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Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
14 October 2008
The Manager
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
Office of the Company Secretary
Level 41
242 Exhibition Street
MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400
Facsimile 03 9632 3215
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra Corporation Limited 2008 Annual Report
In accordance with the listing rules, I attach a copy of an announcement for release to the
market.
Regards
Carmel Mulhern
Company Secretary

Table of contents

  • Page 1
    ... Australian Stock Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Office of the Company Secretary Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Telephone 03 9634 6400 Facsimile 03 9632 3215 ELECTRONIC LODGEMENT Dear Sir or Madam Telstra Corporation Limited 2008 Annual Report In...

  • Page 2
    Telstra Annual Report 2008 Annual Report 2008

  • Page 3
    ... as results announcements and dividend payment dates. Copies are also made available online at www.telstra.com/annualreport. Following the changes to the Corporations Act in June 2007, Telstra's Annual Report is available to all shareholders on our investor website at www.telstra.com/annualreport...

  • Page 4
    Telstra Corporation Limited and controlled entities Contents 1. Full year results and operations review June 2008 ... 3 2. Corporate Governance and Board Practices ...41 3. Shareholder Information ...55 4. Directors' Report ...57 5. Remuneration Report ...75 6. Financial Report ...101 1

  • Page 5
    ... Telstra Corporation Limited ™ Trade mark of Telstra Corporation Limited †Registered trade mark of Twentieth Century Fox Film Corporation ‡ Registered trade mark of Research in Motion Ltd * Registered trade mark of AUSTAR Entertainment Pty Limited ~ Registered trade mark of Research Resources...

  • Page 6
    ... information Results of operations ...Statement of financial position ...Cash flow summary ...Segment information...Statistical data summary ...Analysis information Income...Fixed telephony:...- PSTN products ...- Other fixed telephony ...Mobiles ...Internet ...IP & data access ...Business services...

  • Page 7
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Summary financial information Results of operations Results of operations 2008 $m Sales revenue...Other revenue ...Total revenue ...Other income ...Total income (excl. finance income) ...24,657 ...

  • Page 8
    ... ...Investments - accounted for using the equity method Investments - other ...Property, plant and equipment...Intangible assets...Deferred tax assets ...Derivative financial assets...Defined benefit assets ...Total non current assets ...Total assets ...Current liabilities Trade and other payables...

  • Page 9
    ... ...Total capital expenditure ...Proceeds from: ...- sale of property, plant and equipment and intangibles ...- sale of shares in controlled entities and other investments (net of cash disposed) Proceeds from finance lease principal amounts...Net cash consideration from CSL New World Mobility merger...

  • Page 10
    ... Jun 2008 YoY $m growth % Telstra Consumer Marketing and Channels PSTN products ...Mobile services revenue ...Total internet ...Telstra Business PSTN products ...Mobile services revenue ...Total internet ...Telstra Enterprise and Government Mobile services revenue ...IP & data access ... Half-year...

  • Page 11
    ... of wireless broadband. For high-end business customers, we have also seen strong growth in both Internet Direct and IP Access portfolios, highlighting our success in selling the benefits of the Telstra Next IP® network. Growth in external expenses for the year largely matched revenue growth, with...

  • Page 12
    ... by our competitors as they migrate their customers to their on-net offering and the success of Telstra retail business units in winning-back customers and increasing market share. The revenue decline has not been fully offset by increasing volumes of ULL and facilities access revenues where low...

  • Page 13
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Statistical data summary Statistical data summary - Billable traffic data (i) 2008 m Fixed telephony Number of local calls ...National long distance minutes Fixed to mobile minutes ......

  • Page 14
    ... products ...IP access ...Wholesale internet & data ...Total IP & data access ...Business services and applications ...Advertising and directories ...CSL New World ...TelstraClear ...Offshore services revenue ...Pay TV bundling ...Other minor items ...Elimination for wireless broadband ...Sales...

  • Page 15
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Fixed telephony • PSTN revenue decline further slowed to 3.2% • Retail access lines grew by 87k • PSTN ARPU substantially maintained • Wholesale business driving PSTN reduction through ...

  • Page 16
    ...performance by our consumer segment which grew PSTN revenue by 0.5% and added 56k lines, while Business and Enterprise and Government also added access lines for the year. The strong results in Consumer have been achieved through improved net churn. The growth in retail access lines is partially due...

  • Page 17
    ... and Government segments picking up whole of business customer wins. This is in contrast to the 3.2% decline in the prior year. ISDN voice and data calls revenue have driven the year on year decline as we have seen lower minutes of use and calls made across the various product offerings resulting in...

  • Page 18
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Mobiles1 • Our 3GSM customer base now represents 46.6% of our total mobile base • Mobiles services revenue grew by 12.3%, mobile non-messaging data accounts for 57.1% of this growth • Our ...

  • Page 19
    ... of the total mobile data revenues in the year, driven by our unique wireless broadband proposition. Revenue from wireless broadband and low value data pack users has been the main driver of revenue growth and increased 121.6% to $565 million for the full year. BigPond® Mobile Services which allow...

  • Page 20
    ... growth from high-speed plans follows our investment in our ADSL 2+ services rollout completed in April this year which provided an upgrade to an additional 907 exchanges serving 2.4 million homes and businesses. 1. Internet revenue includes total revenue from wireless broadband and data packs...

  • Page 21
    ... driver of revenue growth and increased 121.6% to $565 million for the full year. Wireless broadband users (those using laptop cards and data packs equal to and in excess of $29 which equates to data usage of 80Mb and above) increased in terms of subscribers, with 124k added in the second half...

  • Page 22
    .... Large corporate customers contributed to the growth in SIOs in IP WAN which offers a cost-effective way to link metro, regional and rural offices in most places across Australia. Year on year subscriber numbers have grown by 34.5% and 14.7% in Telstra Business and Telstra Enterprise & Government...

  • Page 23
    ... million as a result of an infrastructure project carried out during the year. Other managed network services growth was driven by IP telephony supporting the sale of new managed solutions and higher revenue per customer in the SME and for corporate hosting. Business applications revenue declined by...

  • Page 24
    ... mainly due to continued strong sales growth in the established Telstra Singapore and Telstra Hong Kong businesses. Pay TV bundling Pay TV bundling 2008 $m Pay TV bundling revenue ...426 Year ended 30 June 2007 Change 2008/2007 $m $m (% change) 344 82 23.8% FOXTEL†Pay TV bundling subscribers...

  • Page 25
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Other income Other income 2008 $m Proceeds from sale of property, plant and equipment...Proceeds from sale of intangibles ...Proceeds from sale of investments...Proceeds from sale of investments ...

  • Page 26
    ... half of the year, the benefits of this headcount reduction were offset, in part, by further recruitment of new skilled resources as we progress through our transformation initiatives, particularly within Telstra Operations with new trainees to support our new IP network and customer focussed retail...

  • Page 27
    ... in Telstra Operations and Enterprise and Government business units; lower net pension costs (see below); and labour savings within some of our controlled entities including Australian Administration Services which was sold in the prior year, a restructure of the KAZ business and staff reductions...

  • Page 28
    ...) rate • SARC as a percentage of mobile services decreased by 3.3 percentage points year on year Goods and services purchased 2008 $m Cost of goods sold - handset subsidies (postpaid) Cost of goods sold - other ...Usage commissions ...Network payments ...Service fees ...Managed services ...Dealer...

