RNS Number:5015S
National Australia Bank Ld
26 November 2003
PART 4(B)
39 Employee share, bonus and option plans
Employee share, bonus, option and performance rights plans are the vehicles
primarily used by the Group as long-term incentives for employees. Long-term
incentive plans are an integral part of the Group's remuneration program in
rewarding an employee's contribution and potential contribution to the Group's
performance. The non-executive director share arrangement aligns interests with
shareholders and provides flexibility in remuneration structure. These plans
involve the issue of shares to employees of the Group and non-executive
directors of the Company, and options and performance rights to senior employees
of the Group.
(a) National Australia Bank Staff Share Ownership Plan (staff share ownership
plan)
The staff share ownership plan was approved by shareholders by special
resolution in January 1997. Shareholders again approved the staff ownership
plan at the 2002 annual general meeting. Details of issues and acquisitions are
set out in table 1, below.
This plan provides for the Board to invite any employee or non-executive
director of the Group to participate under this plan. The Board may also invite
any employee to apply for a loan to acquire shares or offer to have the Company
provide funds to acquire shares subject to the provisions of applicable laws and
regulations (including the United States Sarbanes-Oxley Act of 2002). The Board
determines the number of shares to be made available and the price per share.
The Company may provide funds for a trustee to subscribe for or purchase fully
paid ordinary shares in the Company on behalf of participating employees or
non-executive directors (if required). The trustee must subscribe for or
purchase the shares within a predetermined timeframe.
Shares acquired under this plan are held in trust and may not be dealt with by
the employee or non-executive director until a prescribed period after they were
acquired, unless otherwise determined by the Board. A certain number of the
shares may also be forfeited in certain limited circumstances. In particular,
directors' fees provided to non-executive directors in the form of shares under
the plan cannot be transferred to a participant until the earliest of:
* the expiration of a period set by the trustee at the time of
the acquisition of the participant's shares (participants may express a
preference for a restriction period of any length between 1 and 10 years);
* the time the participant ceases to hold office; and
* the time the trustee determines that an 'event' has happened
(for example, a takeover offer being made in relation to the Company).
If shares are acquired using a loan under this plan, the shares are held in
trust until the loan is repaid. For so long as the loan is not due for
repayment, the loan is provided at no interest and the loan will be repaid by
the dividends from the shares. The loan must be repaid if the employee ceases
employment with the Group. An employee may direct the trustee to sell the
shares to satisfy this repayment obligation. If the proceeds of the sale are
insufficient to fully repay the outstanding loan balance, the Company will
forgive the difference.
A number of offers were made under this plan in 2003:
* shares were provided to non-executive directors as part of
their remuneration, rather than payment of cash. Every six months, at least 10%
and up to 40% of their remuneration for that fee period is provided as shares
acquired under this plan;
* the Wealth Management ownership offer provides for certain
Wealth Management employees to receive up to 5% of their notional benefit salary
in shares under this plan, based on length of service (continuing an arrangement
in place prior to acquisition of the MLC group), issued bi-annually;
* permanent Wealth Management employees participate in a value
share program (known as 'owning our success') that rewards them for their
contribution to the improvement in the value of Wealth Management. Eligible
employees were able to express a preference to be provided all these rewards in
shares issued in accordance with the terms of this plan;
* certain Wealth Management employees may be provided a
performance reward for individual or team contribution to the overall
performance of Wealth Management. Eligible employees were able to express a
preference to be provided all (or, in some cases, some) of these rewards in
shares in accordance with the terms of this plan;
* the MLC group acquired an interest in Medfin Australia Pty
Ltd (Medfin) prior to the acquisition of the MLC group by the Group.
Subsequently, the remaining share capital of Medfin has been acquired by the
Group, which resulted in an obligation to provide retention benefits to Medfin
employees by way of shares in the Company. The last Medfin offer required to be
made occurred in September 2003; and
* certain Australian employees may be provided an at-risk
reward for individual and business performance. Eligible employees were able to
express a preference to be provided all or part of this reward in ordinary
shares in accordance with the terms of this plan.
As part of the acquisition of the MLC group in 2000, certain employees of the
MLC group were paid retention/transition benefits to remain within the Group.
