Telstra 2011 Annual Report Download - page 201

Telstra Corporation Limited and controlled entities
186
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
• Telstra Employee Share Ownership Plan Trusts (TESOP99 and
TESOP97).
The nature of each plan, details of plan holdings, movements in
holdings, and other relevant information is disclosed below.
Telstra Growthshare Trust
The Telstra Growthshare Trust commenced in fiscal 2000. Under
the trust, Telstra operates a number of different equity plans,
including:
• short term incentive plans;
• long term incentive plans; and
• Directshare and Ownshare plans.
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 market to
underpin the equity instruments issued.
In fiscal 2011, we recorded an expense of $12 million for our share
based payment plans operated by the Telstra Growthshare Trust
(2010: $5 million). As at 30 June 2011, we had an estimated total
expense yet to be recognised of $27 million (2010: $31 million),
which is expected to be recognised over a weighted average of 1.8
years (2010: 1.4 years).
(a) Short term incentive (STI) plans
The purpose of the STI is to link key executives’ rewards to
individual key performance indicators and to Telstra's financial
performance. The STI is delivered in cash and incentive shares
and the executive is paid an annual STI only when the threshold
targets are met or exceeded.
In fiscal 2010 and 2009, all STI payments were provided to Senior
Executives as cash due to the changes of tax law governing
employee share schemes.
(i) Description of equity instruments
Deferred Incentive shares (fiscal 2011)
For fiscal 2011, the Board approved 25% of executives’ short term
incentive to be allocated as deferred incentive shares. The effective
allocation date will be 19 August 2011. These shares vest in equal
parts over one and two years on the anniversary of their allocation
date, subject to the executives’ continued employment with any
entity that forms part of the Telstra Group. However, the
executives may retain the shares if they cease employment
because of death, total and permanent disablement or redundancy
(subject to applicable law relating to the provision of benefits or a
determination by the Board). The executive is able to vote and
receive dividends as and from the allocation date. The deferred
incentive shares are not subject to any performance hurdles.
Incentive shares (fiscal 2008 and 2007):
In relation to fiscal 2008 and 2007 allocations of incentive shares,
the incentive shares vested immediately, and the executive is able
to use the incentive shares to vote and receive dividends from the
vesting date. However, the executive is restricted from dealing
with the vested incentive shares until after they are released from
the restriction period.
Vested incentive shares are released from trust on the earliest of:
• five years from the date of effective allocation;
• when the minimum level of executive shareholding has been
achieved and the Board approves removal of the five year
restriction period;
• upon the ceasing of employment by the executive; or
• a date the Board determines (in response to an actual or likely
change of control).
Once the vested incentive shares are exercised, Telstra shares will
be transferred to the executive.
(ii) Summary of movements and other information
Allocations of Telstra’s shares have been made in the form of
incentive and deferred incentive shares under our STI plans and
are detailed in the following table:
(^) Incentive shares includes both incentive shares and deferred
incentive shares. The weighted average share price for incentive
shares exercised during the financial year was $2.84 (2010:
$3.55).
(*) The fair value of incentive shares granted is based on the
market value of Telstra shares on allocation date.
(#) The number outstanding includes incentives shares that are
subject to a restriction period. These amount to 980,491 as at 30
June 2011.
27. Employee share plans
Incentive shares (^)
Number
Weighted
average
fair value
(*)
Outstanding as at 30 June 2009 2,870,504 $4.34
Granted. . . . . . . . . . . . . . . 12,602 $3.23
Forfeited . . . . . . . . . . . . . . (32,945) $4.77
Exercised . . . . . . . . . . . . . . (1,677,853) $4.33
Outstanding as at 30 June 2010 1,172,308 $4.36
Forfeited . . . . . . . . . . . . . . (68) $4.77
Exercised . . . . . . . . . . . . . . (191,749) $4.42
Outstanding as at 30 June 2011 (#) 980,491 $4.35
Exercisable as at 30 June 2011 . . - -