  • Page 29
    ... as internet modems, HSDPA cards and digital and IT accessories due to ongoing broadband growth. Also in the Business segment, a 45.0% increase in Enhanced CPE revenue contributed to the year on year cost of goods sold growth; and a 23.8% revenue growth in Pay TV bundling was the main contributor...

  • Page 30
    ... new costs in upgrading our Telstra Shops to the new and improved format T[life]â„¢ stores in Sydney and Melbourne during the second half of fiscal 2008. This was offset by lower IT rental expense as a result of the purchase, instead of the lease, of a number of new servers and lower mobile site...

  • Page 31
    ... a result of investments in new network technologies together with the decision to accelerate depreciation on some of the older network assets. Depreciation on other plant and equipment increased by $47 million mainly due to higher asset additions as a result of transformation activity including new...

  • Page 32
    ...to a higher balance of surplus funds available for short term investments together with higher interest rates. Income tax expense and franking account Income tax expense 2008 $m Income tax expense ...Effective tax rate...1,429 27.8% Year ended 30 June 2007 Change 2008/2007 $m $m (% change) 1,417 30...

  • Page 33
    ... and search solutions through print, online, voice, wireless and satellite navigation networks. Sensis also manages the group's advertising assets in China. The group has expanded its investments into China with the acquisition in August 2006 of 55% (on an undiluted basis) of the issued capital of...

  • Page 34
    ... the number of advertisers. Operational initiatives continue to be executed to address these issues and the focus is on improving our online experience for customers to drive growth for the future. As part of these initiatives, our new Trading Post~ Online Auctions feature was launched in May 2008...

  • Page 35
    ... will also impact on fiscal 2009 results. Total income increased by 4.7% to HK$6,395 million for the year ending 30 June 2008. This was driven predominantly by growth in handset sales; data; international voice; and mobile virtual network operator (MVNO) revenues. This was offset by a decline in...

  • Page 36
    ... Telstra's consolidated result and include the Australian dollar value of adjustments to consolidate TelstraClear into the Group result. For the year ended 30 June 2008, revenue declined by 0.2% to NZ$656 million. The primary driver of this decline was a mobile agency agreement that was terminated...

  • Page 37
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 Statement of financial position Statement of financial position 30 Jun 08 $m Current assets Cash and cash equivalents ...Other current assets...Total current assets ...Non current assets Property...

  • Page 38
    ...434 million caused by a lower fiscal 2008 defined benefit fund investment return of -5.7% against the assumed long term rate of 8.0%; offset by a net fair value revaluation gain on our interest rate and cross currency swaps which resulted from exchange rate impacts combined with the effect of having...

  • Page 39
    ... year related to IP enablement of our networks with only growth and some development components continuing in fiscal 2008; reduced expenditure of 14.8% or $142 million in the fixed access network due to the completion of the Telstra Next IP® transformation network rollout along with the broadband...

  • Page 40
    ... Payments for property, plant and equipment...Payments for intangible assets ...Capital expenditure (before investments) ...Investment expenditure ...Total capital expenditure ...Receipts from asset sales/proceeds from finance leases...Loans repaid by/(provided to) jointly controlled and associated...

  • Page 41
    ... Administration Services group for $208 million net of cash disposed. Other cash proceeds of $52 million during the year were driven by proceeds from finance lease principal amounts. The distribution received during fiscal 2008 totalling $130 million relates to a capital distribution from our FOXTEL...

  • Page 42
    ... 2 plus - our upgraded national high-speed broadband network offering improved fixed line ADSL speeds. A-IFRS: Australian equivalents of International Financial Reporting Standards. ARPU: Average revenue per user. BDSL: Business digital subscriber line - high-speed broadband data service. CDMA: Code...

  • Page 43
    Telstra Corporation Limited and controlled entities Full year results and operations review - June 2008 PSTN: Public switched telephone network - referred to as the 'fixed line' network, it is the standard home telephone service delivered over copper wires. Resale Churn: a movement of a fixed ...

  • Page 44
    ... long-term shareholder value through providing integrated communication, information and entertainment services and customerfocused solutions. Good corporate governance is the hallmark of successful companies - it adds value to the Company through efficient oversight and risk management, while...

  • Page 45
    ... telecommunications; Writing directly to you, our shareholders, twice a year about the half-year and annual financial results and other issues that affect your investment; Placing all announcements made to the market, including transcripts of investor and media briefings and related information...

  • Page 46
    ... control and reporting systems and monitoring strategic risk management systems; Approving Telstra's statutory accounts and overseeing its financial position as well as internal and external audit activities; and Approving decisions concerning Telstra's capital and determining the dividend policy...

  • Page 47
    ... all new non-executive Directors setting out the key terms and conditions of their appointment. The tenure of the CEO as a Director is linked to his executive office. Under Telstra's Constitution, no other Director may hold office for more than three years or beyond the third annual general meeting...

  • Page 48
    ... of meetings held by your Board during fiscal 2008 and attendance by Board members are set out in the Directors' report. Board access to management and independent professional advice Directors have complete access to the Company's senior management through the Chairman, CEO or Company Secretary at...

  • Page 49
    ... review comprised a short form questionnaire, analysis of the time spent by each Director, the Board and individual Committees as well as one-on-one interviews with Board members and Group Managing Directors. The findings and recommendations were presented to the August 2008 Board meeting. As noted...

  • Page 50
    ... of Telstra's accounting policies and practices and consistency with current and emerging accounting standards. Telstra's overall risk management process and the management of specific risk areas as directed by your Board; The effectiveness and operation of Telstra's Financial Reporting Compliance...

  • Page 51
    ... and the amounts paid or payable to the auditor for non-audit services provided during the year are disclosed in Note 8 to the financial statements. Telstra shareholders appointed Ernst & Young as the Company's external auditor at the 2007 Annual General Meeting following the resignation of the...

  • Page 52
    ... the Board. Each member is expected to Be familiar with the legal and regulatory disclosure requirements in relation to remuneration; Have adequate knowledge of executive remuneration issues, including executive retention and termination policies, and short term and long term incentive arrangements...

  • Page 53
    ...reflects the Telstra values of accountability, integrity and leadership, supports our Code of Conduct and complements existing management structures and functions. Share Trading Protecting price-sensitive information Telstra's share trading policy prohibits Directors, the CEO, senior management and...

  • Page 54
    Telstra Corporation Limited and controlled entities Corporate Governance and Board Practices 2008 In addition, Directors, the CEO, senior management and relevant employees must notify the Company Secretary before they or their close relatives buy or sell our securities. Changes to the interests of ...

  • Page 55
    Telstra Corporation Limited and controlled entities Corporate Governance and Board Practices 2008 • The Company Secretary's office maintains a record of all market announcements made. The announcements are also posted on our website after market release is confirmed. Telstra's Investor Relations...

  • Page 56
    ... Share Trading Policy which is available in full from our website. See "Audit Committee". See "Audit Committee". See "Audit Committee". See also the Audit Committee Charter which is available in full from our website. See "Market Disclosure". See "Telstra Values, Telstra Business Principles, Code...

  • Page 57
    ... structure of non-executive directors' remuneration from that of executive directors and senior executives. Please refer to the following sections of the Corporate Governance Statement 3 3 3 3 3 3 See "Shareholder Communications". See "Telstra Values, Telstra Business Principles, Code of Conduct...

  • Page 58
    Telstra Corporation Limited and controlled entities Shareholder Information Listing Information Markets in which our shares are traded We are listed, and our shares are quoted on the Australian Securities Exchange (ASX) and on the New Zealand Stock Exchange (NZX). A number of our shares are ...