Employees were able to express a preference to receive all or part of these
benefits in shares in accordance with the plan terms in January 2002. A final
offer was made in July 2002.
Subject to shareholder aproval of the associated arrangements at the Company's
annual general meeting to be held on December 19, 2003, the provision of
deferred shares and matching shares to the Managing Director and Chief Executive
Officer will be made under the terms of the staff share ownership plan. In
addition and also subject to the approval of the applicable arangements at the
2003 annual general meeting, provision of any shares in connection with the
discontinuation of the non-executive director's retirement benefits schemes will
also be made under the terms of the staff share ownership plan.
It is intended that ordinary shares of approximately $1,250 will be gifted to
Wealth Management employees in the 2004 year as part of the next National EVA(R)
share offer (refer to (b) below).
Shares must not be issued under this plan if the total number of shares issued
in the last five years under the Company's employee share, option or performance
rights plans and the total number of outstanding options and performance rights
granted under its plans, including any proposed offer, exceed 5% of the number
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of shares in the issued share capital of the Company at the time of the proposed
offer. This calculation does not include offers or grants made or shares,
options or performance rights acquired as a result of an offer made to a person
situated outside Australia at the time of the offer or grant which did not need
disclosure under section 708 of the Corporations Act 2001 (Cth) (eg. shares
provided to executive officers of the Company), otherwise than as a result of
relief granted by ASIC.
EVA(R) is a registered trademark of Stern Stewart & Co.
(b) National Australia Bank Staff Share Allocation Plan (staff share allocation
plan)
The staff share allocation plan was approved by shareholders by special
resolution in January 1997. Shareholders again approved the staff share
allocation plan at the 2002 annual general meeting. Details of issues and
acquisitions are set out in table 1, below.
This plan provides for the Board to invite any employee of the Group to
participate in an offer under this plan. Under this plan, the Company provides
funds (if required) for a trustee to subscribe for or purchase fully paid
ordinary shares in the Company on behalf of participating employees. The shares
are held by the trustee for three years, or until the employee ceases employment
with the Group. Employees may deal with the shares when the restrictions are
released.
Following the issue of the first National Economic Value Added (EVA(R)) shares
on June 8, 2001, an extraordinary share offer under this plan was extended to
those employees who were eligible for the first offer but for certain reasons
were unable to accept the offer before it expired. So as not to disadvantage
those employees, shares were issued to them on October 11, 2001 on the same
terms as the first National EVA(R) share offer made during 2001. Eligible
employees were offered up to $1,000 of shares for no consideration as a reward
for the Group's performance in 2000 assessed against its EVA(R) target.
In November 2002 and November 2001, under the terms of this plan, an EVA(R)
share offer was made to all eligible employees (excluding employees in certain
jurisdictions and Wealth Management employees for whom there were alternate
arrangements) to acquire fully paid ordinary shares in the Company for no
consideration. Eligible employees were offered up to $960 of shares in November
2002 and $950 of shares in November 2001 as a reward for the Group's
performance in the previous year, assessed against its EVA(R) target.
It is intended that in 2004 an offer will be made to all eligible employees to
acquire approximately $1,250 worth of fully paid ordinary shares for no
consideration under the plan, in line with the Group's performance against its
2003 EVA(R) target.
Shares must not be offered under this plan if the total number of shares issued
in the last five years under the Company's employee share, option or performance
rights plans and the total number of outstanding options and performance rights
granted under its plans, including any proposed offer, exceed 5% of the number
of shares in the issued share capital of the Company at the time of the proposed
offer. This calculation does not include offers or grants made or shares,
options or performance rights acquired as a result of an offer or grant made to
a person situated outside Australia at the time of the offer or grant which did
not need disclosure under section 708 of the Corporations Act 2001 (Cth) (eg.
shares provided to executive officers of the Company), otherwise than as a
result of relief granted by ASIC.
(c) Employee Share Savings Plan - UK and Republic of Ireland (employee share
savings plan)
The employee share savings plan was approved by shareholders in 1995. Shares
acquired under this plan are shown in table 1, below. This plan ceased in March
2002, and has been replaced by the National Share Incentive Plan in the UK and
amendments to the Republic of Ireland (ROI) Group Profit Sharing Scheme (refer
below).
