The range of the share price at the various dates of the Options exercised during the year was $2.12 - $4.73.
The weighted average remaining contractual life of the Performance Awards outstanding at the end of the period was between two-three years.
Fair value of Performance Awards granted
The assessed fair value at grant date of Performance Awards granted during the year ended 30 June 2010 is set out in the following table. The fair value at
grant date is independently determined using a Binomial and Monte Carlo options pricing model that takes into account the exercise price, the term of the
Performance Award, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield
and the risk free interest rate for the term of the Performance Award.
The model inputs for Performance Awards granted during the year ended 30 June 2010 included:
26 September 2009
Award type Performance rights Restricted share units
Tra nche 1 Tra nche 2 Tra nche 3 Tra nche 1 Tra nche 2 Tra nche 3
Exercise price $Nil $Nil $Nil $Nil $Nil $Nil
Consideration $Nil $Nil $Nil $Nil $Nil $Nil
Vesting conditions EPS growth TSR growth ROFE growth EPS growth TSR growth ROFE growth
Expiry date 26 September 26 September 26 September 26 September 26 September 26 September
2015 2015 2015 2015 2015 2015
Share price at grant date $4.13 $4.13 $4.13 $4.13 $4.13 $4.13
Expected company share price volatility 55% 55% 55% 55% 55% 55%
Expected dividend yield 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Risk free interest rate 4.72% 4.73% 4.72% 4.72% 4.73% 4.72%
Fair value at grant date $3.77 $2.99 $3.77 $3.77 $2.99 $3.77
The expected price volatility is based on the historic volatility (based on the remaining life of the Performance Awards), adjusted for any expected changes
to future volatility due to publicly available information.
(b) Deferred Retention Incentive Plans
Short-term deferred retention incentive (ST-DRI)
The Company delivers the ST-DRI component of its remuneration structure to Australian participants by providing a maximum opportunity equivalent in
value to the STI target in the form of Company equity. The TranShare Deferred Plan (TDP) is used for this purpose.
Participation in the ST-DRI is made available to selected high-performing managers who participate in the STI program but are not eligible to participate in
the Company’s LTI program based on the eligibility criteria used for that component of remuneration. Individuals are nominated by the operational Chief
Executive Officers with the support of the Managing Director and Chief Executive Officer within the framework approved by the HR Committee.
The number of shares to be offered to the participant under the ST-DRI is calculated by dividing the ST-DRI amount by the ten-day average closing price of
Transfield Services shares on the date the ST-DRI amount is approved.
Shares are subject to forfeiture in the event that employment with the Group is terminated within two years from the date the ST-DRI payment which gave
rise to the allocation of shares was approved.
Short-term deferred incentive (ST-DI)
The Company delivers the ST-DI component of its remuneration structure for North American participants by providing a specific value of their STI outcome
in the form of deferred cash. Participation in the ST-DI is available in North America to the senior managers and selected high-performing managers who
participate in the STI Plan but are not eligible to participate in the Company’s LTI Plan based on the eligibility criteria used for that component of
remuneration. Individuals are nominated by Operational Chief Executive Officers for consideration by the Managing Director and Chief Executive Officer.
The deferred payment under the ST-DI is subject to annual adjustment in accordance with a nominated US or where relevant the Canadian long term bond
rate, and is subject to forfeiture in the event that employment within the Group is terminated within two years from the date the ST- DI payment
determination date, or as per the contracted term.
MD/CEO Medium-term Incentive
Two-thirds of the MD/CEO’s earned Total Incentive outcome will be delivered to him in the form of medium-term incentives (MTI). The MD/CEO MTI will
take the form of performance rights, being rights to acquire shares for nil consideration under the terms of the Transhare Executive Performance Award Plan
(TEPAP). The TEPAP is the overall plan that delivers the Company’s LTI plan.
The MD/CEO’s MTI are allocated from his earned incentive and are further tested against hurdles prior to the MD/CEO deriving any actual shares. Subject
to achieving performance measures, these MD/CEO MTI performance rights will be available for vesting after two years in respect of half of the MTI’s
granted and after three years for the other half. The performance measures which apply to these MTIs are:
• 25 per cent based on earnings per share growth
• 25 per cent based on relative total shareholder return
• 25 per cent based on return on funds employed and
• 25 per cent based on margin improvement on earnings before interest, tax and amortisation (EBITA).