  • Page 59
    Telstra Corporation Limited and controlled entities Shareholder Information Twenty largest shareholders as at 5 September 2008 The following table sets out the Top 20 holders of our shares (when multiple holdings are grouped together): Shareholders 1 Future Fund Board Of Guardians 2 National ...

  • Page 60
    ...Gâ„¢ network, which offers 14.4Mbps peak download speeds to 99% of Australia's population; we completed our ADSL2+ upgrade to an additional 907 telephone exchanges serving 2.4 million homes and businesses; we upgraded our hybrid fibre-coaxial (HFC) broadband network to 30Mbps in Melbourne and Sydney...

  • Page 61
    ... we also saw increased usage across a range of voice and data services, driving up average revenue per customer. Internet revenue recorded strong growth during the year as we continued to increase our market share in the expanding retail and wireless broadband markets. High speed plan customers grew...

  • Page 62
    Telstra Corporation Limited and controlled entities Directors' Report IP and data access revenue growth during the year was driven by the success of the Telstra Next IP® network. IP Metropolitan Area Network has become our largest revenue generating data product within the IP access portfolio - ...

  • Page 63
    ... Date paid 21 September 2007 4 April 2008 Dividend per share 14 cents franked to 100% 14 cents franked to 100% Total dividend $1,740 million $1,736 million In July 2007, the directors of Telstra Corporation Limited offered shareholders the opportunity to participate in a Dividend Reinvestment Plan...

  • Page 64
    ... employer contributions to the Telstra Super defined benefit divisions for the financial year ended 30 June 2008 and 30 June 2007. A funding deed is in place with the trustee of Telstra Super under which Telstra is committed to maintaining Telstra Super's assets at a specific level measured in terms...

  • Page 65
    Telstra Corporation Limited and controlled entities Directors' Report Deeds of indemnity in favour of directors, officers and employees Telstra has also executed deeds of indemnity in favour of directors of the Telstra Entity (including past directors); secretaries and executive officers of the ...

  • Page 66
    ...'s approval of the annual audit plan; additional audit and non-audit services requires approval from the Chief Financial Officer which is communicated to the Audit Committee at each meeting; fees earned from non-audit work undertaken by Ernst & Young are capped at 1.0 times the total audit fee; and...

  • Page 67
    Telstra Corporation Limited and controlled entities Directors' Report Rounding of amounts The Telstra Entity is a company of the kind referred to in the Australian Securities and Investments Commission class order 98/100, dated 10 July 1998 and issued pursuant to section 341(1) of the Corporations ...

  • Page 68
    ... Wyoming, University of Colorado) Age 56 On 1 July 2005, Mr Solomon ("Sol") Trujillo joined Australia's leading telecommunications company, Telstra Corporation Limited (Telstra) as its Chief Executive Officer (CEO). He is leading an end-to-end transformation, driving Telstra's evolution into a media...

  • Page 69
    ... and before that held a number of executive positions at George Patterson, including Chief Executive of George Patterson Australia. Directorships of other listed companies - current: Nil Directorships of listed companies - past three years: Director, Insurance Australia Group Ltd (2000-2007). Other...

  • Page 70
    ...of listed companies - past three years: Director, Living Cell Technologies Limited (2006-2007). Other: Current: Chairman, Sustainable Investment Research Institute Pty Ltd (2002- ); Director, Racing Information Services Australia Pty Ltd (2007- ) and Orchard Funds Pty Ltd (2007-); Member, Investment...

  • Page 71
    ... July 2008, NAB announced that Mr Stewart will be succeeded as Group Chief Executive Officer effective 1 January 2009. Directorships of other listed companies - current: Director and Chief Executive Officer, National Australia Bank (2004- ). Directorships of Listed companies - past three years: Nil...

  • Page 72
    Telstra Corporation Limited and controlled entities Directors' Report Peter J Willcox - MA Age 62 Mr Willcox joined Telstra as a non-executive director in May 2006. He is a member of the Audit, Nomination and Remuneration Committees. Experience: Mr Willcox holds a degree in physics from Cambridge ...

  • Page 73
    Telstra Corporation Limited and controlled entities Directors' Report Claire E Elliott - BA, GDip IS, GDip App IS Age 45 Ms Elliott was appointed as an additional company secretary of Telstra Corporation Limited on 7 September 2007. She is also company secretary of all Telstra subsidiaries ...

  • Page 74
    ... the director related entities, are excluded from indirect interest. Some of the directors' holdings were instalment receipts purchased in the Telstra 3 Commonwealth share offering. On payment of the final instalment on 29 May 2008, the underlying share was transferred to the registered shareholder...

  • Page 75
    Telstra Corporation Limited and controlled entities Directors' Report Senior executives Direct interest 4,880 13,963 506,030 79,187 223,999 190,975 Number of shares held Indirect interest (1) - Bruce Akhurst . Kate McKenzie . David Moffatt . Deena Shiff ...John Stanhope. David Thodey . Gregory ...

  • Page 76
    Telstra Corporation Limited and controlled entities Directors' Report Auditor's Independence Declaration to the Directors of Telstra Corporation Limited In relation to our audit of the financial report of Telstra Corporation Limited for the financial year ended 30 June 2008, to the best of my ...

  • Page 77
    Telstra Corporation Limited and controlled entities (This page has been left blank intentionally) 74

  • Page 78
    ... significant number of shareholders and taken their feedback into consideration in the design of this year's plan and the Report. The executive summary also highlights Telstra's key accomplishments for the past year and describes how our remuneration plans are linked to Telstra's transformation into...

  • Page 79
    Telstra Corporation Limited and controlled entities Remuneration Report Executive Summary Telstra's Remuneration Plan - Aligned with shareholder value Telstra's remuneration plan is designed to ensure Telstra attracts and retains world-class executives and directors to support the continued success...

  • Page 80
    ...* Return on Investment Target Stretch Target Stretch * TSR growth is calculated from a base TSR value of $4.75 which was the 30 day average closing price up to 30 June 2007. Share ownership policy The remuneration plan continues to require senior executives to maintain a direct stake in Telstra...

  • Page 81
    ... Corporation Limited and controlled entities Remuneration Report Non-executive directors Telstra's non-executive directors continue to be remunerated with set fees. This enables the non-executive directors to maintain their independence and objectivity when making company decisions. Non-executive...

  • Page 82
    ... Price Incentive Contract payment 5. Other Senior Executives' remuneration 5.1. 5.2. 5.3. 5.4. 5.5. Remuneration structure Executive Share Ownership Policy Fixed remuneration Short Term Incentive (STI) Long Term Incentive (LTI) for fiscal 2008 6. Linking Senior Executive remuneration and company...

  • Page 83
    ... advice and market practice; and the total non-executive director fees not to exceed the annual limit of $3,000,000 per annum, which was approved by shareholders at the AGM in November 2007. 1.2 Remuneration structure Telstra's non-executive directors will continue to be remunerated with set fees...

  • Page 84
    ... The Board will continue to review its approach to non-executive directors' remuneration structure to ensure it reflects general market practice and best-practice principles of corporate governance. 1.4 Equity compensation - Directshare Directshare aims to encourage a longer-term perspective...

  • Page 85
    ...for the Chief Executive Officer and the Chief Operations Officer taking into account their central role in driving the transformation of Telstra, their global market experience and ensuring that a substantial part of their reward is directly linked to delivering on the strategy approved by the Board...