Full time and part time employees of controlled entities in the UK and ROI with
at least one full year's continuous service at the beginning of the savings
period were eligible to participate in this plan. This plan allowed for savings
out of salary (up to a maximum of 2%) by participating employees and the
investment of those savings by the acquisition of fully paid ordinary shares in
the Company. At the end of the savings period, the Company made a cash
contribution sufficient to purchase an equivalent number of shares as that
purchased from the accumulated savings of participating employees.
This plan operated in six monthly savings periods beginning in February and
August each year, with the final savings period from August 1, 2001 to January
30, 2002.
(d) National Share Incentive Plan - UK (share incentive plan)
The share incentive plan was approved by the shareholders at the 2002 annual
general meeting and is constituted under a trust deed made between the Company
and National Australia Group SSP Trustee Limited (trustee) dated March 26, 2002
and the rules of the share incentive plan. Within the framework of this plan,
employees participate in the National Partnership Share Plan and the National
EVA(R) share offer. Shares acquired under this plan are shown in table 1,
below.
Employees in the UK are entitled to purchase up to GBP1,500 of shares each year
through the National Partnership Share Plan. Participants contribute up to 10%
of their gross salary, each month, and the trustee uses the contributions to
purchase ordinary shares in the Company which are then held in trust for the
participants. Participants are entitled to receive dividends and exercise
voting rights in respect of these shares and there is no risk of forfeiture. A
participant's shares must be withdrawn from this plan if that participant leaves
employment of one of the relevant UK controlled entities for any reason.
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In addition, up to GBP3,000 of shares may be gifted to employees per annum
through this plan. In November 2002, under the terms of this plan, an EVA(R)
share offer was made to all eligible employees in the UK to acquire fully-paid
ordinary shares in the Company worth A$960. It is intended that ordinary shares
of approximately A$1,250 will be gifted to eligible employees in the 2004 year
as part of the next National EVA(R) share offer. These shares are subject to a
minimum year holding period during which time the shares can be forfeited if the
participant is summarily dismissed. Otherwise, a participant's free shares must
be withdrawn from this plan when they leave the relevant employment. Again,
participants are entitled to receive dividends and exercise voting rights whilst
they are members of this plan.
In both the case of the National Partnership Share Plan and the National EVA(R)
share offer, the shares will only be free of UK income tax and UK National
Insurance contributions if the shares are retained in the share incentive plan
for five years (except if they are withdrawn earlier for certain specified
reasons eg. death, redundancy or disability).
The Company may also offer up to two matching shares for each partnership share
purchased by the participant under the National Partnership Share Plan. This
facility has not so far been offered and there are no proposals to offer
matching shares at the present time.
(e) Group Profit Sharing Scheme - Republic of Ireland (profit sharing scheme)
The profit sharing scheme was approved by shareholders in January 1996 and again
at the 2002 annual general meeting and is constituted under a trust deed made
between the Company and National Australia Group SSP (Republic of Ireland)
Trustee Limited (trustee) dated January 30, 1996. This scheme was amended by
the Company's Board in September 2002 to facilitate the introduction of the
National EVA(R) share offer and Salary Forgone program for the Group's Republic
of Ireland (ROI) employees.
The plan amendments allow for the extension of the National EVA(R) share offer
to ROI employees on similar terms as the National EVA(R) share offer in
Australia and the UK as described above. In November 2002, under the terms of
this plan, an EVA(R) share offer is made to all eligible employees of the
Republic of Ireland to acquire fully-paid ordinary shares in the Company worth
A$960. It is intended that ordinary shares of approximately A$1,250 will be
gifted to eligible ROI employees in 2004 as part of the next National EVA(R)
share offer.
The Salary Forgone program enables the Group's ROI employees to save on a
monthly basis from their pre-tax salary and to acquire fully paid ordinary
shares in the Company with these funds. The number of shares made available to
employees is a function of their monthly contribution (subject to prescribed
limits), the Company's share price at the time shares are acquired and the
applicable Australian dollar to euro exchange rate, with the number of shares
being restricted by reference to the number and share price of the shares
allocated under the National EVA(R) share offer.
