2002 Qantas Annual Report
2002 Qantas Annual Report
2002 Qantas Annual Report
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directors’ report continued<br />
for the year ended 30 June <strong>2002</strong><br />
Share entitlements<br />
On 6 December 2001, <strong>Qantas</strong> awarded 350,000 entitlements to be issued shares in <strong>Qantas</strong> to a number of senior executives<br />
under the <strong>Qantas</strong> Long-Term Executive Incentive Plan. These entitlements may vest and be convertible to shares between three<br />
and five years following award date, conditional on the executive remaining a <strong>Qantas</strong> Group employee and on the<br />
achievement of specific performance hurdles set by the Board. These hurdles are set by reference to the percentile<br />
performance of <strong>Qantas</strong> (based upon average relative total shareholder return) within a modified S&P ASX 200 Index and<br />
within an international airline “peer group”.<br />
To the extent that any entitlements vest, they may be converted into shares within eight years of award in proportion to the<br />
gain in share price from the date the entitlements are awarded to the date they are converted to shares. Entitlements not<br />
converted to shares within eight years of the vesting date will expire.<br />
No entitlements have vested or expired (other than by way of eligible employees leaving <strong>Qantas</strong>) as yet under the Plan, nor<br />
have any shares been issued. Entitlements will be included in remuneration once they have vested.<br />
None of the entitlements awarded under the Plan during the year were granted to Executive Directors or the five most highly<br />
remunerated executive officers of <strong>Qantas</strong> and the <strong>Qantas</strong> Group.<br />
Total entitlements outstanding at 30 June <strong>2002</strong> under the Plan are as follows:<br />
Exercise Number of Entitlements 2,3 Value per Entitlement 4<br />
Price <strong>2002</strong> 2001 <strong>2002</strong> 2001<br />
Expiry Date $ $ $<br />
17 November 2007 4.99 5,901,500 8,115,500 1.32 0.48<br />
24 November 2008 3.44 30,590,000 35,250,000 1.85 0.89<br />
24 November 2008 3.62 760,000 760,000 1.79 0.84<br />
6 December 2009 1 3.25 350,000 – 1.93 –<br />
1 These entitlements were granted during the financial year. No entitlements have been granted since the end of the financial year.<br />
2 These entitlements do not allow the holder to participate in any share issue of <strong>Qantas</strong> or the <strong>Qantas</strong> Group.<br />
3 The market price of <strong>Qantas</strong> shares at 30 June <strong>2002</strong> was $4.60 (30 June 2001: $3.50).<br />
4 The estimated value per entitlement disclosed above is calculated at 30 June <strong>2002</strong> using an actuarial simulation methodology, taking into account the<br />
performance hurdles and the possibility of conversion of vested entitlements before the expiry date.<br />
In addition to the amounts noted above, $500 of <strong>Qantas</strong> shares were issued on 7 December 2001 for nil consideration under<br />
the <strong>Qantas</strong> Profitshare Scheme to each eligible employee (excluding Non-Executive Directors). This equated to 126 shares per<br />
eligible employee at an average price at date of issue of $3.95.<br />
Environmental obligations<br />
The <strong>Qantas</strong> Group’s operations are subject to a range of Commonwealth, State, Territory and international environmental<br />
legislation. The <strong>Qantas</strong> Group is committed to a high standard of environmental performance and the Board places particular<br />
focus on the environmental aspects of its operations through the Safety, Environment & Security Committee, which is<br />
responsible for monitoring compliance with these regulations and reporting to the Board.<br />
The Directors are satisfied that adequate systems are in place for the management of the <strong>Qantas</strong> Group’s environmental<br />
exposures and environmental performance. The Directors are also satisfied that all relevant licences and permits are held<br />
and that appropriate monitoring procedures are in place to ensure that those licences and permits are complied with. Any<br />
significant environmental incidents are reported to the Board.<br />
The Directors are not aware of any breaches of any environmental legislation or of any significant environmental incidents during<br />
the financial year which are material in nature.<br />
Derivatives and other financial instruments<br />
The <strong>Qantas</strong> Group’s activities expose it to changes in interest rates, foreign exchange rates and fuel prices. It is also exposed<br />
to credit risks from its operations. The <strong>Qantas</strong> Group manages these risk exposures using various financial instruments, based<br />
upon a set of policies approved by the Board. Compliance with these policies is strictly monitored by management and<br />
reported to the Board.<br />
It is the <strong>Qantas</strong> Group’s policy not to enter, issue or hold derivative financial instruments for speculative trading purposes.<br />
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THE SPIRIT OF AUSTRALIA