  • Page 86
    ...of Telstra's five-year transformation plan. 3.1 CEO remuneration mix Chief Executive Officer Sol Trujillo's total reported remuneration for fiscal 2008 was $13,394,523. Details are provided in the Remuneration Table (Figure 7). His fiscal 2008 package was announced in August 2007 and has not changed...

  • Page 87
    ...Release 2 in production Multi Service Edge - Build Switched Data Network Core exit Ethernet build Revenue - 2 year compound annual growth Total Shareholder Return (TSR) - 2008 one year growth; 2007 two year compound annual growth The key conditions for the CEO's LTI allocations in fiscal 2008 are as...

  • Page 88
    ... conversion Transformation Release 2 in production Multi Service Edge - Build Multi Service Edge - SDN Core Exit Ethernet Build Revenue Growth - 2 year compound annual growth Total Shareholder Return - 2008 - one year growth; 2007 - 2 year compound annual growth TOTAL % of total allocation tested at...

  • Page 89
    ... in his transformation plan payable after announcement of the fiscal 2008 annual results, being $3,900,000. 4.4 Share Price Incentive The COO may also be entitled to a cash bonus dependant on performance hurdles linked to the achievement of increases in Telstra's share price. Performance for...

  • Page 90
    ... have a substantial holding of Telstra shares, a strong alignment between executive reward, company success and returns to shareholders is created. Telstra last year introduced an Executive Share Ownership Policy to ensure the market performance of the company will have a direct economic impact on...

  • Page 91
    Telstra Corporation Limited and controlled entities Remuneration Report 5.4 Short Term Incentive (STI) The STI component delivers reward on achievement of annual performance targets. What is the STI? An annual performance based payment tailored to reinforce the links between the level of reward ...

  • Page 92
    ... LTI? Telstra's senior executive team, other than the CEO and COO, and other invited senior management staff. What is the exercise price? The exercise price is calculated over the five trading days following the announcement of the annual results. For the fiscal 2008 LTI plan the exercise price is...

  • Page 93
    Telstra Corporation Limited and controlled entities Remuneration Report What are the performance targets? Total Shareholder Return (1) Return on Investment (1) 30 June 2009 Target Stretch 30 June 2010 30 June 2011 10.4 per cent growth p.a. over four years 12.7 per cent growth p.a. over four ...

  • Page 94
    ...-risk remuneration paid to senior executives is directly linked to the company's performance. Figure 4: Our five-year shareholder value and earnings history Year ended 30 June 2008 $m Earnings Sales revenue EBITDA Net profit available to Telstra Shareholder value Share Price ($) Total dividends paid...

  • Page 95
    ... to increase shareholder returns; make a direct impact on our bottom line; and are matters in which the executives can make an impact. The results of the fiscal 2008 STI plan clearly show that Telstra has exceeded overall expectations on a range of financial and transformational measures that...

  • Page 96
    ... tested at 30 June 2008 2.9% 2.9% 1.7% 1.7% 1.7% 5.0% 4.2% 7.0% 27 % Transformation Release 1 in production Transformation Release 1 conversion Multi Service Edge - Build Multi Service Edge - SDN Core Exit Ethernet Build Revenue Growth - 2 year compound annual growth Total Shareholder Return...

  • Page 97
    Telstra Corporation Limited and controlled entities Remuneration Report Summary of LTI plans As at 30 June 2008 the vesting status of all LTI equity plans is as follows: Figure 6: LTI Status Plan Type of instrument Performance granted period 6/9/04 - 6/9/06 Result Future financial years Status in ...

  • Page 98
    ... executives' remuneration Short Term Incentives: Includes the cash component of annual bonuses payable in relation to fiscal 2008 & 2007 Non-monetary benefits: Such as the value of goods and services provided as well as the value of the interest free loan under TESOP 97 and TESOP 99 Other equity...

  • Page 99
    ... for details on our employee share plans. (2) Where a vesting scale is used, the table reflects the maximum achievable allocation. (3) Total Remuneration is the sum of short term benefits, post employment benefits and share based payments detailed in Figure 7. (4) During fiscal 2008 the August 2004...

  • Page 100
    ... the executive, and therefore no transfer of any equity or equity-related instrument. All instruments that have expired were tested against the external performance measure of Total Shareholder Return (TSR). Figure 11: Value of options granted, exercised and expired/forfeited in fiscal 2008 Granted...

  • Page 101
    ... will be entitled to a cash payment of up to $8,000,000 if Telstra's average closing share price for the 30 calendar days following the announcement of Telstra's fiscal 2008 annual results exceeds $7.00 per share. There are no individual contracts for service with our non-executive directors. 98

  • Page 102
    ... details of all remuneration paid to our non-executive directors in fiscal 2008 and 2007. Figure 13: Non-executive directors -details of remuneration Short term employee benefits Termination Equity benefits settled sharebased payments Superannuation Termination Direct share benefits(3) ($) 89,007 12...

  • Page 103
    Telstra Corporation Limited and controlled entities (This page has been left blank intentionally) 100

  • Page 104
    ... - Property, plant and equipment ...Note 14 - Intangible assets ...Note 15 - Trade and other payables ...Note 16 - Provisions ...Note 17 - Share capital ...Note 18 - Capital management, financial assets and financial liabilities Note 19 - Financial risk management ...Note 20 - Notes to the statement...

  • Page 105
    ... Limited and controlled entities Income Statement for the year ended 30 June 2008 Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note Income Revenue (excluding finance income) ...6 Other income ...6 Expenses Labour ...Goods and services...

  • Page 106
    ... loss/gain on defined benefit plans ... (434) 129 (305) 23 (6) 17 (425) 127 (298) 17 (4) 13 Minority interests Translation of financial statements of non-Australian controlled entities ...Total comprehensive income for the year ...Attributable to: Equity holders of Telstra Entity...Minority...

  • Page 107
    ... ...Investments - accounted for using the equity method Investments - other ...Property, plant and equipment...Intangible assets...Deferred tax assets ...Derivative financial assets...Defined benefit assets ...Total non current assets ...Total assets ...Current liabilities Trade and other payables...

  • Page 108
    ...Total capital expenditure ...Proceeds from: - sale of property, plant and equipment ...- sale of intangible assets ...- sale of shares in controlled entities (net of cash disposed) ...- sale of other investments ...Proceeds from finance lease principal amounts...Net cash consideration from CSL New...

  • Page 109
    Telstra Corporation Limited and controlled entities Statement of Changes in Equity for the year ended 30 June 2008 Telstra Group Reserves Foreign Cash currency flow translation hedging (i) (ii) $m $m Consolidation fair value (iii) $m Share capital $m Balance at 1 July 2006 ...- total comprehensive...

  • Page 110
    Telstra Corporation Limited and controlled entities Statement of Changes in Equity (continued) for the year ended 30 June 2008 Telstra Entity Cash flow hedging reserve (ii) $m Share capital $m Balance at 1 July 2006 ...- total comprehensive income for the year...- dividends paid ...- transfers to...

  • Page 111
    ... year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Telstra Board of Directors on 13 August 2008. The principal accounting policies used in preparing the financial report of the Telstra Group and the Telstra Entity are listed in note 2 to our financial statements...

  • Page 112
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of accounting policies 2.1 Changes in accounting policies The following accounting policy changes occurred during the year ended 30 June 2008. (a) Amendment to Key Management Personnel ...

  • Page 113
    ... and consolidated statement of financial position. We account for the acquisition of our controlled entities using the purchase method of accounting. This involves recognising the acquiree's identifiable assets, liabilities and contingent liabilities at their fair value at the date of acquisition...

