Unilever 2006 Annual Report Download - page 120

Unilever Annual Report and Accounts 2006 117
Financial Statements (continued)
Notes to the consolidated accounts Unilever Group
29 Share-based compensation plans
As at 31 December 2006, the Group had a number of share-based compensation plans:
(i) All-Employee Share Option Plans
Local All-Employee Share Option Plans have been set up in 15 countries to enhance employee involvement with Unilever and its performance
by providing a potential financial benefit linked to the Unilever share price. There are no individual performance targets to be met. The plans
permit participation by all permanent employees in the country where the relevant plan applies.
(ii) Executive Option Plans
The Executive Option Plans were introduced in 1985 to reward key employees throughout the world for their contribution to the enhancement
of the Group’s longer-term future and their commitment to the Group over a sustained period. The grants were dependent on performance of
the Group and the individual.
(iii) Global Performance Share Plan (GPSP)
Introduced in 2005, under this plan managers can be awarded conditional shares which will vest three years later at a level between 0%
and 150% - 200% depending on Unilever’s achievement of set targets for Underlying Sales Growth and Ungeared Free Cash Flow over the
three-year performance period.
(iv) TSR Long-Term Incentive Plan
This plan was introduced in 2001 and, depending on the TSR ranking (see page 27) of Unilever in comparison with its peer group, it will
potentially award top executives on the vesting date three years later with between 0% and 200% of the original conditional award.
(v) North America Performance Share Programme
Along-term incentive plan for North American managers, awarding Unilever shares if company targets are met over a three-year period.
(vi) Other plans
These comprise a Share Matching Plan, a Restricted Share Plan, and a cash-settled share-based retention plan.
Unilever will not grant shareoptions in total in respect of Executive Option Plans for more than 5% of its issued ordinary capital, and
for all Plans together, for more than 10% of its issued ordinary capital. The Board does not apportion these limits to each plan separately.
In recent years we have met the obligations under our shareoption and awardplans by purchasing shares in advance and transferring them,
in returnfor the exercise price, to Directors and employees as the options areexercised or the awards vest.
The numbers in this note include those for Executive Directors shown in the report of the Remuneration Committee on pages 49 to 62
and those for key management personnel shown in note 31 on page 122. No awards weremade to Executive Directors in 2004, 2005
and 2006 under the North America Performance ShareProgramme, the Restricted SharePlan or the cash-settled share-based retention plan.
Non-Executive Directors do not participate in any of the share-based compensation plans.
The economic fair value of the awards is calculated using an option pricing model (usually an adjusted Black-Scholes or multinomial model) and
the resulting cost is recognised as remuneration cost amortised over the vesting period of the grant. The actual remuneration costs charged in
each period is shown below,and relates almost wholly to equity settled plans:
€million €million €million
2006 2005 2004
All-Employee Share Option Plans (12) (13) (17)
Executive Option Plans (29) (63) (105)
Global Performance Share Plan (17) (15) –
TSR Long-Term Incentive Plan (9) (10) (9)
North America Performance Share Programme (31) (63) (64)
Other Plans (22) (28) (23)
(120) (192) (218)
Disclosures, including a description of the method and significant assumptions used to estimate the fair values of options and the weighted
average information, aregiven below for each type of plan, on a combined basis.
In the tables for each plan or group of plans, option or awardvaluations are given on the basis of the weighted average of options or awards
granted during each period. For plans involving options, the fair value per option is estimated using the Black-Scholes option pricing method.
The expected option terms arebased on historic data. Figures for expected volatility are set with regard to historic volatility over the last six
years. The expected dividend yield is based on the dividend yield in the year of grant. Forfeiturerates areset annually with regard to historic
forfeiturerates.