into the Models 2010 2009
Weighted average share value $2.54 $2.13
Expected volatility 45% 50%
Dividend yield 2.8% 3.5%
Risk-free interest rate 4.7% 3.6%
The expected volatility for the 2009/2010 award was determined having regard to the historical one year volatility of Qantas shares and the implied
volatility on exchange traded options. The risk-free rate was the yield on an Australian Government bond at the grant date matching the remaining
life of the plan. The yield is converted into a continuously compounded rate in the model. The expected life assumes immediate exercise after vesting.
24. Share-based Payments