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1                    STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below.  These policies have been consistently applied to all the years presented, unless otherwise stated.  The financial report includes separate financial statements for Ten Network Holdings Limited as an individual entity and the consolidated entity consisting of Ten Network Holdings Limited and its controlled entities.

(a)                Basis of Preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group (UIG) Interpretations and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS).  Compliance with AIFRS ensures that the consolidated financial statements and notes of Ten Network Holdings Limited and its controlled entities comply with International Financial Reporting Standards (IFRS).

Historical Cost Convention

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

Critical Accounting Estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

(b)               Principles of Consolidation

The consolidated financial statements incorporate the assets, liabilities and results of all entities controlled by Ten Network Holdings Limited (“the Company”) as detailed in Note 30 to the financial statements.  Ten Network Holdings Limited and its controlled entities together are referred to in this financial report as the consolidated entity.  The financial statements of controlled entities are included from the date control commences until the date control ceases.

All intercompany transactions are eliminated in full.  Minority interest in the equity and results of the entities that are controlled by the Company are shown as a separate item in the consolidated financial statements.

Refer to Note 1(j) for the accounting treatment of investments in associates and joint ventures.

(c)                Income Tax

The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and assessable temporary differences to measure the deferred tax asset or liability.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of distributions from controlled entities and it is probable that the temporary difference will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Management have determined that deferred tax assets and deferred tax liabilities associated with indefinite life intangibles such as television licences should be measured based on the tax consequences that would follow from the recovery through ongoing use.

Tax Consolidation Legislation

A controlled entity, The Ten Group Pty Limited, and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2003.

The Ten Group Pty Limited, as the head entity in the tax consolidation group, recognises current tax amounts relating to transactions, events and balances of the controlled entities in this group as if those transactions, events and balances were its own, in addition to the current tax amounts arising in relation to its own transactions, events and balances.  These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.  In addition to its own deferred tax amounts, The Ten Group Pty Limited also recognises the deferred tax assets arising from unused tax losses and unused tax credits assumed from the controlled entities in the tax consolidated group.

Amounts receivable or payable under a tax sharing agreement with the tax consolidated entities are recognised separately as tax-related amounts receivable or payable.  Expenses and revenues arising under the tax sharing agreement are recognised as a component of income tax expense/revenue.

In accordance with UIG 1052 Tax Consolidation Accounting, the controlled entities in the tax consolidated group account for their own deferred tax balances, except for those relating to tax losses.

(d)               Trade Receivables and Revenue Recognition

Revenue is recognised at fair value of the consideration received net of the amount of goods and services tax (GST).  Revenue from core operating activities consists of advertising and media revenues and is recognised when the advertisement has been broadcast/displayed or the media service performed.

Advertising and media revenues are disclosed after making allowance for commissions paid to advertising agencies.

Other revenue includes bank interest earned.

All trade receivables are initially measured at fair value and subsequently at amortised cost, less provision for doubtful debts.  The amount of the provision is recognised in the income statement.

Trade receivables are due for settlement no more than 45 days from date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis.  Debts which are known to be uncollectable are written off.  A provision for doubtful debts is established when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of receivables.

(e)               Impairment of Assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.  Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).  Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(f)                 Inventories

Television Program Rights

Television programs which are available for broadcast are recognised as an asset and stated at cost.  Series programs are written off in full upon initial airing.  Features are amortised over their estimated useful lives.  Furthermore, the carrying values of television program rights are tested for impairment as set out in Note 1(e).

Television programs at balance date for which the telecast licence period has commenced or will commence in the succeeding year has been classified as a current asset.

Other Inventories

All other inventories are carried at the lower of cost and net realisable value, where net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

(g)               Non-Current Assets Held For Sale (or Disposal Groups) and Discontinued Operations

Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than continuing use.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.  A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised.  A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale.  Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets (including those that are part of a disposal group) classified as held for sale are presented separately from the other assets in the balance sheet.  The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale.  The results of discontinued operations are presented separately on the face of the income statement.

(h)               Property, Plant and Equipment

Property, plant and equipment are stated at historical cost.  Depreciation or amortisation is provided on property, plant and equipment other than freehold land so as to write off the cost of the assets progressively over their estimated remaining useful lives.  The straight line method of calculating depreciation is applied.  The cost of the freehold land and buildings is regularly assessed by Directors through impairment testing (Refer to Note 1(e)).  Estimates of remaining useful lives are made on a regular basis for all assets.  The expected useful lives are as follows:

The cost of leasehold improvements is amortised over the unexpired period of the lease or the estimated useful life of the improvement, whichever is the shorter.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount.  These are included in the income statement.

(i)                 Intangibles

Television Licences

Television licences are stated at cost less accumulated impairment losses.  The television licences continue to be subject to Government legislation and regulation by the Australian Communications and Media Authority (“ACMA”). The Directors have no reason to believe that the licences will not be renewed in due course.

No amortisation is provided against these assets as the Directors believe that the television licences do not have a limited useful life.  Instead, the Directors regularly assess the carrying value of licences through impairment testing (Note 1(e)) so as to ensure that they are not carried at a value greater than their recoverable amount. 

