Telstra 2009 Annual Report Download - page 215

Telstra Corporation Limited and controlled entities
200
Notes to the Financial Statements (continued)
Telstra Growthshare Trust (continued)
(b) Long term incentive (LTI) plans (continued)
(i) Outstanding equity based instruments (continued)
In relation to these executive LTI plans, the Board may, in its
discretion, reset the hurdles governing the fiscal 2009, fiscal 2008 and
fiscal 2007 equity instruments to make them consistent with the
changed circumstances resulting from the occurrence of one or more
of the following factors:
• a material change in the strategic business plan;
• a material regulatory change occurs; or
• a significant out-of-plan business development occurs (this could
include a major acquisition outside the current business plan
resulting in a significant change to the business of Telstra or the
Telstra group (in relation to the fiscal 2008 and fiscal 2009 plans),
or a material change to EBITDA (in relation to the fiscal 2007 plan)
- this could be either a positive or adverse change for Telstra, but
does not include improved or deteriorated operating or financial
performance of Telstra's existing businesses).
In fiscal 2009 the Board did not reset the hurdles governing the equity
instruments issued in fiscal 2009, fiscal 2008 or fiscal 2007.
(ii) Description of equity instruments
Restricted shares
In respect of restricted shares, an executive has no legal or beneficial
interest in the underlying shares, no entitlement to dividends received
from the shares and no voting rights in relation to the shares until the
restricted shares vest. If the performance hurdle is satisfied during the
applicable performance period, a specified number of restricted
shares as determined in accordance with the trust deed and terms of
issue, will become restricted trust shares.
In relation to restricted shares issued in fiscal 2009, once the restricted
shares vest they become restricted trust shares. Although the trustee
holds the restricted trust shares in trust, the executive will retain
beneficial interest (dividends, voting rights, bonuses and rights issues)
in the shares until they are transferred to them at expiration of the
restriction period (unless forfeited).
We have the following restricted shares issued and outstanding in
fiscal 2009:
• return on investment (ROI) restricted shares - are based on an
increase in the earnings before interest and tax for Telstra relative
to the average investment.
Options
An employee or executive is not entitled to Telstra shares unless the
options initially vest (subject to the achievement of the relevant
performance hurdles) and then are exercised. This means that the
employee or executive cannot use options to vote or receive dividends
until they have vested and been exercised. If the performance hurdles
are satisfied in the applicable performance period, options must be
exercised at any time before the expiry date, otherwise they will
lapse. Once the options are exercised and the exercise price paid,
Telstra shares will be transferred to the eligible employee.
We have the following options issued and outstanding in fiscal 2009:
Employee options:
• ESOP options - based on the completion of three years continuous
service by the participant (are not subject to any performance
conditions); and
• US ESOP options - based on the completion of three years
continuous service by the participant (are not subject to any
performance conditions).
Executive LTI options:
• relative total shareholder return options (RTSR options) - based on
growth in Telstra's total shareholder return relative to the growth
in total shareholder return of the companies in the Peer Group;
• total shareholder return options (TSR options) - based on growth in
Telstra's total shareholder return;
• return on investment options (ROI options) - based on an increase
in the earnings before interest and tax for Telstra relative to the
average investment;
• revenue growth options (RG options) - based on increases in
Telstra's revenue;
• next generation network options (NGN options) - based on
completion of certain elements associated with Telstra's next
generation network;
• information technology transformation options (ITT options) -
based on completion of certain elements in Telstra's
transformation program and the rationalisation of the number of
business support systems (BSS) and operational support systems
(OSS) used by companies in the Telstra Group; and
• Stretch EBITDA options (SEBITDA options) - based on increases in
Telstra's earnings before interest, tax, depreciation and
amortisation (EBITDA).
27. Employee share plans (continued)