CLOSE FILE X NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) For the year ended 30 June 2014 25 SHARE BASED PAYMENT PLANS  (continued) (b) Share based Long Term Incentive grants  (continued) (i) Executive Share Plan and Loan Facility (“ESP”)  (continued) For the June 2012 allotment, the ESP shares were granted at $3.14 to  all executives other than Ms. Raffe, whose allocation was delayed to  29 November 2012 at an issue price of $3.78 to allow for shareholder  approval at the Company’s 2012 annual general meeting. The Company  agreed to compensate Ms. Raffe with an additional bonus at the time of her  future sale of ESP shares for the additional value, if any, foregone by the  deferred grant date. This potential bonus payment to Ms. Raffe represents  a cash-settled share-based payment estimated to be a maximum of  $275,439, to be re-assessed at each financial year for changes in the  expected probability of payment. The fair value of this cash-settled  share-based payment was estimated on the basis of the estimated after-tax  impact of $0.64 per share, being the difference between $3.78 and $3.14  and will be accrued over 5 years from date of grant, being $71,920 for the  2014 financial year (2013: $42,167). On 20 December 2012, 400,000 ordinary shares were allotted under the  ESP. The fair value of each ‘in substance option’ was estimated on the date  of the grant using the binomial option pricing model with the following  assumptions: Under AASB 2:  Share-based Payment , any allotments under the ESP are  required to be accounted for and valued as equity settled options, and have  been referred to as ‘in substance options’, even though the equity  instrument itself is not an option. On 29 November 2010, 350,000 ordinary shares were allotted under the  ESP. The fair value of each ‘in substance option’ was estimated on the  date of grant using the binomial option-pricing model with the following  assumptions: The resulting fair value per option for those ‘in substance options’ was $0.62. The resulting fair values per option for those ‘in substance options’ was $1.12. The grant has been amortised over the vesting and exercisable periods  resulting in an increase in employee benefits expense of $25,554 for the  2014 financial year (2013: $43,033). These grants have been amortised over the vesting and exercisable periods  resulting in an increase in employee benefits expense of $116,978 for the  2014 financial year (2013: $61,854). On 29 June 2012, 1,700,000 ordinary shares were allotted under the ESP.  The fair value of each ‘in substance option’ was estimated on the date of  the grant using the binomial option pricing model with the following  assumptions: The expected volatility of all ESP allotments reflects the assumption that  the historical volatility is indicative of future trends, which may not  necessarily be the actual outcome. Under AASB 2: Share-based Payment,  any allotments under the ESP are also referred to as ‘in substance options’  even though the equity instrument itself is not an option. The resulting fair values per option for those ‘in substance options’ was $0.79. These grants have been amortised over the vesting and exercisable periods  resulting in an increase in employee benefits expense of $350,672 for the  2014 financial year (2013: $350,672). On 22 October 2012, 630,000 ordinary shares were allotted under the ESP.  The fair value of each ‘in substance option’ was estimated on the date of  the grant using the binomial option pricing model with the following  assumptions: The 2008 OP for the Company’s CEO, Mr. Graham Burke, was approved by  the Company’s shareholders on 17 July 2008 with a grant on 18 July 2008 of  six million options over ordinary shares exercisable at $3.00 per share, with  vesting subject to performance hurdles relating to growth in earnings per  share and growth in dividends. Following the $1.00 per share capital return,  which was approved by shareholders in general meeting, the options  exercise price was reduced to $2.00 per share, effective from 19 July 2011.  All options under the 2008 OP have either lapsed or have been exercised  and none of these 2008 options remained at 30 June 2013. These grants have been amortised over the vesting and exercisable periods  resulting in an increase in employee benefits expense of $157,920 for the  2014 financial year (2013: $109,030). The options were not transferable and did not confer any right to participate  in bonus issues or cash issues of ordinary shares. The option exercise price  would have been adjusted for discounted cash issues, and the number of  shares issued on exercise of an option would have been adjusted for bonus  issues of shares. The options did not carry voting or dividend rights and  were not listed for quotation on ASX. Subject to certain performance conditions, two million options were  exercisable not earlier than 1 March 2011; two million options were  exercisable not earlier than 1 March 2012; and two million options were  exercisable not earlier than 1 March 2013. The earnings per share (“EPS”) performance hurdle had a starting point of  27 cents per ordinary share on 31 December 2007 and the dividend per  share (“DPS”) performance hurdle had a starting point of 9 cents per  ordinary share on 31 December 2007, with growth measured on calendar  year performance. On 29 November 2012, 300,000 ordinary shares were allotted under the  ESP to Ms. J.E. Raffe. The fair value of each ‘in substance option’ was  estimated on the date of the grant using the binomial option pricing model  with the following assumptions: The resulting fair values per option for those ‘in substance options’ was $1.05. These grants have been amortised over the vesting and exercisable periods  resulting in an increase in employee benefits expense of $82,250 for the  2014 financial year (2013: $48,223). For all options to vest, the Company’s performance must have met a  minimum 10% cumulative average growth rate (“CAGR”) in EPS over the  3 year vesting period for half of each tranche to vest, and must have met a  minimum 10% CAGR in dividends paid over 2 out of the 4 year vesting period  for the other half of each tranche to vest. For half of the options to vest, the  Company’s performance must have met a minimum 5% CAGR in EPS over  the 3 year vesting period for one quarter of each tranche to vest, and must  have met a minimum 5% CAGR in dividends paid over 2 out of the 4 year  vesting period for another quarter of each tranche to vest. Below 5% CAGR  in either dividends or in EPS no options vest, with a pro-rata straight line  vesting scale between 5% and 10% CAGR for each performance condition.  The effect of the performance hurdles on the potential vesting of the  options can be illustrated as follows: 62 VILLAGE ROADSHOW LIMITED – Expected life of options: 8 years. – Risk-free interest rate: 3.07% – based on the 8 year Australian  Government bond yield; and – Expected volatility: 35% – based on historical volatility; – Value per loan per share: $3.78; – Expected life of options: 8 years. – Risk-free interest rate: 2.78% – based on the 8 year Australian  Government bond yield; and – Expected volatility: 35% – based on historical volatility; – Value per loan per share: $3.52; The resulting fair values per option for those ‘in substance options’ was $0.96. (ii) 2008 Option Plan over ordinary shares to the entity’s CEO  (“2008 OP”) – Expected life of options: 8 years. – Risk-free interest rate: 3.21% – based on the 8 year Australian  Government bond yield; and – Expected volatility: 35% – based on historical volatility; – Value per loan per share: $3.92; – Value per loan per share: $2.35; – Expected volatility: 35% based on historical volatility; – Risk-free interest rate: 5.36% – the risk-free rate was converted to a  continuously compounded rate; and – Expected life of options: 8 years. – Value per loan per share: $3.14; – Expected volatility: 35% – based on historical volatility; – Risk-free interest rate: 2.73% – the risk-free rate was converted to a  continuously compounded rate; and – Expected life of options: 8 years.