Other Licences

Other licences represent capitalised outdoor site leases.  These licences are being amortised on a straight line basis over the term of the site leases (approximately 20 to 40 years).

Goodwill

Goodwill represents the excess of the purchase consideration plus incidental costs over the fair value of the identifiable net assets acquired.  Goodwill acquired in business combinations is not amortised.  Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.  Each of these cash-generating units represents the consolidated entity's investment in each business segment.

(j)         Investments

Associates and Joint Ventures

Associates comprise those investments where the consolidated entity exercises significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost.  The consolidated entity's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The consolidated entity’s equity accounted share of the associates’ and joint ventures’ net profit or loss is recognised in the consolidated income statement and its share of post-acquisition movements in reserves is recognised in reserves from the date significant influence commences until the date significant influence ceases.

When the consolidated entity’s share of losses in an associate equals or exceeds its interest in the associate, the consolidated entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains and losses on transactions between the consolidated entity and its associates are eliminated to the extent of its interest in the associates.

Other Investments

Other investments are carried in the consolidated financial statements at the lower of cost and recoverable amount.

(k)       Business Combinations

The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.  Cost is determined as the fair value of the assets given up at the date of acquisition plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.  The excess of the cost of acquisition over the fair value of the consolidated entity’s share of the identifiable net assets acquired is recorded as goodwill.  If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition.  The discount rate used is the rate at which a similar borrowing could be obtained under comparable terms and conditions.

A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is a demonstrable commitment by the acquiree to restructure the acquired entity and a reliable estimate of the amount of the liability can be made.

(l)         Leases

Operating leases

Operating leases are those leases under which the lessor effectively retains substantially all the risks and benefits incident to ownership of leased non-current assets.

Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

The present value of future payments for surplus leased space under non-cancellable operating leases is recognised as a liability, net of sub-leasing revenue, in the period in which it is determined that the leased space will be of no future benefit to the company.  Each lease payment is allocated between the liability and finance charge.

Lease income from operating leases is recognised in income on a straight-line basis over the lease term.

Finance leases

Finance leases are capitalised.  A lease asset and a lease liability equal to the present value of the minimum lease payments are recorded at the inception of the lease.

Lease liabilities are reduced by repayments of principal.  The interest components of the lease payments are expensed.  Contingent rentals are expensed as incurred.

(m)       Trade and Other Payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial period and which are unpaid.  The amounts are unsecured and are usually paid within 30 days of recognition.

(n)        Employee Benefits

Wages and Salaries, Annual Leave and Long Service Leave

Liabilities for wages and salaries, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised, and are measured at the amounts expected to be paid when the liabilities are settled.

The liability for long service leave expected to be settled more than 12 months from reporting date are recognised, and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.  Consideration is given to expected future wage and salary levels including related on-costs, experience of employee departures and periods of service.

Retirement Benefit Obligations

Contributions to defined contribution funds are recognised as an expense as they become payable.

Equity-Based Compensation Benefits

Ten Executive Option Plan

In previous years, equity-based compensation benefits had been provided to employees via the Ten Executive Option Plan.  Information relating to this scheme is set out in Note 37.

No accounting entries are made in relation to the Ten Executive Option Plan until options are exercised, at which time the amounts receivable from employees are recognised in the balance sheet as share capital.  The Ten Executive Option Plan is not accounted under AASB 2 Share-based Payment because options were granted before 7 November 2002. 

The amount disclosed for emoluments relating to options is the assessed fair value at grant date of options granted to Executives, allocated equally over the period from grant date to vesting date.  Fair values at grant date have been independently determined by Mercer Financing and Risk Consulting using the Monte-Carlo option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The Ten Executive Option Plan is currently suspended.

Ten Long-Term Incentive Plan

The market value of shares purchased for employees for no cash consideration under the Ten Long-Term Incentive Plan is recognised as part of employee benefit costs evenly across the total period over which they vest.

Shares purchased, but which have not yet vested to the employee as at reporting date are classified as Treasury Shares and offset the contributed equity of the consolidated entity (see Note 1(x)).  Any differences in the timing of the vesting and expensing of shares are recognised within a share-based payment reserve in equity.

(o)               Cash and Cash Equivalents

For purposes of the cash flow statement, cash and cash equivalents includes cash management deposits at call net of outstanding deposits.  Any bank overdrafts are shown within interest bearing liabilities in current liabilities on the balance sheet.

(p)               Interest Bearing Loans and Borrowings

Interest bearing loans and borrowings are recognised at fair value and subsequently measured at amortised cost.

(q)               Borrowing Costs

Borrowing costs are recognised as expenses in the period when incurred. 

(r)                Provisions

Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

Dividends

Provision is made for the amount of any dividend declared, determined or publicly recommended by the Directors on or before the end of the financial year but not distributed at balance date.

Deferred Settlement Costs

The consolidated entity has provided for payment of additional consideration in relation to the original acquisition of a lease.  The timing and amount of payment are subject to the extension of the lease over the site. 

