Telstra 2012 Annual Report Download - page 208

Telstra Corporation Limited and controlled entities
178
Notes to the Financial Statements (continued)
Telstra Growthshare Trust (continued)
(b) Long term incentive (LTI) plans (continued)
(ii) Description of equity instruments (continued)
• total shareholder return options (TSR options) - the performance
hurdle for these options is based on growth in Telstra's total
shareholder return; and
• return on investment options (ROI options) - the performance
hurdle for these options is based on an increase in the earnings
before interest and tax for Telstra relative to the average
investment.
Performance rights
In respect of performance rights allocated prior to fiscal 2010, an
executive or an employee has no legal or beneficial interest in the
underlying shares, no entitlement to dividends received from the
shares and no voting rights in relation to the shares until the
performance rights vest. If the performance hurdle is satisfied
during the applicable performance period, a specified number of
performance rights, as determined in accordance with the trust
deed and terms of issue, will become vested performance rights.
The exercise price for the vested performance rights allocated to
executives prior to fiscal 2010 is $1 in total for all of the performance
rights exercised on a particular day.
For employee share rights plan (ESRP) performance rights
allocated in fiscal 2011 and fiscal 2010, there is no exercise price
payable. Once the performance rights have vested, the rights will be
automatically exercised and Telstra shares will be transferred to the
employee. Until this time, the employee cannot use the
performance rights (or vested performance rights) to vote or receive
dividends.
A description of each type of performance right that existed in fiscal
2012 is set out below:
Employee performance rights (fiscal 2011 and fiscal 2010):
• employee share rights plan (ESRP) performance rights - the
performance hurdle for these rights is based on the completion
of three years continuous service by the participant (and once
granted are not subject to any performance conditions).
Executive LTI performance rights:
• revenue growth (RG) performance rights - the performance
hurdle for these rights is based on increases in Telstra’s
revenue; and
• network transformation (NT) performance rights - the
performance hurdle for these rights is based on completion of
certain elements in Telstra’s network transformation program.
(iii) Performance hurdles
Restricted Shares
Details of the relevant performance hurdles in relation to restricted
shares, are set out below:
Relative Total Shareholder Return (RTSR) restricted shares (fiscal
2012, fiscal 2011 and fiscal 2010)
For fiscal 2012, fiscal 2011 and fiscal 2010 RTSR restricted shares,
the single performance period is the three year period ending on 30
June 2014, 30 June 2013 and 30 June 2012 respectively.
If Telstra achieves a result placing it in at least the 50th percentile
for the performance period, then:
• the number of RTSR restricted shares that vest for that
performance period is scaled proportionately from the 50th
percentile (at which 25% of the allocation vests) to the 75th
percentile (at which 100% of the allocation vests); and
• any restricted shares that do not vest will lapse.
If Telstra does not reach the 50th percentile, all of these RTSR
restricted shares will lapse.
Any RTSR restricted shares that vest become restricted trust
shares and are held by the Trustee until the restriction period ends
(4 years after the effective allocation date of the restricted shares).
Free Cashflow Return on Investment (FCF ROI) restricted shares
(fiscal 2012, fiscal 2011 and fiscal 2010)
For fiscal 2012, fiscal 2011 and fiscal 2010 FCF ROI restricted
shares, the single performance period is the three year period
ending on 30 June 2014, 30 June 2013 and 30 June 2012
respectively.
The number of FCF ROI restricted shares that will vest is calculated
as follows:
• if the threshold target is achieved, then 50% of the allocation of
FCF ROI restricted shares will vest;
• if the result achieved is between the threshold and stretch
targets, then the number of FCF ROI restricted shares that will
vest is scaled proportionately between 50% and 100%; and
• if the stretch target is achieved or exceeded, then 100% of the
FCF ROI restricted shares will vest.
If the threshold target is not achieved, all of these FCF ROI
restricted shares will lapse.
Any FCF ROI restricted shares that vest become restricted trust
shares and are held by the Trustee until the end of the restriction
period (4 years after the effective allocation date of the restricted
shares).
27. Employee share plans (continued)