Eligibility for participation in the plan is prescribed in the plan rules.
Employees who are ROI tax residents and have been employed within the Group for
at least six months will be eligible to participate in the Salary Forgone
program in any year during which there is an allocation of shares under the
National EVA(R) share offer.
(f) National Australia Bank Executive Share Option Plan No. 2 (executive share
option plan no. 2)
The executive share option plan No. 2 was approved by shareholders by special
resolution in January 1997 and again at the 2002 annual general meeting and
options granted under this plan are shown in table 2, below.
This plan provides for the Board to grant options to executives of the Group to
subscribe for fully paid ordinary shares in the Company. Options must not be
granted if the total number of shares issued in the last five years under the
Company's employee share, option and performance rights plans and the total
number of outstanding options and performance rights under its plans, including
the proposed offer or grant, exceed 5% of the number of shares in the issued
share capital of the Company at the time of the proposed offer or grant. This
calculation does not include offers or grants made or shares, options or
performance rights acquired as a result of an offer or grant made to a person
situated outside Australia at the time of the offer or grant or which did not
need disclosure under section 708 of the Corporations Act 2001 (Cth) (eg. shares
provided to executive officers of the Company) otherwise than as a result of
relief granted by ASIC.
During 2003, 6,103,750 share options were granted to 842 senior employees (2002:
11,263,500 share options issued to 751 senior employees).
The options are granted free of charge to participants in this plan. There are
no voting or dividend rights attached to the options. Each option is to
subscribe for one fully paid ordinary share in the Company. The exercise price
per share for an option is the market price of the Company's fully paid ordinary
shares as at the date the option was granted or such other date determined by
the Board. The market price is determined as the weighted average of the prices
at which the Company's fully paid ordinary shares were traded on ASX in the one
week up to and including the relevant day.
Generally, these options may not be exercised before the third anniversary of
their grant, and must be exercised before the fifth or eighth anniversary
(depending on the particular terms of each option) of the grant. The Board may
determine such other terms for the grant of options consistent with the ASX
Listing Rules and the Corporations Act 2001 (Cth).
Options may, however, be exercised before the third anniversary of the grant and
notwithstanding the performance hurdle (described below) where an executive
ceases employment with the Group as the result of death or total and permanent
disablement. The Board may also allow the option holders to exercise the
options irrespective of the normal criteria where certain events occur, such as
the making of a takeover offer or announcement to the holders of fully paid
ordinary shares in the Company.
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Options will lapse if unexercised on or before their expiry date or, for options
granted prior to November 1999, if the Board determines that the holder has
acted fraudulently, dishonestly or in breach of the holder's obligations to any
entity in the Group and for options granted after November 1999, 30 days after
an executive ceases to be employed by the Group otherwise than as a result of
death or total and permanent disablement.
A loan may be available to executives if and when they wish to exercise their
options subject to the provisions of applicable laws and regulations (including
the United States Sarbanes-Oxley Act of 2002). The rules of this plan provide
that the rate of interest applicable to such a loan shall be the Company's base
lending rate plus any margin determined by the Board. Dividends payable in
respect of a loan share are applied firstly towards payment of any interest
which is due, and secondly towards repayment of the principal amount outstanding
under the loan.
Exercise of the options is subject to satisfaction of a performance hurdle. The
performance hurdle for options issued after November 1999 is measured after the
first three years by comparing the performance of the Company with the
performance of other companies in which shareholders may potentially invest.
Options become exercisable depending on the maximum total shareholder return of
the Company relative to the total shareholder return of a group of companies
(based on share price growth, assuming reinvestment of dividends) during the
relevant performance period. This group of companies is based on the top 50
companies in the S&P ASX 100 (excluding the Company), determined at the date
when the options are issued. If the relative performance of the Company during
the vesting period (years three to eight) does not exceed the 49th percentile at
any time, then no options will vest with the holder (or be exercisable). If the
relative performance of the Company reaches or exceeds the 75th percentile
during the vesting period at any time, then all options will be exercisable by
the holder. If the relative performance of the Company reaches between the 50th
and 74th percentile then a formula is applied resulting in a percentage of
between 50% and 74%, of the total options granted being exercisable by the
holder.