Provision has also been made in relation to acquisitions during the period where further consideration is anticipated but dependent on future events.

Make good

A make good provision is recognised for the costs of restoration or removal in relation to property, plant and equipment and site leases where there is a legal or constructive obligation.  The provision is initially recorded when a reliable estimate can be determined and discounted to present value.  The unwinding of the effect of discounting on the provision is recognised as a finance cost.

Straight-lining

Lease payments are recognised as an expense on a straight-line basis over the lease term for contracts which include fixed annual increases.  Cash costs relating to certain contracts will be lower than reported costs in earlier years and higher than reported costs in later years of each contract term.  In the earlier years of the lease term, a provision is created which will in effect be unwound over the lease term.

(s)                Foreign Currency Translation

Functional and Presentation Currency

Items included in the financial statements of the consolidated entity are measured using the currency of the primary economic environment in which the entity operates.  The consolidated financial statements are presented in Australian dollars, which is Ten Network Holdings Limited’s functional and presentation currency.

Transactions and Balances

Foreign currency transactions are translated into the functional currency at the date of the transaction.  At balance date amounts payable and receivable are translated at rates of exchange current at that date.  All realised and unrealised currency translation gains and losses are brought to account in the income statement.

Consolidated Companies

The result and financial position of the consolidated entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

§         Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

§         Income and expenses for each income statement are translated at average exchange rates; and

§         All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity.  When a foreign operation is sold or borrowing repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or the loss on sale.

(t)                 Earnings Per Share

Basic Earnings per Share

                        Basic earnings per share is determined by dividing the operating profit after income tax attributable to members of Ten Network Holdings Limited by the weighted average number of ordinary shares outstanding during the financial year.

Diluted Earnings per Share

                        Diluted earnings per share has been calculated on the basis that the convertible debentures in The Ten Group Pty Limited (a controlled entity) had been converted and the subordinated debentures had been redeemed for the full year.     

(u)               Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority.  In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable.  The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis.  The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(v)               Derivatives

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date.  The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.  The consolidated entity designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).

The consolidated entity documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  The consolidated entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

Fair Value Hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Cash Flow Hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve.  The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement.  When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(w)              Segment Note

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments.  A geographical segment is engaged in providing products or services within a particular environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(x)               Contributed Equity

Ordinary shares are classified as equity.

If the consolidated entity reacquires its own equity instruments, eg under the Ten Long-Term Incentive Plan, those instruments are deducted from equity.

(y)                Rounding of Amounts

The company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report.  Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

(z)                New Accounting Standards and UIG Interpretations

Certain new accounting standards and UIG interpretations have been published that are not mandatory for 31 August 2007 reporting periods.  The consolidated entity's assessment of the impact of these new standards and interpretations is set out below.

AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments to Australian Standards [AASB 132, AASB 1010, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]

AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1 January 2007.  The consolidated entity has not adopted the standards early.  Application of the standards will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the consolidated entity's financial instruments.

AASB-I 10 Interim Financial Reporting and Impairment

AASB-I 10 applies to annual reporting periods beginning on or after 1 November 2006.  It prohibits impairment losses recognised in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date.  The consolidated entity has not adopted the standard early and it is not expected to have any impact on the consolidated entity's financial statements.

Revised AASB 101 Presentation of Financial Statements

A revised AASB 101 was issued in October 2006 and is applicable to annual reporting periods beginning on or after 1 January 2007.  The consolidated entity has not adopted the standard early.  Application of the revised standard will not have an impact on the consolidated entity's financial statements.

AASB-I 11 AASB 2 Group and Treasury Share Transactions and AASB 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11

AASB-I 11 and AASB 2007-1 are effective for annual reporting periods commencing on or after 1 March 2007.  AASB-I 11 addresses whether certain types of share-based payment transactions should be accounted for as equity-settled or as cash settled transactions and specifies the accounting in a subsidiary's financial statements for share-based payment arrangements involving equity instruments of the parent.  The consolidated entity has not adopted the standard early.  Application of the revised standard is not expected to have an impact on the consolidated entity's financial statements.

AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2008.  AASB 8 requires adoption of a 'management approach' to reporting on the financial performance.  The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments.  Application of the revised standard will likely not have an impact on the consolidated entity's financial statements.

Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

The revised AASB 101 was issued in September 2007 and is applicable to annual reporting periods beginning on or after 1 January 2009.  It requires the presentation of a statement of comprehensive income and makes changes to the statement of recognised income and expense but will not affect any of the amounts recognised in the financial statements.  If an entity has made a prior period adjustment or a reclassification of items in the financial statements, it will also need to disclose a third balance sheet, this one being as at the beginning of the comparative period.

2          FINANCIAL RISK MANAGEMENT

The consolidated entity's activities expose it to a variety of financial risks; market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk.  The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity.  The consolidated entity uses derivative financial instruments such as interest rate swaps to hedge certain risk exposures.

Risk management is carried out under a Treasury Policy approved by the Board of Directors.  This Treasury Policy covers specific areas, such as mitigating foreign exchange, interest rate, credit and liquidity risks and the use of derivative financial instruments.

