Qantas 2007 Annual Report Download - page 114

112 Qantas |Annual Report 2007
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 60.
Performance Rights Plan
The PRP is specifically targeted to Senior Executives in key roles or other participants who have been identified 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. TSR testing for each award commences three years after the Rights are
granted and is performed quarterly over the following two years, or until the test indicates that full vesting has been achieved. If the target is not met,
or the Executive ceases employment prior to vesting, all of the Rights granted will lapse. Vesting of the Rights granted under the 2003/04 award were
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.
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.
Performance Rights Reconciliation
2007 2006
Number
of Rights
Number
of Rights
Rights outstanding at 1 July 4,590,000 3,476,500
Rights granted 2,044,300 1,662,000
Rights forfeited (279,000) (548,500)
Rights exercised (1,316,500) –
Rights expired ––
Rights outstanding as at 30 June 5,038,800 4,590,000
Rights exercisable as at 30 June 675,748 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,
1,316,500 Rights were exercised (2006: nil). Subject to confirmation of the achievement of the performance hurdle tested as at 30 June 2007, for the
2004/05 award, 675,748 Rights may vest after 15 August 2007. A further 944,752 Rights may vest, subject to achievement of the performance hurdle,
which will be retested quarterly until the earlier of 30 June 2009 or until full vesting is achieved. For more information on the operation of the PRP, see
page 61.
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 $2.92 (2006: $2.44).
Inputs into the models
Monte-Carlo Valuation Methodology
2007 2006
Weighted average share value $3.90 $3.57
Expected volatility 24% 16-18%
Dividend yield 6.0% 5.5%
Risk-free interest rate 5.7% 5.2%
The expected volatility was determined having regard to the historical one to two 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.
24. Key Management Personnel and Executive Equity Benefits continued
Notes to the Financial Statements
for the year ended 30 June 2007