Unilever 2006 Annual Report Download - page 122

Unilever Annual Report and Accounts 2006 119
Financial Statements (continued)
Notes to the consolidated accounts Unilever Group
29 Share-based compensation plans (continued)
(ii) Executive Option Plans
Under the Executive Option Plans options are granted to key employees of the Group on a discretionary basis. The exercise price is the market
price at the date of grant. Since the introduction of the Global Performance Share Plan in 2005, it is the intention to make no further grants
under the Executive Option Plans, except for a few premium option grants which result from prior commitments. The plans are made up
of the following:
NV Executive Option Plan and PLC Executive Option Plan
These plans provide for the granting of options to purchase shares of Unilever N.V. and of Unilever PLC, at a price not lower than the market
price on the day the options were granted. These options become exercisable after a three-year period from the date of grant. The options have
amaximum term of ten years.
North America Executive Stock Option Programme
This programme is covered by the Unilever North America 2002 Omnibus Equity Compensation Plan and provides for the granting of options to
purchase a maximum of 121.5 million shares in Unilever N.V. of the New York Registry, and 117.9 million shares of Unilever PLC, at a price not
lower than the market value on the day the options are granted. These options become exercisable over a three-year period from the date of
grant and have a maximum term of ten years.
Managers working in India can participate in an Executive Option Plan relating to Hindustan Lever Limited’s shares. As these are neither NV nor
PLC shares, no figures for this plan are disclosed in this note, but the fair value costs for 2006 €1 million (2005: €2 million; 2004: €3 million)
and are included in the costs of Executive Option Plans on page 117.
Asummary of the status of the Executive Option Plans as at 31 December 2006, 2005 and 2004 and changes during the years ended on these
dates is presented below:
2006 2005 2004
Weighted Weighted Weighted
average average average
Number of exercise Number of exercise Number of exercise
options price options price options price
Outstanding at 1 January 94 304 917 €18.16 106 817 066 €18.18 101 146 875 €17.45
Granted ––994 780 €17.07 16 785 813 €17.03
Exercised (12 458 411) €16.80 (6 387 147) €15.34 (5 079 787) €12.41
Forfeited (3 487 375) €19.76 (7 078 325) €19.19 (6 035 835) €18.34
Expired (55 912) €13.87 (41 457) €18.00 – –
Outstanding at 31 December 78 303 219 €18.31 94 304 917 €18.29 106 817 066 €17.57
Exercisable at 31 December 64 704 677 €18.46 59 766 857 €18.39 49 223 513 €16.54
The weighted average market price of the shares at the time of exercise was €19.64 (2005: €18.82; 2004:€17.13). As at 1 January 2006 there
were 34 538 060 non-vested options at a weighted average fair value of €4.13. As at 31 December 2006 there were 13 598 542 non-vested
options at a weighted average fair value of €3.82. During 2006 21 234 947 options vested at a weighted average fair value of €4.32.
2006 2005 2004
Option value information
Fair value per option –€3.67 €3.72
Valuation assumptions:
Expected option term –6.0 years 5.9 years
Expected volatility –27.5% 27.5%
Expected dividend yield –3.8% 3.4%
Risk-free interest rate –4.0% 3.7%
The exercise prices and remaining life of the Executive Option Plans as at 31 December 2006 are as follows:
Options outstanding Options exercisable
Number Weighted
Range of outstanding at average remaining Weighted average Number exercisable at Weighted average
exercise prices 31 December 2006 contractual life exercise price 31 December 2006 exercise price
€8.58 – €11.65 1 165 006 4 years €11.51 1 165 006 €11.51
€12.34 – €16.91 16 001 431 5 years €15.10 14 608 402 €14.95
€17.19 – €24.66 61 136 782 5 years €19.28 48 931 269 €19.68