(a)           Market Risk

Foreign Exchange Risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency.

The consolidated entity has some exposure to foreign exchange risk arising from certain agreements being denominated in US dollars and also from a number of foreign operations.

During the current year, the US and UK operations in the Out-of-home segment have grown significantly and the consolidated entity is currently considering hedging options for those operations in line with its Treasury Policy.

Fair Value Interest Rate Risk

Refer to (d) below.

(b)          Credit Risk

The consolidated entity has no significant concentrations of credit risk.  The consolidated entity has policies in place to ensure that sales of services are made to customers with an appropriate credit history.  Derivative counterparties and cash transactions are limited to high credit quality financial institutions. 

(c)           Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities.  Due to the dynamic nature of the underlying businesses, the consolidated entity aims to maintain flexibility in funding by keeping committed credit lines available.

(d)          Cash Flow and Fair Value Interest Rate Risk

As the consolidated entity has no significant interest bearing assets, the consolidated entity's income and operating cash flows are not materially exposed to changes in market interest rates.

The consolidated entity's interest-rate risk arises from long-term borrowings.  Borrowings issued at variable rates expose the consolidated entity to cash flow interest-rate risk.  Borrowings issued at fixed rates expose the consolidated entity to fair value interest-rate risk.  The consolidated entity's policy is to have no fixed rate borrowings.  The fixed rate USD Private Placement entered into in March 2003 has been swapped to a floating rate via a cross currency interest rate swap.  The consolidated entity has no other fixed rate debt.

The consolidated entity manages its cash flow interest-rate risk by using floating-to-fixed interest rate swaps.  Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.  Generally, the consolidated entity raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the consolidated entity borrowed at fixed rates directly.  Under the interest-rate swaps, the consolidated entity agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.

3          CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

The consolidated entity makes estimates and assumptions concerning the future.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimated Impairment of Intangible Assets With Indefinite Lives and Goodwill

The consolidated entity tests annually or when circumstances indicate impairment, whether indefinite lived intangibles and goodwill have suffered any impairment, in accordance with the accounting policy stated in Note 1(e).  The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.  These calculations require the use of assumptions.  Refer to Note 18 for details of these assumptions and the potential impact of changes to the assumptions.

 

 

 

 

 

 

 

^A:  Additional invoices relating to prior year acquisitions were capitalised during 2007.

 

 

Movements in each class of provision during the financial year, other than employee entitlements are set out below:

(i) Surplus lease space provision relates to the excess cost of surplus leased premises.

(ii) Deferred settlement provision relates to the contractual obligation for an outdoor advertising site and future consideration on acquisitions.

 

(a) Bank Loan

In December 2003, The Ten Group Pty Limited, a controlled entity, refinanced its $700m Syndicated Loan Facility to expire December 2008.

(b) USD Senior Unsecured Notes

In 2003, The Ten Group Pty Limited raised funds through USD $125m Senior Unsecured Notes (due March 2013) in the US Private Placement market.  The notes have been fully swapped by the use of foreign currency and interest rate swaps into an AUD floating exposure of $210.084m.  This amount will be required to be repaid to noteholders upon maturity in March 2013.  This has been offset by $62.48m revaluation to fair value as required under AASB 139 Financial Instruments: Recognition and Measurement.  The net carrying amount at 31 August 2007 is $147.604m.

(c) AUD Senior Unsecured Notes

In December 2005, The Ten Group Pty Limited raised funds through AUD $150m Senior Unsecured Notes.  This amount will be required to be repaid to noteholders upon maturity in December 2015.

 (d) Debentures

On 28 August 2007, CanWest exchanged the convertible debentures previously issued by The Ten Group Pty Limited into 455,000,000 new shares in Ten Network Holdings Limited.  At the same time, the convertible debentures were converted into new shares in The Ten Group Pty Limited which are held by Ten Network Holdings Limited.  Following this exchange and conversion, the subordinated debentures held by a CanWest entity were redeemed for cash.  Prior to this exchange, details of the debentures were as follows.

The 45,500,000 subordinated debentures of $1 each fully paid had a base interest rate of 15%.  The
rate of interest paid was adjusted to the rate of dividend distribution should the dividend distribution amount exceed the base rate in any year.  An equivalent amount of interest was also payable in the same proportion to any additional dividend distributions that may be paid from retained earnings.  The subordinated debentures could not be redeemed until 30 December 2042, unless done in conjunction with the conversion of the convertible debentures.

The 455,000 convertible debentures of $1.01 each partly paid to 10 cents had a market linked interest rate and could each be converted to 1,000 ordinary shares in The Ten Group Pty Limited at the option of the convertible debenture holder in certain circumstances within 45 years from date of issue.  The new ordinary shares were issued at the price of $0.10 per share.

 

 (e) Financing Arrangements

 Unrestricted access was available at balance date to the following lines of credit:

   (f) Interest Rate Risk Exposures

   The following table sets out the consolidated entity's exposure to interest rate risk by maturity periods.

 

24       INTEREST BEARING LIABILITIES (NON-CURRENT) (continued)

(g) Fair value

The fair value of interest bearing liabilities of the consolidated entity is their carrying value. 

