Telstra 2013 Annual Report Download - page 175

NOTES TO THE
FINANCIAL STATEMENTS
(CONTINUED)
FINANCIAL STATEMENTS
Telstra Corporation Limited and controlled entities Telstra Annual Report 2013 173
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 financial year 2013,
2012, 2011, 2010 and 2009 equity instruments to make them
consistent with the changed circumstances resulting from the
occurrence of factors including:
• a material change in the strategic business plan;
• a material regulatory change; or
• a significant out-of-plan business development (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, that means that (in the reasonable opinion of the
Board) the targets for that class of equity instruments are no
longer appropriate).
In financial year 2013, the Board did not reset the hurdles governing
the equity instruments issued in financial years 2013, 2012, 2011,
2010 or 2009.
(ii) Description of equity instruments
Performance rights
Executive LTI performance rights (previously referred to as
restricted shares)
In respect of performance rights, 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 performance rights become restricted trust
shares.
In relation to performance rights issued, except for the 2006
financial year, if the performance hurdle is satisfied during the
applicable performance period, a specified number of performance
rights, as determined in accordance with the trust deed and terms
of issue, will become restricted trust shares. Although the trustee
holds the shares in trust, the executive will retain beneficial interest
(dividends, voting rights, bonuses and rights issues) in the shares
until they vest and are transferred to them or sold on their behalf, at
the end of the restriction period (unless forfeited).
In respect of performance rights allocated in financial year 2006, if
the performance hurdle is satisfied during the applicable
performance period, a specified number of performance rights, as
determined in accordance with the trust deed and terms of issue,
will become vested performance rights. The exercise price for these
rights is $1 in total for all of the performance rights exercised on a
particular day.
Employee share rights plan (ESRP) performance rights
For ESRP performance rights allocated in financial years 2011 and
2010, there is no exercise price payable. Once the performance
rights have vested, the rights will be automatically exercised and
Telstra shares will be transferred to the employee. Until this time,
the employee cannot use the performance rights (or vested
performance rights) to vote or receive dividends
A description of each type of performance right that existed in
financial year 2013 is set out below:
Executive LTI performance rights:
• revenue growth (RG) performance rights - the performance
hurdle for these rights is based on increases in Telstra’s
revenue;
• network transformation (NT) performance rights - the
performance hurdle for these rights is based on completion of
certain elements in Telstra’s network transformation program;
• return on investment (ROI) performance rights - the performance
hurdle for these rights is based on an increase in the earnings
before interest and tax for Telstra divided by the average
investment;
• relative total shareholder return (RTSR) performance rights - the
performance hurdle for these rights is based on growth in
Telstra's total shareholder return relative to the growth in total
shareholder return of the companies in a peer group; and
• free cashflow return on investment (FCF ROI) performance
rights - the performance hurdle for these rights is based on
Telstra’s annual free cashflow (less finance costs) over the
performance period divided by the average investment over the
performance period.
Employee performance rights:
• employee share rights plan (ESRP) performance rights - the
vesting condition for these rights is based on the completion of
three years continuous service by the participant (and once
granted are not subject to any performance conditions).
Restricted shares
GMD Telstra Wholesale restricted shares
Due to the Structural Separation Undertaking (SSU) arising from the
NBN transaction, the GMD of Telstra Wholesale is prohibited from
participating in the financial year 2013 and 2012 LTI plans. As a
result, an alternative remuneration arrangement has been provided
in financial year 2013, which is a restricted share plan where the
number of restricted shares allocated is based on the same
performance measures as his financial year 2012 STI plan.
27. EMPLOYEE SHARE PLANS (CONTINUED)