(g) National Australia Bank Performance Rights Plan (performance rights plan)
The performance rights plan was approved by shareholders at the 2002 annual
general meeting and performance rights issued under this plan are shown in table
2, below.
The performance rights plan provides for the Board to grant performance rights
to executives of the Group to subscribe for fully paid ordinary shares in the
Company. Performance rights cannot be granted under the performance rights plan
if the number of shares to be received on exercise of those performance rights
together with all shares issued under the Company's employee incentive plans
over the last five years and the number of outstanding options and performance
rights issued under those plans exceed 5% of the Company's issued share capital.
This calculation does not include offers or grants made or shares, options or
performance rights acquired as a result of an offer or grant made to a person
situated outside Australia at the time of the offer or grant or which did not
need disclosure under section 708 of the Corporations Act 2001 (Cth) (eg. shares
provided for no consideration under the staff share allocation plan), otherwise
than as a result of relief granted by ASIC.
During 2003, 1,551,082 performance rights were issued to 842 senior employees.
Performance rights are granted free of charge to participants in the performance
rights plan. Performance rights cannot be transferred and are not quoted on
ASX. Each performance right is to subscribe for one fully paid ordinary share in
the Company. Executives do not need to pay any amounts to the Company for the
performance rights they receive; however, the holder of a performance right must
pay a nominal exercise price to exercise the performance rights. The total
exercise price payable on the exercise of any performance rights on a particular
day is A$1.00, irrespective of the number of rights exercised on that day.
Generally, performance rights may not be exercised before the third anniversary
of their grant, and must be exercised before the fifth or eighth anniversary of
grant. The Board may determine such other terms for the grant of performance
rights consistent with ASX Listing Rules and the terms of the Corporations Act
2001 (Cth).
Performance rights may, however, be exercised before the third anniversary of
the grant and notwithstanding the performance hurdle (described below) where an
executive ceases employment with the Group as the result of death or total and
permanent disablement. The Board may also allow the performance right holders
to exercise the performance rights irrespective of the normal criteria where
certain events occur, such as the making of a takeover offer or announcement to
the holders of fully paid ordinary shares in the Company.
Exercise of the performance rights is subject to substantially the same vesting
schedule and performance hurdle as options issued under the executive share
option plan No. 2. A performance right not exercised will lapse in similar
circumstances to an unexercised option granted under the executive share option
plan No. 2.
Table 1 Employee share plans
Current employee share plans (1) Issue date No. of Issue price (2) No. of fully
eligible paid
participants ordinary shares
Staff share ownership plan
2001 Non-executive directors' shares (3) Mar 21, 2001 7 $ 28.81 3,132
2001 Wealth Management ownership offer Jun 8, 2001 2,772 $ 33.72 91,909
2001 Wealth Management Medfin offer Jun 8, 2001 35 $ 33.72 6,444
2001 Non-executive directors' shares (3) Aug 3, 2001 7 $ 33.05 3,485
2001 Wealth Management transition benefits (4) Aug 17, 2001 110 $ 34.04 34,351
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Current employee share plans (1) Issue date No. of Issue price (2) No. of fully
eligible paid
participants ordinary shares
2002 Wealth Management ownership offer Nov 9, 2001 3,044 $ 30.39 70,250
2002 Wealth Management value share program Nov 9, 2001 511 $ 30.39 20,225
2002 Wealth Management Medfin offer Nov 9, 2001 32 $ 30.39 6,676