(a) Instruments used by the consolidated entity

The consolidated entity is party to derivative financial instruments in the normal course of the business in order to hedge exposure to fluctuations in interest and foreign exchange rates (refer to Note 2 Financial Risk Management policies). 

(i)  Cross currency interest rate swap (CCIRS)

In 2003, The Ten Group Pty Limited, a controlled entity, raised funds through USD $125m Senior Unsecured Notes (due March 2013) in the US Private Placement market.  This has been fully swapped by the use of foreign currency and interest rate swaps into an AUD floating exposure of $210.084m.  This amount will be required to be repaid to note holders upon maturity in March 2013.

This debt is hedged by a combination of fair value and cash flow hedges.  Interest rate swaps have been designated to this debt as cash flow hedges (see (ii) below).  For the periods of time where interest rate swaps have not been designated, the debt is in a fair value hedge relationship where changes in the fair value of the debt are effectively offset by changes in the mark-to-market of the CCIRS.

As at balance date, the hedges in relation to the USD Senior Unsecured Notes have a net fair value of $64.2m liability ($3.8m hedge asset and $68.0m hedge liability).  The majority of this liability is offset by a $62.5m revaluation of debt to fair value, the remainder being in an equity reserve representing the movement in the fair value of effective hedges.  A loss of $78k was recognised in relation to the ineffective portion.

(ii)  Interest rate swap contracts

The bank loan and unsecured notes of the consolidated entity bear an average variable interest rate of around 7.5%.  It is policy to protect part of these loans from exposure to increasing interest rates.  Accordingly, the consolidated entity has entered into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates.

Swaps currently in place cover approximately 40% (2006: 50%) of loan principals outstanding.  The fixed interest rates range between 5.04% and 6.17% (2006: 5.04% and 5.95%) and the variable rates are at BBSW, which at balance date was 6.8567% (2006: 6.1267%).

 

(ii)  Interest rate swap contracts (continued)

At 31 August 2007, the notional principal amounts and period of expiry of the interest rate swap contracts are as follows:

The contracts require settlement of net interest receivable or payable each 90 days.

The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and re-classified into profit and loss when the hedged interest expense is recognised.  The ineffective portion, if any, is recognised in the income statement immediately.  In the year ended 31 August 2007 a loss of $71k was transferred to the income statement.  A loss of $77k was from cash flow hedges of the USD Private Placement in (i) above.  A gain of $6k was recognised from cash flow hedges of floating rate debt.

The hedges relating to the USD Senior Unsecured Notes are discussed in (i) above.  Remaining cash flow hedges relate to floating rate debt and have a fair value of $1.6m recognised as hedge assets.

(b) Credit risk exposures

Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity.  This arises with amounts receivable from unrealised gains on derivative financial instruments.  At balance date, the amounts receivable for the consolidated entity from interest rate swap contracts are immaterial.

 (c) Interest rate risk exposures

Refer to Note 2(d) and Note 24 for the consolidated entity's exposure to interest rate risk on interest rate swaps.

 

Movements in each class of provision during the financial year, other than employee entitlements are set out below:

 

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.

(f)  In the event of winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

Nature and purpose of reserves

Foreign currency translation

Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in accounting policy Note 1(s).  The reserve is recognised in profit and loss when the net investment is disposed of.

Hedging reserve

The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in accounting policy Note 1(v).  Amounts are recognised in profit and loss when the associated hedge transaction affects profit and loss.

Share-based payment reserve

The share-based payment reserve recognises the fair value of shares vesting to employees and the expense pattern of shares held by The Ten Employee Share Plans Pty Limited which has yet to vest, as described in accounting policy Note 1(n).

Conversion reserve

The value of the shares exchanged and the resulting increase in Ten Network Holdings Limited's investment in The Ten Group Pty Limited were both recorded at the prevailing market value ($2.62 per share).  On elimination of the investment in The Ten Group Pty Limited, the $1.3b premium of market value ($2.62) over cost value ($0.10) of the shares in The Ten Group Pty Limited has been reflected as a debit in a conversion reserve.  To offset this debit, there is a further $0.1b credit to remove the CanWest minority interest in the balance sheet at the time of conversion.

The above treatment reflects the economic entity method of accounting for minority interests.

AASB 117 Leases requires lease costs to be recognised on a straight line basis for contracts with fixed annual increases.  In previously reported results, site lease costs were expensed as incurred.  The impact of AASB 117 is that costs recognised for site leases will be higher in earlier years and balance out in later years of the lease term.  This is a timing issue only with no impact on total costs incurred and recognised over the full term of a contract.  Opening retained earnings have been adjusted by $1.2m to reflect this treatment.

 

 

 

 

32       INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)

 

 

Diluted Earnings per Share

Information Concerning the Classification of Securities

(a)                Options

Options granted to Executives under the Ten Executive Option Plan are considered to be potential ordinary shares and have been included in the determination of economic and fully diluted earnings per share.  The options have not been included in the determination of shareholding earnings per share.  Details of the options are set out in Note 37.

