(31) Share-based Compensation

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Long Term Incentive (LTI) Program

Telekom Austria Group introduced a Long Term Incentive Program (LTI) in 2010. Participants are required to invest an amount depending on the annual gross basic salaries and the management-level of the entitled employee in Telekom Austria shares and to hold these shares until the end of the holding period (at least three years). For each tranche, the number of shares granted is calculated based on the average Telekom Austria stock price for a defined period. The performance period for meeting the performance targets was determined to be three years.

On 1 June 2011 the second tranche (LTI 2011) and on 1 August 2012 the third tranche (LTI 2012) were granted. Free cash flow, total shareholder return and EBITDA were defined as key performance indicators. The target values for these key indicators were determined by the Supervisory Board at the beginning of each tranche. At the vesting date (at the earliest three years after the grant date), bonus shares will be allocated to the participants and will be settled in cash. If the targets are fully met, bonus shares equal to the personal investment will be allocated to the participants. If the targets are exceeded, additional shares will be allocated up to a maximum of 175% of the shares on a pro rata basis. In case of a significant underperformance, no shares will be allocated. For LTI 2011, the actual performance and the bonus shares allocated are summarised in the subsequent table.

On 1 September 2013, the fourth tranche (LTI 2013) and on 1 July 2014, the fifth tranche (LTI 2014) were granted. Net income, relative total shareholder return and EBITDA were defined as key performance indicators. The relative total shareholder return is determined based on a balanced peer group of nine European telecommunications providers. The target values for these key indicators were determined by the Supervisory Board. At the vesting date (at the earliest three years after the grant date), bonus shares will be allocated to the participants and will be settled in cash. If the targets are fully met, bonus shares equal to the double personal investment will be allocated to the participants. If the targets are exceeded, additional shares will be allocated up to a maximum of 175% of the shares on a pro rata basis. In case of a significant underperformance, no shares will be allocated.

The following table summarises the significant terms and conditions for each tranche not yet settled:

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LTI 2014

LTI 2013

LTI 2012

LTI 2011

*

For LTI 2011 personal investment at the end of the vesting period.

**

For LTI 2011 actual performance at the end of the vesting period.

***

Taking into account the allocation of bonus shares equal to the double personal investment for LTI 2014 and 2013.

****

Including the personal investment of Hans Tschuden for all tranches. LTI 2014 including the personal investment of Siegfried Mayrhofer (see Note (35)).

Start of the programme

1 January 2014

1 January 2013

1 January 2012

1 January 2011

Grant date

1 July 2014

1 September 2013

1 August 2012

1 June 2011

End of vesting period

31 December 2016

31 December 2015

31 December 2014

31 December 2013

Vesting date

1 July 2017

1 September 2016

1 August 2015

1 June 2014

 

 

 

 

 

Personal investment (at grant date)

299,239

343,738

510,986

527,094

Thereof Management Board****

75,671

73,977

59,674

51,348

Personal investment (at reporting date)*

297,739

292,123

399,658

443,786

Expected performance**

49.70%

40.10%

17.70%

28.00%

Expected bonus shares***

292,985

216,693

70,739

0

Maximum bonus shares***

1,042,085

1,022,429

699,401

0

Fair value of programme (in TEUR)

1,562

1,181

405

0

Allocated bonus shares

0

0

0

124,260

Average stock price at end of vesting period (in EUR)

0

0

0

6.04

Share-based compensation (in TEUR)

0

0

0

750

As of the reporting date, a liability measured at fair value for the portion of the expected future expense of the LTI program, which has already vested, is recognised. The fair value of the liability is measured based on the expected target achievement and the expected share price, as determined by applying a binomial calculation model generally used for share price analysis, taking into account expected dividends. The liability is recognised over the vesting period (see Notes (23) and (28)). The following personnel expense is recognised in profit or loss (negative values indicate income):

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in TEUR

2014

2013

LTI 2010

0

−549

LTI 2011

−20

−370

LTI 2012

149

−260

LTI 2013

7

801

LTI 2014

526

0

Expense

662

−378

Sensitivity analysis

A change of one Euro in the average stock price expected at the end of the vesting period would result in the following changes in fair values (negative values indicate a reduction):

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in TEUR, at 31 December

1 EUR increase

1 EUR decrease

Fair value of LTI 2013

217

−217

Fair value of LTI 2014

293

−293

A change of five percentage points in the EBITDA applied would result in the following changes of fair values (negative values indicate a reduction):

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in TEUR, at 31 December

5 percentage points increase

5 percentage points decrease

Fair value of LTI 2013

309

−188

Fair value of LTI 2014

374

−701

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