Telstra 2007 Annual Report Download - page 217

Telstra Corporation Limited and controlled entities
214
Notes to the Financial Statements (continued)
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 Trust; and
• the Telstra Employee Share Ownership Plans (TESOP99 and
TESOP97).
The nature of each plan, details of plan holdings, movements in
holdings, and other relevant information is disclosed below:
(a) Telstra Growthshare Trust
The Telstra Growt hshare Trust commenced in fiscal 2000. Under the
trust, Telstra operates a number of different short and long term
incentive equity plans whereby the following equity based
instruments may be allocated:
•options;
• performance rights;
• deferred shares;
• restricted shares;
• incent ive shares; and
• sign-on bonus shares.
In addition, the following share plans are operated for our non
executive directors and certain eligible employees:
• directshare; and
• ownshare.
The trustee for the trust is Telstra Growthshare Pty Ltd. This company
is 100% owned by Telstra. Funding is provided to the Telstra
Growthshare Trust to purchase Telstra shares on the market t o
underpin the equity instruments issued.
In fiscal 2007, we recorded an expense of $25 million for our share
based payment plans operated by the Telstra Growthshare Trust
(2006: $15 million). The fiscal 2007 expense for our share based
payment plans includes an expense for those options relat ing to the
fiscal 2007 long term incentive plan. The fair value of these options
has been measured at a grant date of 30 June 2007 and has been
allocated over the period for which the service is received which
commenced 31 January 2007.
As at 30 June 2007, we had a total expense yet to be recognised of $68
million (2006: $25 million), which is expected to be recognised over a
weighted average of 2 years (2006: 2 years).
Our election not to apply the measurement provisions of AASB 2:
“ Share-based payment” (AASB 2) to equity instruments granted prior
to 7 November 2002, as permitted under AASB 1: “ First-time Adoption
of Australian Equivalents to Int ernational Financial Reporting
Standards” (AASB 1), has reduced the expense we have recorded, as
well as the total expense we are yet to recognise in relation to these
share-based payment plans.
(i) Nature of share plans
The purpose of the long term incent ive plans is to align key execut ives’
rewards with shareholders’ interests, and reward performance
improvement whilst supporting business plans and corporate
strategies. These plans are administered through the Telstra
Growt hshare Trust. The Board determines who is invited to
participate in the share plans.
Allocations have been made over a number of years in the form of
performance rights, restricted shares and options under our long term
incentive plan, deferred shares under our deferred remuneration plan
and incentive shares under our short term incentive plan. Instruments
issued represent a right to acquire a share in Telstra. Further
information regarding each type of instrument we have allocated is
detailed below:
Options
We have the following six types of options currently on issue:
• total shareholder return options (TSR options) - are based on
growth in Telstra's total shareholder return;
• revenue growt h options (RG options) - are based on increases in
Telstra's revenue;
• next generation network options (NGN options) - are based on
completion of certain element s associated with Telstra's next
generation network;
• information technology transformation options (ITT opt ions) - are
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;
• return on investment options (ROI options) - are based on an
increase in the earnings before interest and tax for Telst ra relative
to the average investment ; and
• accelerator options (ACC options) - are based on increases in
Telstra's earnings before interest, tax, depreciation and
amortisation (EBITDA).
An executive is not entitled to Telstra shares unless the options
allocated under Telstra Growthshare initially vest, meet the gateway
TSR hurdle (for fiscal 2007 option grants only) and then are exercised.
This means that the executive cannot use options to vote or receive
dividends. If t he performance hurdles are satisfied in the applicable
performance period and the gateway TSR hurdle is achieved after four
years, options may be exercised at any time before the expiry date
(but will lapse if not exercised by the expiry date).
Once the options are exercised and the exercise price paid, Telstra
shares will be transferred to the executive.
Details of the performance hurdles for options are set out below.
31. Employee share plans