(b)                Convertible Debentures

Convertible debentures on issue in a controlled entity are considered to be potential ordinary shares of the controlled entity and accordingly would impact the earnings after tax included in the consolidated result of the consolidated entity and therefore in the determination of economic and fully diluted earnings per share.  The notes have not been included in the determination of shareholding earnings per share.  Details relating to the notes are set out in Note 24.

On 28 August 2007, these convertible debentures were converted and therefore will not form a category of diluted securities in future years.

 

Directors

The following persons were Directors of Ten Network Holdings Limited during the financial year:

Mr NG Falloon, Chairman

Mr JJ Cowin (Alternate Mr JB Studdy)

Mr LS Freedman (Alternate Mr NG Falloon)

Mr PV Gleeson (Alternate Mr NG Falloon)

Mr PPA Harris (Alternate Mr PV Gleeson) ^A

Ms IYL Lee (Alternate Mr JB Studdy)

Mr GH Levy (Alternate Mr PV Gleeson)

Mr R Magid (Alternate Mr NG Falloon)

Mr BM Sherman (Alternate Mr B Sechos) ^B

Mr JB Studdy (Alternates Mr JJ Cowin and Mr AJ Peschar) ^C

Mr PD Viner (Alternates Mr LJ Asper, Mr TC Strike and Mr JE Maguire)

^A:   Mr PV Gleeson was appointed Alternate Director for Mr PPA Harris on 12 March 2007.

^B:    Mr EP Sherman resigned as Alternate Director and Mr PV Gleeson was appointed Alternate Director for Mr BM Sherman on 10 November 2006.

      Mr PV Gleeson resigned as Alternate Director for Mr BM Sherman on 4 December 2006.

      Mr EP Sherman was appointed Alternate Director for Mr BM Sherman on 5 December 2006.

      Mr EP Sherman resigned as Alternate Director and Mr B Sechos was appointed Alternate Director for Mr BM Sherman on 18 May 2007.

^C:    Mr AJ Peschar resigned as Alternate Director for Mr JB Studdy on 11 September 2007.

Other key management personnel

The following persons also had the authority and responsibility for planning, directing and controlling the activities of the consolidated entity, directly or indirectly, during the financial year:

All of the above persons were also key management persons during the year ended 31 August 2006. 

 

Remuneration Report

Principles Used To Determine The Nature And Amount Of Remuneration

The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered.  The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders.  The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

·         Competitiveness and reasonableness

• Acceptability to shareholders
• Performance linkage / alignment of executive compensation
• Transparency
• Capital management.

In consultation with external remuneration consultants, the Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.

Alignment to shareholders’ interests:

·         Has economic profit (earnings before interest and tax – “EBIT”) as a core component of plan design

• Focuses on sustained growth in share price and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value
• Attracts and retains high calibre executives.

Alignment to program participants’ interests:

·         Rewards capability and experience

• Reflects competitive reward for contribution to shareholder growth
• Provides a clear structure for earning rewards
• Provides recognition for contribution.

The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives.  As Executives gain seniority with the group, the balance of this mix shifts to a higher proportion of “at risk” rewards. 

Non-Executive Directors

Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of the Directors.  The Nomination Committee has responsibility for reviewing and recommending the level of remuneration for non-executive Directors in relation to Board and Committee duties.  The non-executive Directors do not participate in any share option plans.

Remuneration for non-executive Directors consists of annual fees and superannuation contributions made in accordance with superannuation guarantee legislation for the Directors performing their duties on the Board of the Company and The Ten Group Pty Limited and on various committees. 

Directors’ fees have been determined on the basis that it will be attractive to proposed Board members and ensure the Company’s Board is comprised of skilled and well-qualified Directors.

 

There are no retirement allowances for non-executive Directors.

 

 

Executive Pay

The executive pay and reward framework has four components:

·         Base pay and benefits

• Short-term performance incentives through cash bonuses
• Long-term incentives through participation in the Long-Term Incentive Plan, and
• Other remuneration such as superannuation.

Executives in the past have been granted share options under the Ten Executive Option Plan.  This Plan is currently suspended.

The combination of these components comprises the Executives’ total remuneration. 

Base Pay

Base pay is structured as fixed remuneration that may be delivered as a combination of cash and salary packaged benefits including motor vehicles.

External remuneration consultants periodically provide analysis and advice to ensure base pay is set to reflect the market for a comparable role.  Base pay for senior Executives is reviewed annually to ensure the Executive’s pay is competitive with the market. Some Executives have fixed annual base pay increases included as a term of their employment contract.

Retirement Benefits

Retirement benefits are delivered under defined contribution superannuation funds. 

 

Short-Term Incentives

Short-term incentives are available through cash bonuses to certain Executives as determined by the Remuneration Committee.  Short-Term Incentive Scheme ('STI') targets are established in each financial year with 25% of the incentive dependent on group EBIT targets, as approved by the Board, and the remainder based on achievement of specific individual and leadership related business drivers and objectives plus a discretionary component based on individual contribution to the business. EBIT is deemed to be the most appropriate measure in determining incentive remuneration in line with company performance.  Short-term incentives are payable in December of each year.  Using a combination of financial and non-financial targets ensures variable reward is linked to shareholder value consistent with the business plan. 

