Telstra 2007 Annual Report Download - page 227

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(a) Telstra Growthshare Trust (continued)
(iv) Fair value of instruments granted during the financial year
Short term incentive equity share plans
As part of the fiscal 2007 short term incentive scheme, the incentive
shares will be granted on 17 August 2007 and will vest immediately.
The fair value of these incentive shares will be based on the market
value of Telstra shares on that date.
Long term incentive equity share plans
The fair value of long term incentive instruments granted during the
financial year was calculated using a valuation technique that is
consistent with the Black-Scholes methodology and ut ilises Monte
Carlo simulations. The fair value has been measured at a grant dat e of
30 June 2007 and has been allocated over the period for which the
service is received which commenced 31 January 2007. The following
weighted average assumptions were used in determining the
valuation:
(a) The date t he instruments become exercisable
The expected stock volatility is a measure of the amount by which the
price is expected to fluctuate during a period. This was based on
historical daily and weekly closing share prices.
As the gateway TSR hurdle must be met for all vested options to
become exercisable for RG, NGN, ITT, ROI and ACC options, an
adjustment for the expected achievement of the performance hurdles
was made in the valuation of 58%. As there was no gateway TSR
hurdle for the performance rights granted in fiscal 2006, the RG, OEG,
NTT, ITT and ROI performance rights are not based on market
conditions, and no adjustment for the expected achievement of the
performance hurdles is made in the valuat ion.
Telstra directshare and ownshare
(i) Nature of Telstra directshare and ownshare
Telstra directshare
Non-executive directors are required to sacrifice a minimum of 20% of
their fees towards the acquisit ion of restricted Telstra shares, known
as directshares. Shares are acquired by the trustee from time to time
and allocated to the participating directors on a 6 monthly basis, on
dates determined by the trustee at its discretion. Although the trustee
holds the shares in trust, the participant retains the beneficial int erest
in the shares (dividends, voting rights, bonuses and rights issues) until
they are transferred at expiration of the restriction period.
The restriction period continues until the earlier of:
• five years from the date of allocat ion of the shares;
• the participating director is no longer a director of, or is no longer
employed by, a company in the Telstra Group; or
• the Board of Telstra determines that an ‘event’ has occurred.
At the end of the restriction period, the directshares will be transferred
to the part icipat ing director. The participating director is not able to
deal in the shares until this transfer has taken place. The expense
associated with shares allocated under this plan is included in the
disclosure for directors’ remuneration.
Telstra ownshare
Cert ain eligible employees may, at their election, be provided part of
their remuneration in Telstra shares. Shares are acquired by the
trustee from time to time and allocated to these employees at the
time their application is accepted. Although the trustee holds the
shares in trust, the participant retains the beneficial interest in the
shares (dividends, voting rights, bonuses or rights issues) until they
are transferred at expiration of the restriction period.
The restriction period continues until the earlier of:
• three years or five years from the date of allocation (depending on
the elections available to the participant at the time of allocation);
• the participant ceases employment with the Telstra Group; or
• the Board of Telstra determines that an ‘event’ has occurred.
At the end of the restriction period, the ownshares will be transferred
to the participant. The participant is not able to deal in the shares
until this transfer has taken place.
31. Employee share plans (continued)
Growthshare
options
Growthshare
performance
rights
June 2007 Feb 2006
Share price . . . . . . . . . . . . . $4.59 $3.87
Risk free rate . . . . . . . . . . . . 6.41% 5.20%
Dividend yield . . . . . . . . . . . 6.0% 6.0%
Expected stock volatility . . . . . 19% 19%
Expected life . . . . . . . . . . . . (a) (a)
Expected rate of achievement of
TSR performance hurdles . . . . 46% 15%
Expected rate of achievement of
RG, OEG, NGN, ITT, ROI, and ACC
performance hurdles . . . . . . . 58% n/a