  • Page 114
    ... sold is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs incurred in marketing, selling and distribution. It approximates fair value less costs to sell. Net realisable value of items expected to be consumed, for example used...

  • Page 115
    ...-for-sale' financial assets and are measured at fair value at each reporting date. Fair values are calculated on the following basis: • for listed securities traded in an organised financial market, we use the current quoted market bid price at balance date; and • for investments in unlisted...

  • Page 116
    ... in the income statement. Property, plant and equipment Telstra Group As at 30 June 2008 2007 Service life Service life (years) (years) 55 8 - 40 10 - 20 The service lives of our significant items of property, plant and equipment are as follows: Buildings - building shell ...- general purpose...

  • Page 117
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of accounting policies (continued) 2.11 Leased plant and equipment We distinguish between finance leases, which effectively transfer substantially all the risks and benefits incidental to ownership...

  • Page 118
    ... employee benefits at their nominal amounts. These are calculated based on remuneration rates expected to be current at the date of settlement and include related on costs. Certain employees who have been employed by Telstra for at least ten years are entitled to long service leave of three months...

  • Page 119
    ... claims incurred but not reported. Present values are calculated using appropriate rates based on the risks specific to the liability with similar due dates. Certain controlled entities do not self insure, but pay annual premiums to third party insurance companies for their workers' compensation...

  • Page 120
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of accounting policies (continued) 2.17 Revenue recognition Sales revenue Our categories of sales revenue are recorded after deducting sales returns, trade allowances, discounts, sales ...

  • Page 121
    ... per share is calculated by dividing the profit attributable to ordinary shareholders after tax by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of the instruments in the Telstra Growthshare Trust and the Telstra Employee Share Ownership Plans...

  • Page 122
    ... a result of employee services provided. (b) Defined benefit plans We currently sponsor a number of post-employment benefit plans. As these plans have elements of both defined contribution and defined benefit, these hybrid plans are treated as defined benefit plans. At reporting date, where the fair...

  • Page 123
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 2. Summary of accounting policies (continued) 2.22 Derivative financial instruments We use derivative financial instruments such as forward exchange contracts, cross currency swaps and interest rate ...

  • Page 124
    ... treatment for changes in ownership interests and the fair value measurement of contingent liabilities in the statement of financial position at acquisition date with subsequent changes reflected in theincome statement. This accounting standard will only impact on acquisitions completed post 1 July...

  • Page 125
    ... the limit on the asset that an employer's statement of financial position may contain in respect of its defined benefit pension plan. Management have determined that the adoption of AASB Interpretation 14 will not have a significant impact on our financial results. Other Standards AASB 2008...

  • Page 126
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 3. Earnings per share Telstra Group Year ended 30 June 2008 2007 ¢ ¢ Basic earnings per share ...Diluted earnings per share ...29.9 29.8 $m Earnings used in the calculation of basic and diluted ...

  • Page 127
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 4. Dividends Telstra Entity Year ended 30 June 2008 2007 $m $m Dividends paid Previous year final dividend paid ...Interim dividend paid ...Total dividends paid...Dividends paid per ordinary share ...

  • Page 128
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 4. Dividends (continued) Telstra Entity Year ended 30 June 2008 2007 $m $m The combined amount of exempting and franking credits available to us for the next fiscal year are: Franking account balance ...

  • Page 129
    ...including handset sales, voice and data products to the Hong Kong market. TelstraClear (TClear) is our New Zealand subsidiary responsible for: • providing full telecommunications services to the New Zealand market. Telstra Country Wide (TCW) is responsible for: • the local management and control...

  • Page 130
    ... of corporate planning, accounting and administration, treasury, risk management and assurance, investor relations and the office of the company secretary. It also includes providing financial support to all business units and financial management of the majority of the Telstra Entity fixed assets...

  • Page 131
    ... 37,921 Revenue from external customers . . Other income ...Total income ...Labour expenses ...Goods and services purchased...Other expenses ...Share of equity accounted losses. Depreciation and amortisation . . EBIT contribution ... Total assets as at 30 June 2008 ... Telstra Group TC&C Year ended...

  • Page 132
    ... assets, defined benefit assets and deferred tax assets. Telstra Group Year ended 30 June 2008 2007 $m $m Information about our products and services PSTN ...Other fixed telephony ...Mobiles ...Internet ...IP and data access ...Business services and applications ...Pay TV bundling ...Advertising...

  • Page 133
    ... Notes to the Financial Statements (continued) 6. Income Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note Sales revenue Rendering of services ...Sale of goods ...Rent of network facilities ...Construction contracts ...Advertising and directory...

  • Page 134
    ...: Employee redundancy ...Share based payments ...Defined benefit plan expense...24 Goods and services purchased Included in our goods and services purchased are the following: Cost of goods sold ...Rental expense on managed services ...Other expenses Impairment losses: - impairment in value of...

  • Page 135
    ...) Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note (a) Profit before income tax expense has been calculated after charging/(crediting) the following items: (continued) Depreciation of property, plant and equipment - general purpose buildings...

  • Page 136
    ...: $49 million) in relation to an impairment of the value of one controlled entity (2007: two controlled entities). This balance was eliminated on consolidation for Telstra Group reporting purposes. Each fiscal year, we review the value of our investment in controlled entities. As a result, we have...

  • Page 137
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 8. Remuneration of auditors Telstra Group Year ended 30 June 2008 2007 $m $m Audit fees Ernst & Young has charged the following amounts for auditing and reviewing the financial reports ...Other audit ...

  • Page 138
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 9. Income taxes Telstra Group As at 30 June 2008 2007 $m $m Major components of income tax expense Current tax expense...Deferred tax resulting from the origination and reversal of temporary ...

  • Page 139
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 9. Income taxes (continued) Telstra Group As at 30 June 2008 2007 $m $m Deferred tax asset/(deferred tax liability) Deferred tax items recognised in income statement Property, plant and equipment......

  • Page 140
    ...(e): Income tax losses ...Capital tax losses ...Deductible temporary differences ...Telstra Entity As at 30 June 2008 2007 $m $m 68 154 463 685 48 161 427 636 126 268 394 127 218 345 (e) Our deferred tax assets not recognised in the statement of financial position may be used in future years if...

  • Page 141
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 10. Trade and other receivables Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Current Trade receivables (a) ...Allowance for doubtful debts (a) ... 3,...

  • Page 142
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 10. Trade and other receivables (continued) (a) Trade receivables and allowance for doubtful debts The ageing of current and non-current trade receivables is detailed below: Telstra Group As at 30 June 2008...

  • Page 143
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 10. Trade and other receivables (continued) (b) Finance lease receivable We enter into finance leasing arrangements predominantly for communication assets dedicated to solutions management and ...

  • Page 144
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) . 11. Inventories Telstra Group As at 30 June 2008 2007 $m $m Current Finished goods recorded at cost ...Finished goods recorded at net realisable value ...Total finished goods ...Telstra Entity As at...

  • Page 145
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 12. Investments Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Investments - accounted for using the equity method Investments in jointly controlled ...

  • Page 146
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment Telstra Group As at 30 June 2008 2007 $m $m Land and site improvements At cost ...Buildings (including leasehold improvements) At cost ...Accumulated depreciation/...

  • Page 147
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment (continued) Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note Land and site improvements Opening cost ...- ...

  • Page 148
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment (continued) Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note Communication assets (including leasehold ...