Each Executive has a target short-term incentive opportunity depending on the accountabilities of the role and impact on organisation or business unit performance.  For senior Executives (other than the Executive Chairman) the maximum target bonus opportunity varies between 15-30% of fixed remuneration.  The Executive Chairman can receive up to a maximum target bonus of 75% of fixed remuneration.  Each year, the Remuneration Committee reviews both the prescribed business drivers for the forthcoming year and recommended payments for the completed year under the plan.  Performance against STI objectives is measured via a confidential 360-degree feedback review plus a discretionary payment based on individual contribution to the business. The Executive Chairman's performance is assessed by the Board Remuneration Committee annually against pre-determined performance criteria.

 

 

Long-Term Incentive Plan

A limited number of senior Executives are invited to participate in a long-term incentive share plan.  Ten Network Holdings Limited wishes to give eligible employees an opportunity to participate in the Long-Term Incentive Plan (“Ten Long-Term Incentive Plan”) to encourage retention of key employees, provide an incentive for future performance and align employee interests with shareholder value in the future.

For participants a maximum “incentive amount” is determined at the Remuneration Committee's discretion.  The incentive amount is payable with reference to certain profit and personal targets. 

Shares equal to the incentive amount are bought on market upfront and vest in four equal tranches over 3 years.  The first tranche vests on or about 1 January of the following year with the next 3 tranches of shares vesting on or about each successive anniversary of the first acquisition date.

If the Ten Network Holdings Limited performance target is not met the Remuneration Committee may in its discretion determine the incentive amount the employees will receive, having regard for the reasons why the performance target was not met.

Whilst employed by the Company the tranches of shares are subject to a trading lock until the applicable anniversary of the first acquisition date.

Long-Term Incentive Share Option Plan

Executives in the past have been granted share options under the Ten Executive Option Plan.  This Plan is currently suspended.

 

34       KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Details of Remuneration

Details of the remuneration of each Director of Ten Network Holdings Limited and the other Key Management Personnel of the consolidated entity are set out in the following tables.

 

34       KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Details of Remuneration (continued)

^A:   D Mott's cash bonus includes a $200,000 sign-on bonus.

 

34       KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Service Agreements

Remuneration and other terms of employment for the Executive Director and the five Executives of the consolidated entity receiving the highest emoluments are formalised in service agreements.  Each of these agreements provide for the provision of short-term performance-related incentives, other benefits including car leases and participation when eligible, in the Ten Executive Option Plan and the Long- Term Incentive Plan.  Major provisions of the agreements relating to remuneration are set out below.

Nicholas Falloon, Executive Chairman

Term of agreement – 3 years commencing 1 September 2005.

·         Effective 1 September 2006 fixed remuneration of $2,100,000 inclusive of superannuation, to be reviewed annually by the Remuneration Committee and increased by an amount not less than any rise in the annual CPI during the relevant period.

·         A short-term incentive (STI) of up to 75% of current fixed remuneration may be paid against a set of targets and objectives heavily weighted to the financial performance of the group.

·         Long-term incentives (LTI) of up to a maximum of $1,500,000 of Ten Network Holdings Limited shares may be paid against a set of targets to be determined annually and weighted heavily to the financial performance of the Group.  Shares must be held by Mr Falloon for a period of not less than 18 months from date of acquisition.

·         Payment of termination benefit on early termination by the employer, other than for gross misconduct, is based on 12 months' fixed remuneration plus 12 months' short and long-term incentive payments.

·         In addition, 100% of the eligible STI is paid on a pro-rated period remaining in the financial year. 

·         Termination benefit for resignation, immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.

·         One month's notice of termination may be given by Mr Falloon within ninety days after there is any diminution in the nature of the duties or responsibilities to be performed by him which results from a change in control.  A payment equal to 12 months' fixed remuneration together with short-term and long-term incentive payments is required to be paid to Mr Falloon in such circumstances.

Grant Blackley, Chief Executive Officer – Television

Term of agreement – commencing 1 July 2005 and expiring 1 September 2009.

·         Effective 1 September 2006 fixed remuneration salary, inclusive of superannuation is $840,000, to be reviewed annually by the Executive Chairperson of the board of directors of the Ten Group Pty Limited (currently Mr Falloon), and increased by an amount not less than any rise in the CPI.

·         Fixed remuneration will be reviewed each year with effect from 1 September 2007.

·         For the financial year commencing from 1 September 2006 short-term incentives are available under a short-term incentive scheme equivalent to 30% of fixed remuneration on achievement of specific STI targets.

·         Long-term incentives of up to 25% of fixed remuneration are available through participation in the Long-Term Incentive Plan, subject to Mr Blackley satisfying individual and corporate performance criteria.

·         Payment of termination benefit on early termination by the employer, other than for gross misconduct, on or after 1 July 2006 shall be 12 months' fixed remuneration to the employee.