2002 Wealth Management performance reward Dec 19, 2001 601 $ 30.97 281,458
2002 Wealth Management transition benefits Jan 11, 2002 68 $ 31.42 72,498
(4)
2002 Non-executive directors' shares Mar 26, 2002 8 $ 34.48 4,532
2002 Wealth Management ownership offer May 31, 2002 2,814 $ 36.06 72,764
2002 Wealth Management value share program May 31, 2002 1,371 $ 36.06 48,381
2002 Wealth Management performance reward May 31, 2002 21 $ 36.06 2,179
2002 Wealth Management transition benefits Jul 8, 2002 39 $ 33.91 111,241
2002 Non-executive directors' shares Aug 16, 2002 8 $ 34.51 4,701
2003 Wealth Management ownership program Nov 14, 2002 3,127 $ 32.37 92,015
2003 Wealth Management performance reward Nov 28, 2002 900 $ 33.13 279,799
2003 At-risk staff share offer Jan 3, 2003 42 $ 31.89 20,628
2003 Non-executive directors' shares Feb 27, 2003 8 $ 29.23 7,457
2003 Wealth Management ownership program May 29, 2003 3,054 $ 32.65 94,139
2003 Wealth Management performance reward May 29, 2003 13 $ 32.65 1,391
2003 Non-executive directors' shares Sep 26, 2003 8 $ 30.45 5,842
Staff share allocation plan
2001 National EVA(R) share offer Jun 8, 2001 25,025 $ 33.72 665,500
2002 National EVA(R) extraordinary share Oct 11, 2001 882 $ 28.39 30,870
offer
2002 National EVA(R) share offer Jan 4, 2002 24,227 $ 31.92 703,509
2003 National EVA(R) share offer Jan 3, 2003 35,493 $ 31.89 1,064,790
Employee share savings plan (4)
Aug 1, 1999 - Jan 31, 2000 12,694 $ 21.67 180,718
Feb 1, 2000 - Jul 31, 2000 12,911 $ 25.84 165,430
Aug 1, 2000 - Jan 31, 2001 12,599 $ 29.39 151,066
Feb 1, 2001 - Jul 31, 2001 12,386 $ 33.83 136,380
Aug 1, 2001 - Jan 31, 2002 12,562 $ 34.81 139,008
Share incentive plan (4)
May 1, 2002 - Sep 30, 2002 National 12,587 $ 34.49 60,668
Partnership Share Plan
Oct 1, 2002 - Sep 30, 2003 National 13,697 $ 29.33 153,547
Partnership Share Plan
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(1) Under ASX Listing Rules, options, performance rights or shares may not
be issued to company directors under an employee incentive scheme without
specific shareholder approval. Shareholders approved the issue of securities to
the then managing director at the relevant annual general meeting. At the
Company's annual general meeting held in December 2000, shareholders approved
the non-executive directors' share arrangement under the staff share ownership
plan. Under this arrangement, shares are provided to non-executive directors as
part of their remuneration, rather than receiving cash. Shareholder approval
for the continuation of the non-executive directors' share arrangement will be
sought at the 2003 annual general meeting.
(2) The issue price is the weighted average market price of the Company's
ordinary shares that were traded on ASX in the week up to and including the day
on which the shares were issued.
(3) 6,617 shares were issued, of which 361 were forfeited upon resignation
of a director.
(4) These shares were purchased on-market.
Table 2 Executive share option plan No. 2 and performance rights plan
Issue date Exercise Exercise No. held No. lapsed No. No. held No. No. Fair value
period price of at or exercised at lapsed exercised as at grant
(1) options Sep 30, cancelled during Sep 30, or during date
2003 during 2003 2002 cancelled 2002
2003 (2) during
2002
Executive
share
option
plan No. 2
Feb 26, Feb 26,
1998 2001 -
Feb 25, $ 19.90 - 20,000 819,500 839,500 - 3,344,000 $ 39,294,080
2003
Mar 19, Mar 19,
1999 2002 -
Mar 18, $ 28.23 12,180,000 115,000 - 12,295,000 - - $ 56,624,750
2004
Aug 6, Aug 6,
1999 2002 -
Aug 5, $ 23.34 20,000 - 100,000 120,000 - - $ 589,200
2004
Mar 23, Mar 23,
2000 2003 -
Mar 24, $ 21.29 4,475,500 27,500 5,475,500 9,978,500 205,000 - $ 47,194,260
2008
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Issue date Exercise Exercise No. held No. lapsed No. No. held No. No. Fair value
period price of at or exercised at lapsed exercised as at grant
(1) options Sep 30, cancelled during Sep 30, or during date
2003 during 2003 2002 cancelled 2002
2003 (2) during
2002
Sep 28, Sep 28,
2000 2003 -