  • Page 149
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 13. Property, plant and equipment (continued) Telstra Group Year ended 30 June 2008 2007 $m $m Telstra Entity Year ended 30 June 2008 2007 $m $m Note Other plant, equipment and motor vehicles Opening ...

  • Page 150
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets Telstra Group As at 30 June 2008 2007 $m $m Goodwill ...Internally generated intangible assets Software assets developed for internal use (a) ...Accumulated amortisation ......

  • Page 151
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets (continued) Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Goodwill Opening cost ...- acquisitions through business combinations - ...

  • Page 152
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets (continued) Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Patents and trademarks Opening cost ...- additions...- disposals ...- ...

  • Page 153
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets (continued) Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Customer bases Opening cost ...- additions...- disposals ...- ...

  • Page 154
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 14. Intangible assets (continued) Telstra Group As at 30 June 2008 2007 $m $m Deferred expenditure (c) Opening cost ...- additions...- amounts written off ...- foreign currency exchange movements. - ...

  • Page 155
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 15. Trade and other payables Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m Note Current Trade creditors (a) ...Accrued expenses ...Accrued capital ...

  • Page 156
    ... employee benefits consist of amounts for annual leave and long service leave accrued by employees. Non current employee benefits for long service leave are measured at their present value. The following assumptions were adopted in measuring this amount: Telstra Group As at 30 June 2008 2007 Telstra...

  • Page 157
    ... employee benefits Telstra Group Year ended 30 June 2008 2007 $m $m Workers' compensation Opening balance ...- additional provisions ...- amount used ...- unwinding of discount on liabilities recognised at present value - effect of any change in the discount rate ...Closing balance ...Restructuring...

  • Page 158
    ... of the termination benefits that affected employees will be entitled to; • costs associated with shutting down certain networks, platforms and applications; • property rationalisation and other onerous lease costs; and • costs of replacing customer equipment in order to meet our current...

  • Page 159
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 17. Share capital Telstra Group As at 30 June 2008 2007 $m $m Telstra Entity As at 30 June 2008 2007 $m $m 5,793 (98) (197) 36 5,534 Contributed equity ...Share loan to employees...Shares held by employee...

  • Page 160
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities This note provides information on our capital structure and our underlying economic positions as represented by the carrying values, ...

  • Page 161
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (a) Capital management (continued) Interest and yields (continued) Table B Telstra Group As at 30 June 2008 2007 $m $m ...

  • Page 162
    ...Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (b) Financial assets and financial liabilities (continued) Table C Telstra Group As at 30 June 2008 Carrying Fair value Face value...

  • Page 163
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (b) Financial assets and financial liabilities (continued) Table D Telstra Entity As at 30 June 2008 Carrying Fair value ...

  • Page 164
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (b) Financial assets and financial liabilities (continued) (i) Our bank accounts operate under a set off arrangement ...

  • Page 165
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (c) Net position on a contractual face value basis (continued) Table E Telstra Group As at 30 June Face values 2008 2007 ...

  • Page 166
    ...of interest rates and maturity profiles are included in note 19. ( Table F Note Current Short term debt Promissory notes (i) ...Loans from wholly owned controlled entities (ii) ...29 Long term debt - current portion Telstra bonds ...Offshore loans (iii) ...Finance leases ...22 Telstra Group As at...

  • Page 167
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (iii) Offshore loans Offshore loans comprise debt raised overseas. The carrying amount of offshore loans are denominated ...

  • Page 168
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 18. Capital management, financial assets and financial liabilities (continued) (e) Derivative financial instruments (continued) Table H Cross currency swaps Asset Liability $m $m Current Fair value ...

  • Page 169
    ... due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that we use. Non derivative interest bearing assets are predominantly short term liquid assets. Our interest rate liability risk arises primarily from long term foreign debt...

  • Page 170
    ... & interest rate swap payable...Finance lease payable ...Telstra bonds and domestic loans ...Forward contract liability ...Loans from wholly owned controlled entities ...Fixed rate instruments - Foreign interest rates Bank deposits with maturity greater than 90 days Finance lease payable ...Offshore...

  • Page 171
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (a) Risk and mitigation (continued) (i) Interest rate risk (continued) (*) The average rate is calculated as the weighted average (based on principal / ...

  • Page 172
    ... tax) is included within finance costs. The higher sensitivity in 2008 when compared to 2007 is largely due to our long term Euro bond issue in 2008 which is not in a designated hedge relationship for hedge accounting purposes and our Euro borrowings which were de-designated from fair value hedge...

  • Page 173
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (a) Risk and mitigation (continued) (iii) Foreign currency risk Foreign currency risk refers to the risk that the value of a financial commitment, recognised ...

  • Page 174
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (a) Risks and mitigation (continued) (iv) Sensitivity analysis - foreign currency risk The sensitivity analysis included in this section is based on foreign ...

  • Page 175
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (a) Risks and mitigation (continued) (iv) Sensitivity analysis - foreign currency risk (continued) The following sensitivity analysis is based on our foreign ...

  • Page 176
    ... to credit risk on all financial assets included in our statement of financial position, comprising cash and cash equivalents, trade and other receivables, available-for-sale financial assets, finance lease receivables and derivative instruments. To help manage this risk: • we have a policy for...

  • Page 177
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (a) Risks and mitigation (continued) Credit risk (continued) In determining the potential credit limit factors to be used in these calculations, the following...

  • Page 178
    ...; • have readily accessible standby facilities and other funding arrangements in place; • generally use instruments that are tradeable in highly liquid markets; and • have a liquidity portfolio structure that requires surplus funds to be invested within various bands of liquid instruments...

  • Page 179
    .... Financial risk management (continued) (a) Risks and mitigation (continued) Liquidity risk (continued) TABLE F Telstra Corporation Limited and controlled entities Carrying amount $m Notes to the Financial Statements (continued) Derivative financial liabilities Interest rate swaps - pay fixed...

  • Page 180
    ...... Non-derivative financial liabilities Telstra bonds and domestic loans ...Trade/other creditors and accrued expenses. . Offshore loans ...Finance leases ...Promissory notes ...Amounts owed to controlled entities ...Loans from wholly owned controlled entities ... (i) Net amounts for interest rate...

  • Page 181
    ...finance costs in the category 'loss on transactions dedesignated from fair value hedge relationships'. We hold a number of different financial instruments to hedge risks relating to underlying transactions. Our major exposure to interest rate risk and foreign currency risk arises from our long term...

  • Page 182
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (b) Hedging strategies (continued) Fair value hedges During the period we held cross currency principal and interest rate swaps to mitigate our exposure to changes...

  • Page 183
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (b) Hedging strategies (continued) Refer to note 18 Table H and Table I for the value of our derivatives designated as cash flow hedges. The following table ...

  • Page 184
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (b) Hedging strategies (continued) Hedges of net investments in foreign operations We have exposure to foreign currency risk as a result of our investments in...

  • Page 185
    ...(5,672) 19. Financial risk management (continued) (c) Hedge relationships (continued) Table J Face value Telstra Corporation Limited and controlled entities Pre hedge underlying exposure Native currency $m Derivative hedging instruments - cross currency and interest rate swaps Notional / Face...

  • Page 186
    19. Financial risk management (continued) (c) Hedge Relationships (continued) Telstra Group and Telstra Entity - 30 June 2007 Table K Face value Pre hedge underlying exposure Native currency $m (Pay)/receive float $m Native currency $m $m $m $m Final leg - Australian dollar $m $m Derivative ...

  • Page 187
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (c) Hedge Relationships (continued) Table L describes each of our hedge relationships, where forward foreign currency exchange contracts are used as the ...

