## 24 KEY MANAGEMENT PERSONNEL DISCLOSURES (continued) 

## (b) Other transactions and balances with Key Management Personnel 

Peninsula Cinemas Pty. Ltd., which are non-competing cinemas owned by an entity associated with Mr. R.G. Kirby, exhibit films supplied by the Roadshow Distributors Pty. Ltd. group (“RD group”) on arm’s length terms and conditions. The total amount paid to the RD group for the year ended 30 June 2014 was $358,685 (2013: $302,595). The entities in the RD group are wholly-owned subsidiaries of the VRL group. 

The consolidated entity purchased wine from Yabby Lake International Pty. Ltd., an entity in which family members of Mr. R.G. Kirby have an economic interest. The total purchases were $305,999 for the year ended 30 June 2014 (2013: $289,764). The wine purchased was mainly for the Cinema Exhibition division’s Gold Class and Europa cinemas and for Corporate functions. These transactions were carried out under arm’s length terms and conditions. 

The consolidated entity purchased swimwear from Garyson Nominees Pty. Ltd., an entity associated with Mr. G.W. Burke. The total purchases were $50,338 for the year ended 30 June 2014 (2013: $53,989). The swimwear was purchased on an arm’s length basis as merchandise for resale by the Theme Parks division. 

The consolidated entity recharged occupancy costs and other net recharges for services provided and received, on an arm’s length basis, to a number of entities associated (either individually or collectively) with Messrs. R.G. Kirby, J.R. Kirby and G.W. Burke. The total net amount charged for the various occupancy and other services in the year ended 30 June 2014 was $83,530 (2013: $77,441). 

The consolidated entity reimbursed Carolyna Chase Pty. Ltd., an entity associated with Mr. J.R. Kirby, for accommodation and transport costs, on arm’s length terms and conditions. The total amount reimbursed for the year ended 30 June 2014 was $Nil (2013: $4,370). 

As at 30 June 2014, the total amount owing by the related parties detailed above, and included in current assets of the VRL group, was $16,142 (2013: $19,251), and the total amount owing by the VRL group to the related parties detailed above, and included in current liabilities, was $1,662 (2013: $8,235). 

## 25 SHARE BASED PAYMENT PLANS 

## (a) Long Term Incentive Executive Share and Loan Plans (“LTI plans”) 

The Company has used the fair value measurement provisions of AASB 2: Share-based Payment  for all options or equity instruments granted to Directors and relevant senior executives after 7 November 2002 which have not vested as at 1 January 2005. Under AASB 2: Share-based Payment  these LTI plan shares and loans are all treated as ‘in substance options’ even where the equity instrument itself is not a share option. 

The fair value of such ‘in substance option’ grants is amortised and disclosed as part of Director and senior manager compensation on a straight-line basis over the vesting period. 

During the current and prior periods the consolidated entity had three different LTI plans in which Group employees, including Key Management Personnel (“KMP”), participated to varying extents. These included: 

1. The Company’s Executive Share Plan and Loan Facility (“ESP”) introduced in 1996; 

2. The 2008 Option Plan over ordinary shares to the Company’s CEO (“2008 OP”); and 

3. The 2012 Option Plan over ordinary shares to the Company’s CEO (“2012 OP”). 

At 30 June 2014 both the ESP and 2012 OP remain in operation. 

In addition the Group has a loan arrangement over a 1993 legacy equity- linked performance plan in which Mr. P.M. Harvie is the sole remaining participant, where dividends are used to repay the interest accrued with any surplus dividend payment used to repay the capital amount of the loan. All grants to Mr. Harvie under this legacy plan were in his capacity as an executive of the consolidated entity and were prior to him becoming part of KMP of the Company. One of these loans, over 64,350 shares, was repaid from dividends during the 2014 year (2013: Nil shares). 

All LTI plans have been approved by shareholders at the time of their introduction. Grants were made from time to time as appropriate, and all proposed grants to Directors of the Company were put to shareholders for approval. The quantum of the LTI plan grants are reflective of the seniority 

of the position of the relevant executive and their ability to contribute to the overall performance of the consolidated entity. 

