Tiscali 2008 Annual Report Download - page 97

Financial instruments
Fair Value
The following tables show the valuations respectively at 31 December
2008 and at 31 December 2007, of the fair value relating to the
financial instruments present as of the balance sheet date:
31.12.2008 (EUR 000) Book value Fair Value
Secured Bank Loans 590,623 458,533
Convertible bond - -
Unsecured Bank Facility 30,743 32,463
Finance Lease Liabilities 94,516 60,440
IRS 9,527 9,527
VNL deferred consideration 71,275 71,275
31.12.2007 (EUR 000) Book value Fair Value
Secured Bank Loans 596,700 607,231
Convertible bond 43,842 43,842
Unsecured Bank Facility 33,669 28,300
Finance Lease Liabilities 98,969 95,525
IRS - -
VNL deferred consideration 93,904 93,904
The fair value of the financial instruments as indicated above
has been determined using the discounted cash flow method
and taking as reference the market interest rates, uplifted by
the contractual spreads (where applicable)
Derivative instruments
For the purpose of hedging the interest rate risk on the Banca
Intesa SanPaolo and JPMorgan loan, Tiscali has activated a
series of hedges (Interest Rate Swap or ‘IRS’).
At 31 December 2008, the value of the IRS presented a negative
balance of EUR 9.5 million. This amount was recorded in the income
statement under financial income and charges. In accordance with
the accounting nature of trading instruments pertaining to the IRS
lacking the preparation of the formal documentation envisaged by
IAS 39 for its accounting classification as a hedging instrument.
Stock Options
Upon the proposal of the Board of Directors, on 3 May 2007 the
shareholders’ meeting approved a stock incentive plan in favour
of the Chief Executive Officer and key employees of the Company
and its Italian subsidiaries, with the aim of aligning management’s
interests with the creation of value for the Tiscali Group and its
shareholders, encouraging the achievement of the strategic
objectives. With regards to the Chief Executive Officer, the
implementation of the plan, besides representing a valid incentive
tool in line with market practices, represents the execution of a
precise contractual obligation undertaken by the Company at the
time of the formation of the management relationship.
The plan envisaged the allocation:
•to the Chief Executive Officer, of 3,593,143 options for the
purchase of the same amount of ordinary shares in the
Company, deriving from purchases of treasury shares which
the Company purchased on the market in compliance with
Article 2357 of the Italian Civil Code and on the basis of the
authorization granted by the shareholders’ meeting. The
exercise of these options was dependent on the achievement
of the performance objectives linked to the budget established
by the Board of Directors, involving 40% with reference to the
objectives established for 2006, which are understood to have
been achieved, and the remaining 60% with reference to the
objectives established for 2007. Please note that, as a
consequence of the resignation of the Chief Executive Officer,
Tommaso Pompei, on 28 February 2008 the afore-mentioned
options have been considered as exercisable for the entire
amount in accordance with the terms envisaged by the
regulations. As envisaged by IFRS 2, section 28 this transaction
was considered as an early accrual;
•to the employees, of up to a maximum of 4,244,131 options
for the subscription of the same amount of newly-issued ordinary
shares in the Company, deriving from the share capital increase
reserved in accordance with Article 2441.8 of the Italian Civil
Code resolved by the shareholders’ meeting.
By way of implementing the afore-mentioned plan, the Board
of Directors:
•on 10 May 2007, assigned the Chief Executive Officer all the
options due him in a single tranche; it will be possible to exercise
the options, in several tranches as well, between 4 May 2010
and 3 November 2010, at a price of EUR 2.763, adjusted to
EUR 2.477 following the share capital increase;
•on 28 June 2007, assigned 23 managers a total of 3,330,000
options; it will be possible to exercise the options, in several
tranches as well, between 29 June 2010 and 28 December
2010, at an exercise price of EUR 2.378, adjusted to EUR
2.132 following the share capital increase.
The beneficiaries of the options are obliged not to sell, for a
period of at least five years as from the exercise date, a quantity
of shares whose total value is no lower than the difference
between the normal value of the shares as of the exercise date
and the amount paid by the beneficiaries, in compliance with
applicable tax legislation.
For further information, with particular reference to the effects - on
the rights assigned - of the possible termination of the employment
relationship of the beneficiaries or a change in the management of
the Company, please refer to the disclosure document drawn up in
accordance with Article 84
bis of Regulation No. 11971 approved
by Consob under resolution dated 14 May 1999, available on the
Company’s website (www.tiscali.com).
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CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES