Citibank 2011 Annual Report Download - page 186

164
Fair Value Assumptions
Valuation and related assumption information for Citigroup option programs
is presented below. Citigroup uses a lattice-type model to value stock options.
For options granted during 2011  
Weighted-average per-share fair
value, at December 31 $ 13.90    
Weighted-average expected life
/RIGINALæGRANTS 4.95 yrs. æYRS æYRS
Valuation assumptions
%XPECTEDæVOLATILITY 35.64%  
2ISKFREEæINTERESTæRATE 2.33%  
%XPECTEDæDIVIDENDæYIELD 0.00%  
Expected annual forfeitures
/RIGINALæANDæRELOADæGRANTS 9.62%  
Profit Sharing Plan
In October 2010, the Committee approved awards under the 2010 Key
Employee Profit Sharing Plan (KEPSP) which may entitle participants to
profit-sharing payments based on an initial performance measurement
period of January 1, 2010 through December 31, 2012. Generally, if a
participant remains employed and all other conditions to vesting and
payment are satisfied, the participant will be entitled to an initial payment
in 2013, as well as a holdback payment in 2014 that may be reduced
based on performance during the subsequent holdback period (generally,
January 1, 2013 through December 31, 2013). If the vesting and performance
conditions are satisfied, a participant’s initial payment will equal two-thirds
of the product of the cumulative pretax income of Citicorp (as defined in the
KEPSP) for the initial performance period and the participant’s applicable
percentage. The initial payment will be paid after January 20, 2013, but no
later than March 15, 2013.
The participant’s holdback payment, if any, will equal the product
of (a) the lesser of cumulative pretax income of Citicorp for the initial
performance period and cumulative pretax income of Citicorp for the initial
performance period and the holdback period combined (generally, January
1, 2010 through December 31, 2013), and (b) the participant’s applicable
percentage, less the initial payment; provided that the holdback payment
may not be less than zero. The holdback payment, if any, will be paid after
January 20, 2014, but no later than March 15, 2014. The holdback payment,
if any, will be credited with notional interest during the holdback period. It is
intended that the initial payment and holdback payment will be paid in cash;
however, awards may be paid in Citi common stock if required by regulatory
authority. Regulators have required that U.K. participants receive at least
50% of their initial payment and at least 50% of their holdback payment, if
any, in shares of Citi common stock that will be subject to a six-month sales
restriction. Clawbacks apply to the award.
Independent risk function employees were not eligible to participate in the
KEPSP as the independent risk function participates in the determination of
whether payouts will be made under the KEPSP.
On February 14, 2011, the Committee approved grants of awards under the
2011 KEPSP to certain executive officers, and on May 17, 2011, to the CEO.
These awards have a performance period of January 1, 2011 to December 31,
2012, and other terms of the awards are similar to the 2010 KEPSP.
Expense taken in 2011 in respect of the KEPSP was $285 million.
Other Incentive Compensation
Citigroup may at times issue Cash in Lieu of Equity awards, which are
deferred cash awards given to new hires in replacement of prior employer’s
awards or other forfeited compensation. The vesting schedules and terms and
conditions of these deferred cash awards are generally structured to match
the terms of awards or other compensation from a prior employer that was
forfeited to accept employment with the Company. Expense taken in 2011 for
these awards was $172 million.
Additionally, certain subsidiaries or business units of the Company operate
and may from time to time introduce other incentive plans for certain
employees that have an incentive-based award component. These awards are
not considered material to Citigroup’s operations.