Sep 27, $ 24.89 717,500 60,000 - 777,500 - - $ 5,168,475
2008
Mar 23, Mar 23,
2001 2004 -
Mar 22, $ 27.85 10,907,500 476,000 - 11,383,500 375,500 - $ 59,320,165
2009
Sep 14, Sep 14,
2001 2004 -
Sep 13, $ 28.87 1,133,500 29,000 - 1,162,500 14,500 - $ 6,238,100
2009
Jun 14, Jun 14,
2002 2005 -
Jun 13, $ 36.14 10,759,500 501,500 - 11,261,000 2,500 - $ 71,861,130
2010
Mar 21, Mar 21,
2003 2006 -
Mar 20, $ 30.46 5,949,000 29,750 - - - - $ 26,964,163
2011
Aug 8, Mar 21,
2003 2006 -
Mar 20, $ 30.46 125,000 - - - - - $ 563,750
2011
Performance
rights plan
Mar 21, Mar 21,
2003 2006 -
Mar 20, $ 1.00 (3) 1,512,394 7,438 - - - - $ 33,466,701
2011
Aug 8, Mar 21,
2003 2006 -
Mar 20, $ 1.00 (3) 31,250 - - - - - $ 140,938
2011
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(1) The latest date to exercise options and performance rights is the last
day of the exercise period.
(2) For options issued before 2000, options lapse on cessation of
employment following a determination of the Board, as provided for in the terms
attaching to those options. For options issued from 2000 onwards, options lapse
30 days after cessation of employment unless otherwise determined in accordance
with their terms.
(3) A notional sum of $1.00 is payable by the holder on exercise of an
entire tranche of these performance rights.
The market price of the Company's shares at September 30, 2003 was $30.80 (2002:
$33.48, 2001: $25.66, 2000: $25.51).
No expense is recognised in the profit and loss account in relation to options
and performance rights granted to executives. If they are exercised, the
amounts receivable from executives are recognised in the balance sheet as
contributed equity.
The fair value of options issued on March 21, 2003 and August 8, 2003 were
valued at $4.51 each (June 14, 2002: $6.38 each, September 14, 2001: $5.33 each,
March 23, 2001: $4.91 each) and performance rights issued on March 21, 2003 and
August 8, 2003 were valued at $22.02 each.
For options and performance rights granted in the current year, the valuations
are based on a numerical pricing method which takes into account both the
probability of achieving the performance hurdle required for these options or
performance rights to vest, and the probability of early exercise after vesting.
The numerical pricing model applied by the Company to value options and
performance rights is a simulated version of the Black-Scholes method as
prescribed by SFAS 123 "Accounting for Stock-Based Compensation". The
simulation approach allows the valuation to take into account both (i) the
probability of achieving the performance hurdle required for the options or
performance rights to vest and (ii) the potential for early exercise of vested
options or performance rights. The Black-Scholes method is modified in order to
incorporate the performance hurdle requirements that are integral to the number
of options or performance rights vesting (which may be zero), and the option or
performance rights holder's ability to exercise the option or performance right.
The key assumptions and inputs for the valuation model are the volatility of the
Company's share price, the risk-free interest rate and the Company's expected
dividend yield. Assumptions for the correlations and volatilities of share
price returns for companies in the performance hurdle peer group are also
required, but are of lesser importance to the valuation results. The following
significant assumptions were adopted to determine the fair value of options and
performance rights:
Aug 8, 2003 Mar 21, 2003 Jun 14, 2002 Sep 14, 2001 Mar 23, 2001
Risk-free interest rate (per 5.38 % 5.38 % 5.89 % 5.91 % 5.64 %
annum)
Life of options or performance 8 years 8 years 8 years 8 years 8 years
rights
Volatility of share price 18.00 % 18.00 % 15.00 % 24.47 % 20.74 %
Dividend rate (per annum) 4.71 % 4.71 % 3.73 % 4.84 % 4.56 %
Refer to (f) and (g) above for details of the plans and the hurdles that must be
achieved before the options and performance rights can be exercised.
143
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