  • Page 188
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 19. Financial risk management (continued) (c) Hedge Relationships (continued) Table M describes our hedge relationships where offshore loans and promissory notes are used as the hedging instruments. ...

  • Page 189
    ... following transactions Depreciation and amortisation ...Finance income ...Finance costs ...Dividend revenue ...Distribution from FOXTEL partnership ...Share based payments ...Defined benefit plan expense...Net gain on disposal of property, plant and equipment ...Net gain on disposal of intangibles...

  • Page 190
    ...acquisition ... Assets/(liabilities) at acquisition date Cash and cash equivalents ...Trade and other receivables ...Property, plant and equipment...Intangible assets...Trade and other payables ...Deferred tax liabilities ...Revenue received in advance ...Dividend payable ...Net assets ...Adjustment...

  • Page 191
    ... home improvements portal. Other fiscal 2007 acquisitions In fiscal 2007, our controlled entity KAZ Group Pty Limited sold its 100% shareholdings in controlled entities Australian Administration Services Pty Ltd, AAS Superannuation Services Pty Ltd and Atune Financial Solutions Pty Ltd for a total...

  • Page 192
    ... sold its 61% shareholding in controlled entity Platefood Limited for a total consideration of $10 million. (e) Significant financing and investing activities that involve components of non cash Acquisition of assets by means of finance leases Telstra Group Year ended 30 June 2008 2007 $m $m Telstra...

  • Page 193
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 21. Impairment Cash generating units For the purposes of undertaking our impairment testing, we identify cash generating units (CGUs). Our CGUs are determined according to the smallest group of assets...

  • Page 194
    ... testing conducted in 2007. (b) Terminal value growth rate represents the growth rate applied to extrapolate our cash flows beyond the five year forecast period. These growth rates are based on our expectation of the CGUs long term performance in their respective markets. The terminal growth rates...

  • Page 195
    ... Telstra Group As at 30 June 2008 2007 $m $m (a) Capital expenditure commitments Total capital expenditure commitments contracted for at balance date but not recorded in the financial statements: Property, plant and equipment commitments Within 1 year ...Within 1 to 5 years...After 5 years...

  • Page 196
    ...88 We have finance leases for the following types of assets: • property leases in our controlled entity, Telstra Europe Limited; and • computer mainframes, computer processing equipment and other related equipment. The average lease term is: • 24 years for the property leases with a remaining...

  • Page 197
    ... years...After 5 years ...Telstra Entity As at 30 June 2008 2007 $m $m 527 824 210 1,561 387 580 83 1,050 507 794 204 1,505 301 505 60 866 Our other expenditure commitments include contracts for printing, engineering and operational support services, information technology services and building...

  • Page 198
    ... Service (ULLS) and Line Sharing Service (LSS) Certain common law claims by employees and third parties are yet to be resolved. As at 30 June 2008, management believes that the resolution of these contingencies will not have a significant effect on the Telstra Entity's financial position, results...

  • Page 199
    ... companies in the event of their winding up. Refer to note 25 for further information. The Telstra Entity and its partners, News Corporation Limited and Publishing and Broadcasting Limited, and Telstra Media Pty Ltd and its partner, Sky Cable Pty Ltd, have entered into agreements relating to pay...

  • Page 200
    ... in are set out below. Telstra Superannuation Scheme (Telstra Super) The benefits received by members of the defined benefit schemes are based on the employees' remuneration and length of service. Measurement dates For Telstra Super actual membership data as at 30 April was used to value precisely...

  • Page 201
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 24. Post employment benefits (continued) (a) Net defined benefit plan asset - historical summary Our net defined benefit plan asset recognised in the statement of financial position for the current ...

  • Page 202
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 24. Post employment benefits (continued) (b) Reconciliation of changes in fair value of plan assets Telstra Group As at 30 June 2008 2007 $m $m Fair value of defined benefit plan assets at beginning of year...

  • Page 203
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 24. Post employment benefits (continued) (d) Amounts recognised in the income statement and in equity Telstra Group Year ended 30 June 2008 2007 $m $m The components of defined benefit plan expense ...

  • Page 204
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 24. Post employment benefits (continued) (f) Principal actuarial assumptions We used the following major assumptions to determine our defined benefit plan expense for the year ended 30 June: Telstra Super...

  • Page 205
    ...CSL Retirement Scheme The contributions payable to the defined benefit divisions are determined by the actuary using the attained age normal funding actuarial valuation method. Employer contributions made to the HK CSL Retirement Scheme for the financial year ended 30 June 2008 was $1 million (2007...

  • Page 206
    ...Technologies Pty Ltd ...Telstra 3G Spectrum Holdings Pty Ltd ...Telstra OnAir Holdings Pty Ltd ...Converged Networks Pty Ltd ...Telstra Payment Solutions Pty Limited ...Telstra Business Systems Pty Ltd (a) ...Telstra Plus Pty Ltd (f)...Clayton 770 Pty Ltd ...1300 Australia Pty Ltd ...• Alpha Phone...

  • Page 207
    ... Technology Co. Ltd (c)(f) ...• Advertisement Limited (c)(f)...• Haocheng Shidai (Beijing) Advertisement Co. Ltd (c)(d)(f) ...• Beijing Australia Telecommunications Technical Consulting Services Company Limited (c) ...• Telstra Holdings (Bermuda) No. 2 Limited ...• CSL New World Mobility...

  • Page 208
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 25. Investments in controlled entities (continued) Name of entity Country of incorporation Telstra Entity's recorded amount of investment (#) As at 30 June 2008 2007 $m $m 20 20 514 911 % of equity ...

  • Page 209
    ....0 100.0 Controlled entities (continued) Sensis Pty Ltd (a)...• Just Listed Pty Limited (a) ...• Research Resources Pty Ltd ...• CitySearch Australia Pty Ltd ...• Trading Post (Australia) Holdings Pty Ltd (a)...• Trading Post Group Pty Limited (a)...• The Melbourne Trading Post Pty Ltd...

  • Page 210
    ... Listed Pty Limited; Trading Post (TCA) Pty Limited; Trading Post Australia Pty Limited; Universal Publishers Pty Limited; Sensis Holdings Pty Ltd; Telstra Pay TV Pty Ltd; and Telstra Business Systems Pty Ltd. The consolidated income statement and statement of financial position of the closed group...

  • Page 211
    ... ...Investments - accounted for using the equity method Investments - other ...Property, plant and equipment...Intangible assets...Deferred tax assets ...Derivative financial assets...Defined benefit assets ...Total non current assets ...Total assets ...Current liabilities Trade and other payables...

  • Page 212
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 25. Investments in controlled entities (continued) (a) ASIC deed of cross guarantee financial information (continued) Closed group income statement and retained profits reconciliation Closed group Year...

  • Page 213
    ... entity Telstra International Holdings No.2 Limited. • We have no direct equity interest in the following entities within the SouFun Group: • Beijing Jia Tian Xia Advertising Co. Ltd; • Beijing SouFun Internet Information Service Co. Ltd; • Beijing SouFun Science and Technology Development...

  • Page 214
    .... Ltd. (g) Sales and disposals • On 31 July 2007, our controlled entity KAZ Group Pty Limited sold its 100% shareholding in KAZ Business Services Pty Ltd, KAZ Software Solutions Pty Ltd and Enhanced Processing Technologies Pty Ltd for a total consideration of $2 million (net of cash balances of...