·         In addition, 100% of the eligible STI is paid on a pro-rated period remaining in the financial year, such pro rata amount being calculated using the percentage of the maximum short term incentive payment achieved in the previous financial year.

·         Long-term incentives allocated but not acquired will be additionally delivered.

·         Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration, any STI amount due and payable and leave unpaid at the date of termination.

·         Twelve months' notice of termination may be given by Mr Blackley no earlier than six months prior to the expiration of the contract.  A payment of fixed remuneration to date of termination and short term incentive payments is required to be paid to Mr Blackley in such circumstances.

 

34       KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Service Agreements (continued)

Gerry Thorley, Chief Executive Officer – Eye Corp

Term of agreement – 3 years commencing 1 January 2005.

·         Effective 1 January 2006 fixed remuneration, inclusive of superannuation, is $650,000.

·         Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific short term incentive targets.

·         Long-term incentives are available through participation in the Long-Term Incentive Plan.

·         Six months' fixed remuneration may be given by the employee if there is a substantive change to his role.

·         A payment equivalent to twelve months' fixed remuneration must be paid if there is a substantive change in his role leading to termination.

Term of agreement – commencing 1 January 2007.

·         Effective 1 January 2007 fixed remuneration, inclusive of superannuation is $725,000 increasing by no less than 4% on 1 January 2008, no less than 4% annually.

·         Short-term incentives are available under a short-term incentive scheme equivalent to 35% of fixed remuneration on achievement of specific STI targets weighted heavily to the financial performance of the Group.

·         Long-term incentives equivalent to 20% of fixed remuneration are available through participation in the Long-Term Incentive Plan.

·         The company may terminate the contract at any time by providing twelve months' fixed remuneration.

·         Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.

·         21 days' notice may be given by the employee if there is a substantive change to his role.

·         A payment equivalent to twelve months' fixed remuneration must be paid if there is a substantive change in his role leading to termination.

·         Six months' notice of termination may be given by Mr Thorley on or after the fourth anniversary of the commencement date.

David Mott, Chief Programming Officer

Term of agreement – 4 years commencing 1 January 2006

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2006 of $650,000, increasing to $680,000 on 1 January 2007, $710,000 on 1 January 2008 and $740,000 on 1 January 2009.

·         A sign on bonus of $200,000 was payable upon commencement of this agreement.

·         Short-term incentives are available under a short term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.

·         Long-term incentives are available through participation in the Long-Term Incentive Plan.

·         Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.

Kerry Kingston, Chief Operating Officer

Term of agreement – 3 years commencing 1 January 2006.

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2006 of $529,000, increasing to $555,450 on 1 January 2007 and no less than 4% on 1 January 2008.

·         Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.

·         Long-term incentives are available through participation in the Long-Term Incentive Plan.

·         Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.

 

34       KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

Service Agreements (continued)

John Kelly, Chief Financial Officer

Term of agreement – 3 years commencing 1 January 2005.

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2006 of $416,745.

·         Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.

·         Pro rata short-term incentive payment payable at end of contract based on completed calendar months in fiscal year.

·         Long-term incentives are available through participation in the Long-Term Incentive Plan.

Term of agreement – 4 years commencing 1 January 2007.

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2007 of $550,000, increasing by no less than 5% on 1 January 2008, no less than 5% on 1 January 2009 and no less than 5% on 1 January 2010.

·         Short-term incentives are available under a short-term incentive scheme equivalent to 25% of fixed remuneration on achievement of specific STI targets.

·         Pro rata short-term incentive payment payable at end of contract based on completed calendar months in fiscal year.

·         Long-term incentives are available through participation in the Long-Term Incentive Plan.

·         Immediate termination by the company for cause or breach of contract is restricted to fixed remuneration and leave unpaid at the date of termination.

Stephen Partington, Group General Counsel & Company Secretary

·         Rolling contract.

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2006 of $310,012.

·         Fixed remuneration, inclusive of superannuation, for the year ended 31 December 2007 of $325,513.

·         Short-term incentives are available under a short term incentive scheme equivalent to 25% of base salary on achievement of specific STI targets.

·         Long-term incentives are available through participation in the Long-term Incentive Plan.

·         Twenty six weeks notice period by the employer and thirteen week notice period by the employee.

Share-Based Compensation - Options

Options have been granted to Executives under the Ten Executive Option Plan, details of which are set out in Note 37 to the financial statements. 

Options are granted under the Plan for no consideration.

Options granted under the plan carry no dividend or voting rights.

The exercise price of options is based on the weighted average price at which the Company’s shares are traded on the Australian Stock Exchange during the five trading days immediately before the options are granted.

Equity instrument disclosures relating to Key Management Personnel

Options Provided As Remuneration

No options over unissued ordinary shares of Ten Network Holdings Limited were granted during or since the end of the financial year to Directors of Ten Network Holdings Limited or any other Key Management Personnel of the consolidated entity as part of their remuneration.

Shares Provided on Exercise of Remuneration Options

During the year ended 31 August 2007, there were no ordinary shares in the Company provided as a result of the exercise of options held by the Key Management Personnel (2006: Nil).

Option Holdings

The