Annual Report 2011 - T-Hrvatski Telekom

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Introduction
As a result of the extension of the new LTIP —
Variable II 2011 duration from three to four years,
there appears a lack of payment after three years.
In order to close the lack of a payout option, the
Transitional HT MTIP 2011 is established. Transitional
HT MTIP 2011 was set up as a “bridging instrument”
before introducing newly designed four-year-term
LTIP 2011 (Variable II).
All MTIPs cover period of three years and LTIP-
Variable II covers period of four years. Upon expiry of
the term of the plan (after three years for MTIP and
after four years for LTIP- Variable II), the Supervisory
Board of the Company shall determine for MTIP
whether each of the targets has been achieved or
for Variable II target achievement for each of four
parameters. Based on the findings of the Supervisory
Board, the Management Board shall determine and
announce the level of target achievement.
Based on decision of the Supervisory Board who
has established that one target (of two) MTIP 2008
have been achieved, in March 2011 was the payment
for participants HT MTIP 2008. In accordance with
targets achievements, payment of 50% of the total
amount was made.
Currently are in progress HT MTIP 2009, HT MTIP
2010, Transitional HT MTIP 2011 and LTIP - Variable
II 2011. All MTIPs have two targets which are equally
weighted and cannot be changed during the MTIP
duration. One target is based on the increase of the
share price by a certain percentage; the second target
is related to the share price movement compared to
the complex return index.
The incentives themselves consist of 20 or 30% of the
participants’ individual annual salary as contracted
on the beginning of the each MTIP, depending on the
management level of the participant and according to
the Supervisory Board decision. Participants’ individual
annual salary is defined as the annual amount of total
fixed salary and the amount of variable salary in case of
a 100 percent target achievement.
operating Return On Capital Employed - ROCE, third
target is customer satisfaction and fourth target is
employee satisfaction.
The amounts awarded for LTIP — Variable II 2011
are for International Business Leaders (BLT’s) —
HT CEO is fixed sum specified in the individual
employment contract,and for other participant is 30%
or 20% of the participants’ individual annual salary
as contracted on the beginning of the LTIP- Varaible
II 2011. depending on the management level of the
participant and according to the Supervisory Board
decision. Participants’ individual annual salary is
defined as the annual amount of total fixed salary and
the amount of variable salary in case of a 100 percent
target achievement.
In 2011 HT Matching Share Plan is introduced,
following its implementation for DT Group
International Business Leaders (BLTs). For the time
being it is applicable only for the President of the
Management Board (CEO), as a member of DT Group
BLTs.
HT Matching Share Plan is established to ensure the
long-term incentive effect and orientation towards the
sustained development of the Company.
According to the provisions of the Plan, the
participant is obliged to invest in HT shares, through
a personal investment, minimum 10% and maximum
33.33% of his annual gross variable salary (Bonus/
Variable I) paid for 2011.
These shares are to be held for a period of at least 4
years (lock-up period). After the lock-up period expires,
one additional share (matching share) Company
will grant for each share acquired as a part of the
aforementioned personal investment.
Consequently, the new compensation model for
the President of the Management Board (CEO) was
introduced based on the above described Matching
Share Plan.
LTIP — Variable II has four equally weighted
performance parameters and also cannot be
changed during the LTIP durations. Two targets are
financial KPIs, Earnings Per Share - EPS and adjusted