  • Page 215
    ... Cable Holdings Limited (incorporated in Bermuda) (d) (g) Telstra Super Pty Ltd (a) (g) Pay television Pay television Customer service Management services Pay television International connectivity services Toll free number portability in New Zealand Management services 3G network services Regional...

  • Page 216
    ... Partnership - 31 December; Bridge Mobile Pte Ltd - 31 March; and Australia-Japan Cable Holdings Limited - 31 December. Financial reports prepared as at 30 June are used for equity accounting purposes. Our ownership interest in jointly controlled and associated entities with different balance dates...

  • Page 217
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 26. Investments in jointly controlled and associated entities (continued) (f) Other disclosures for jointly controlled and associated entities The movements in the consolidated equity accounted amount...

  • Page 218
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 26. Investments in jointly controlled and associated entities (continued) (f) Other disclosures for jointly controlled and associated entities (continued) Summarised presentation of all of our jointly...

  • Page 219
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 26. Investments in jointly controlled and associated entities (continued) (g) Suspension of equity accounting Our unrecognised share of (profits)/losses for the period and cumulatively, for our ...

  • Page 220
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans The Company has a number of employee share plans that are available for directors, executives and employees. These include: • those conducted through the Telstra Growthshare ...

  • Page 221
    ... Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (i) Instruments issued in fiscal 2008 and fiscal 2007 (continued) These TSR options vest if the growth in Telstra's total shareholder return...

  • Page 222
    ...number of business support systems (BSS) and operational support systems (OSS) used by companies in the Telstra Group; and • return on investment (ROI) performance rights - are based on an increase in the earnings before interest and tax for Telstra relative to the average investment. An executive...

  • Page 223
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (ii) Instruments issued in fiscal 2006 (continued) Of the performance rights that do not vest in the initial performance ...

  • Page 224
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iii) Instruments issued between 30 June 2001 and 30 June 2005 If in the first quarter of the performance period the ...

  • Page 225
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iv) Summary of movements and other information Number of equity instruments Outstanding at 30 June 2007 Outstanding ...

  • Page 226
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iv) Summary of movements and other information (continued) Number of equity instruments Outstanding at 30 June 2006 ...

  • Page 227
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (iv) Summary of movements and other information (continued) Effective allocation date Performance period (i) from to ...

  • Page 228
    ... value of incentive and deferred incentive shares granted on 17 August 2007 is based on the market value of Telstra shares on that date. Telstra Corporation Limited and controlled entities (v) The fair value of these instruments is calculated using an option pricing model that takes into account...

  • Page 229
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) (v) Fair value of instruments granted during the financial year Long term incentive (LTI) and Employee Share Option plan ...

  • Page 230
    ... grant of ownshares relates to employees short term incentive payments and the 29 February 2008 grant relates to shares acquired through salary sacrifice by employees. The weighted average fair value of fully paid shares granted to directors and executives under the directshare and ownshare plans...

  • Page 231
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (iii) Summary of movements The table below provides information about our directshare and ownshare plans: Number of equity instruments Outstanding Outstanding Granted...

  • Page 232
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (a) Telstra Growthshare Trust (continued) Sign-on bonus shares Certain eligible employees may be provided sign-on bonus shares upon commencing employment at ...

  • Page 233
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 27. Employee share plans (continued) (b) TESOP99 and TESOP97 (continued) The Telstra ESOP Trustee continues to hold the loan shares where the employee has ceased employment and elected not to repay ...

  • Page 234
    ...Winn Chief Executive Officer, Sensis Group Managing Director, Telstra Wholesale Group Managing Director, Telstra Consumer Marketing and Channels Group Managing Director, Telstra Business Chief Financial Officer and Group Managing Director, Finance and Administration Group Managing Director, Telstra...

  • Page 235
    ... at 30 June 2008 2007 $ $ Telstra Entity As at 30 June 2008 2007 $ $ 30,308,353 21,956,242 1,360,764 2,635,944 288,125 282,500 484,756 16,518,575 12,002,386 48,475,817 37,361,828 Short term employee benefits Post employment benefits . . Other long term benefits...Termination benefits ...Share based...

  • Page 236
    ... ... ... ... ... Total shareholdings include shares held by our KMP and their related entities. Unless related to our employee share plans, shares acquired or disposed by our KMP during fiscal 2008 were on an arm's length basis at market price. (a) Shares provided to directors under Directshare are...

  • Page 237
    ... instalment receipts have the right to receive dividends and are entitled to vote, by directing the trustee, Telstra Sale Company Limited, at a meeting of the company. Telstra instalment receipts are traded on the Australian Stock Exchange with the final instalment payable to the Commonwealth. 234

  • Page 238
    ... Corporation Limited and controlled entities Notes to the Financial Statements (continued) 28. Key management personnel compensation (continued) KMP interests in equity instruments of Telstra Entity The following details the balances and changes in instruments issued for our KMP during fiscal 2008...

  • Page 239
    Telstra Corporation Limited and controlled entities Notes to the Financial Statements (continued) 28. Key management personnel compensation (continued) KMP interests in equity instruments of Telstra Entity (continued) The following details the balances and changes in instruments issued for our KMP...

  • Page 240
    ... in the income statement and statement of financial position are as follows: Telstra Group Year ended/As at 30 June 2008 2007 $m $m Telstra Entity Year ended/As at 30 June 2008 2007 $m $m Note Income from controlled entities: Sale of goods and services (a)...Finance income (a) ...Dividend revenue...

  • Page 241
    ...) 29. Related party disclosures (continued) Transactions involving our controlled entities (continued) (b) The Telstra Entity recorded dividend revenue during fiscal 2008 from Telstra Media Pty Limited of $127 million, Sensis Pty Ltd of $81 million and Telstra Services Solutions Holdings Limited of...

  • Page 242
    ... income statement and statement of financial position are as follows: Telstra Group Year ended/As at 30 June 2008 2007 $m $m Telstra Entity Year ended/As at 30 June 2008 2007 $m $m Note Income from jointly controlled and associated entities: Sale of goods and services (a)...Distribution from FOXTEL...

  • Page 243
    ... Corporation Limited. As at 30 June 2008, Telstra Super holds bonds with a cost of $6 million (2007: $6 million) and a market value of $6 million (2007: $6 million). All purchases and sales of Telstra shares and bonds by Telstra Super are determined by the trustee and/or its investment managers...

  • Page 244
    ... franking account balance. Dividend Reinvestment Plan In July 2007, the directors of Telstra Corporation Limited offered shareholders the opportunity to participate in a Dividend Reinvestment Plan ("DRP") where Telstra expected to source the shares to be allocated under the DRP from the Future Fund...

  • Page 245
    ... financial statements and notes of the Telstra Entity and the Telstra Group set out on pages 101 to 241: (i) comply with the Accounting Standards and Corporations Regulations; (ii) give a true and fair view of the financial position as at 30 June 2008 and performance, as represented by the results...

  • Page 246
    ...June 2008 (the Telstra Group), which comprises the statement of financial position as at 30 June 2008, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies...

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  • Page 252
    ... is listed on Stock Exchanges in Australia and in New Zealand (Wellington) Investor Relations Level 36, 242 Exhibition Street Melbourne Victoria 3000 Australia Ph: +61(3) 9634 8190 email: [email protected] The Telstra Share Registrar Link Market Services Limited PO Box A942 Sydney...

  • Page 253
    Visit Telstra Investor Relations at www.telstra.com.au/abouttelstra/investor or visit our interactive advocacy website at www.nowwearetalking.com.au