Abacus Property Group – Annual Financial Report 2018

ABACUS PROPERTY GROUP
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2018
20. SECURITY BASED PAYMENTS
(a) Recognised security payment expenses
The expense recognised for employee services received during the year is as follows:
2018 2017
$'000
$'000
Expense arising from equity-settled payment transactions 3,296 2,062
(b) Type of security – based payment plan
Security Acquisition Rights (SARs)
The deferred variable incentive plan has been designed to align the interests of executives with those of
securityholders by providing for a significant portion of the remuneration of participating executives to be linked to
the delivery of sustainable underlying profit that covers the distribution level implicit in the Group’s security price.
Key executives have been allocated SARs in the current financial year generally equal to the last current variable
incentive paid. Allocations were based on the performance assessment completed in determining current
variable incentive awards for the prior financial year, adjusted to take into account other factors that the Board
considers specifically relevant to the purpose of providing deferred variable incentives.
The SARs granted during the year vest as follows:
Vesting date Amount Vested* Potential number to vest
September 2018 One quarter of the initial issue 128,456
September 2019 One quarter of the initial issue 128,456
September 2020 One quarter of the initial issue 128,456
September 2021 One quarter of the initial issue 128,456
* The Board is able to claw back unvested SARs if the distribution level fails by more than 10% below the sustainable annual distribution
rate
For valuation purposes the SARs are equivalent to European call options (in that they may be “exercised” only at
their maturity (i.e. vesting date)). The fair value of the SARs granted is estimated at the date of the grant using a
trinomial tree model (using 500 steps) cross checked by a modified Black-Scholes model. The trinomial tree
model and the Black-Scholes model generally produce the same values for an option over a non-dividend paying
share, or where the option is entitled to the same distributions as are paid on the underlying security, as is
assumed in this case, and if the time to exercise is the same, (i.e. at the end of the term).
When SARs vest they will convert into ABP securities on a one for one basis or at the Board’s discretion a cash
equivalent amount will be paid.
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