Telstra 2007 Annual Report Download - page 221

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(a) Telstra Growthshare Trust (continued)
(ii) Performance hurdles (continued)
ROI performance rights
For the allocat ion of ROI performance rights, if the return on
investment is:
• equal to the minimum target, then 50% of the allocation will
become exercisable (except for the CEO, who will receive 75% of the
allocated performance rights);
• between the minimum and maximum targets, the number of
exercisable ROI performance rights is scaled proportionately
between 50% and 100% (with the exception of the CEO whose
number of performance rights is scaled proportionately between
75% and 100%);
• greater than the maximum target, then 100% of the ROI
performance rights will become exercisable; or
• is less than the minimum target, 25% of the allocated ROI
performance rights will lapse.
If the ROI performance rights have not become exercisable in this
period, 75% of these performance rights will be added to the allocat ion
of TSR performance rights for measurement against the TSR
performance hurdle. If this TSR performance hurdle is not achieved,
all ROI performance rights will lapse.
Performance hurdle for instruments issued between 30 June 2001 and
30 June 2005
EPS performance rights
The number of EPS performance rights that become vested EPS
performance rights, and therefore become exercisable, is based on the
following:
• if the cumulative growt h in EPS from 1 July 2004 to 30 June 2007 is
equal to 15.7%, then 50% of the allocation becomes exercisable;
• if the cumulative growth in EPS is greater than 15.7% and less than
33.1%, then the number of exercisable performance rights is scaled
proportionately between 50% and 100%;
• if the cumulative growth in EPS meets or exceeds 33.1%, then 100%
of the EPS performance rights will become exercisable; or
• if Telstra does not achieve cumulative growth in EPS of 15.7%, all
EPS performance rights will lapse.
TSR performance rights and options
For allocations of TSR performance rights made between 30 June 2001
and 30 June 2005, and options issued during fiscal 2002, the applicable
performance hurdle is based on comparing Telstra’s TSR with the TSRs
of the companies in the S&P/ASX 200 (Industrial) Index (peer group)
within the performance period.
The companies in the peer group are anchored at the effective date of
allocation, and this same peer group of companies are then tracked
during the performance period. At the end of each quarter during the
performance period, the 30 day average TSR is calculated for Telstra
and the companies in the peer group for each trading day during that
quarter.
Both, the number of TSR performance rights and the number of
options potentially exercisable, are based on the following.
If in the first quarter of the performance period Telstra’s percentile
ranking is the 50th percentile or above, then:
• the number of TSR performance rights and opt ions that become
exercisable for that quarter is scaled proportionately from the 50th
percentile (at which 50% of the allocation becomes exercisable) to
the 75th percentile (at which 100% of the allocation becomes
exercisable); and
• in subsequent quarters, the number that become exercisable is
based on the same proportionate scale, but is reduced by the
number of performance rights or options that have previously
become exercisable. The percentile ranking achieved needs to be
above that achieved in previous quarters for additional
performance rights and options to become exercisable.
If in the first quarter of the performance period the percentile ranking
is less than the 50th percentile, then:
• half of the allocation will lapse; and
• in subsequent quarters, the remaining 50% of the options or
performance rights will become exercisable if the ranking is the
50th percentile or above for that quart er.
If Telstra does not achieve or exceed the 50th percentile ranking in any
quarter of the performance period, all TSR performance rights and
options will lapse.
Performance hurdle for instruments issued prior to 30 June 2001 that
are outst anding at 30 June 2007
For all allocations prior to 30 June 2001, which include restricted
shares and options, the applicable performance hurdle was that the
average Telstra Accumulation Index must exceed the average S&P/
ASX 200 (Industrial) Index (replacing the superseded All Industrials
Accumulation Index) for thirty consecutive days within the
performance period. If the performance hurdle is satisfied for these
allocations, all of the relevant options or restricted shares would
become exercisable (i.e. they do not become exercisable on a
proportionate basis).
31. Employee share plans (continued)