The ESP plan for senior executives of the consolidated entity has no specific performance conditions for the removal of restrictions over the relevant shares other than successful achievement of annual performance criteria. Any value accruing to KMP and senior executives from the LTI plan is derived from improvement in the Company’s share price and dividends and distributions by the Company. The LTI plan also encourages a sense of ownership with those senior executives to whom the LTI plan shares are granted, assisting in aligning their long term interests with those of shareholders. 

The Company considers that the five year period over which the ESP ‘in-substance options’ are ‘earned’ and the long term horizon of the loans from the consolidated entity for the ESP for the duration of the employees’ employment are appropriate given the shorter term annual performance hurdles to which each senior executive is subject. Similarly, the three, four and five year vesting periods of the ordinary options granted to the entity’s CEO in both the 2008 OP and 2012 OP, together with the performance conditions attaching to each tranche of options, are designed to encourage performance and to closely align the CEO’s interests with those of shareholders. 

There are no provisions within any of the LTI plans for the automatic removal of restrictions on the relevant shares in the event of a change of control of the Company. 

The ESP has limited recourse loans secured over the relevant shares, together with a buy-back option in the event of default. The Company has full control over all loans and the repayment thereof and full control over all shares including through holding locks. From 1 July 2011 the Company has implemented a policy that specifically prohibits the hedging of incentive remuneration granted to Executive KMP, whether restricted or unrestricted. For the CEO’s 2008 and 2012 ordinary options, the terms of the offers specifically prohibit the hedging of unvested options by Mr. Burke. 

From 1 January 2005, ‘in substance options’ granted as part of employee and executive compensation have been valued using the Black-Scholes or binomial option-pricing model or the Monte Carlo simulation technique, which takes account of factors including the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the underlying share, current market price of the underlying share and the expected life of the ‘in substance option’. 

## (b) Share based Long Term Incentive grants 

## (i) Executive Share Plan and Loan Facility (“ESP”) 

The Company’s ESP was approved by shareholders on 19 November 1996 and allows for the issue of up to 5% of the Company’s issued A Class Preference shares (now ordinary shares) to relevant employees of the consolidated entity and significant associated entities. Directors of the Company are not eligible to participate in the ESP. The conversion of the Company’s preference shares on 16 November 2010 into ordinary shares also applied to ESP preference shares and the ESP is now ordinary share based. All grants to Mr P.M. Harvie were in his capacity as an executive of the consolidated entity and were prior to him becoming a Director of the Company. 

Offers are at the discretion of the Directors and shares are issued at the 5-day weighted average price on the market prior to allotment, rounded up to the next whole cent. The shares are held directly by the employee who pays for the allotment by obtaining a loan from the consolidated entity which holds the ESP shares as security. 

The ESP was amended in 2012. Shares issued prior to 2012 are earned and become exercisable at the rate of 20% per year over five years from date of issue. The loan bears interest at ten cents per share per annum, and ten cents of dividends per share each year is used to repay the interest accrued and 50% of the remaining dividend per share is used to repay the capital amount of the loan. For shares issued in 2012 and thereafter, one third vest at the end of years 3, 4 and 5 from the date of issue, the loan bears interest at twenty cents per share per annum, and the first twenty cents of dividends per share per year is used to repay the interest charged, and 50% of the remaining dividend per share is used to repay the capital amount of the loan. For shares issued in 2012 or thereafter, where the loan balance owing falls below $2.00 per share, the interest rate becomes 10% of the balance owing on the loan. 

If the employee resigns or is dismissed, the restricted shares are forfeited and the loan on the remaining unrestricted shares must be repaid within six months or such other time as approved by Directors. In circumstances where the market value of the remaining ESP shares at the end of the six month period is less than the amount owing on the loan, then the Company will buy-back the shares and cancel them in repayment of the loan without further recourse to the employee. This is the basis on which they have been described as ‘in substance options’. 

