ING Direct 2011 Annual Report Download - page 195

Notes to the consolidated annual accounts of ING Group continued
In 2011 no share awards (2010: nil; 2009: nil) were granted to the members of the Executive Board of ING Groep N.V., 154,440 share awards
were granted to the Management Boards of ING Bank N.V., ING Verzekeringen N.V., Insurance Eurasia and Americas Insurance Holdings.
Tosenior management and other employees 20,135,968 share awards (2010: 26,369,146; 2009: 6,273,467) were granted.
Every year, the ING Group Executive Board decides whether the option and share schemes are to be continued and, if so, to what extent.
In2010 the Group Executive Board decided not to continue the option scheme as from 2011. The existing option schemes up and until 2010
will be run off in the coming years.
The option rights are valid for a period of five or ten years. Option rights that are not exercised within this period lapse. Option rights granted
will remain valid until the expiry date, even if the option scheme is discontinued. The option rights are subject to certain conditions, including
apre-determined continuous period of service. The exercise prices of the options are the same as the quoted prices of ING Group shares at
the date on which the options are granted.
ING Group holds its own shares in order to fulfil its obligations with regard to the existing stock option plan and to hedge the position risk
ofthe options concerned (the so-called delta hedge). As at 31 December 2011, 42,126,329 own shares (2010: 45,213,891; 2009: 35,178,086)
were held in connection with the option plan compared to 108,138,551 options outstanding (2010: 124,836,694; 2009: 122,334,486). As
aresult the granted option rights were (delta) hedged, taking into account the following parameters: strike price, opening price, zero coupon
interest rate, dividend yield, expected volatility and employee behaviour. The hedge used to be rebalanced regularly at predetermined points
in time. In December 2010 ING Groep N.V. announced that it will no longer rebalance its hedge portfolio. This decision is an effort to simplify
the management and administration of ING’s various employee share and option programmes. The remaining shares in the hedge portfolio
will be used to fund the obligations arising from exercise and vesting. Once all shares in the hedge portfolio are used ING will fund these
obligations by issuing new shares.
Exposure arising from the share plan is not hedged. The obligations with regard to these plans will in the future be funded either by cash,
newly issued shares or remaining shares from the delta hedge portfolio at the discretion of the holder.
In December 2009 ING Groep N.V. completed a rights issue of EUR 7.5 billion. Outstanding stock options and share awards have been
amended to reflect the impact of the rights issue through an adjustment factor that reflects the fact that the exercise price of the rights issue
was less than the fair value of the shares. As a result, exercise prices and outstanding share options and share awards have been amended
through an adjustment factor of approximately 1.3.
On 6 April 2010 ING Groep N.V. announced that it bought 13,670,000 (depositary receipts for) ordinary shares for its delta hedge portfolio,
which was used to hedge employee options and facilitate employee share programmes. The shares were bought in the open market between
23 March and 6 April 2010 at an average price of EUR 7.47 per share.
On 2 June 2010 ING Groep N.V. announced that it bought 2,080,000 (depositary receipts for) ordinary shares for its delta hedge portfolio,
which was used to hedge employee options and facilitate employee share programmes. The shares were bought in the open market on
1and2 June 2010 at an average price of EUR 6.33 per share.
On 8 September 2010 ING Groep N.V. announced that it sold 3,590,000 (depositary receipts for) ordinary shares of its delta hedge portfolio,
which was used to hedge employee options and facilitate employee share programmes. The shares were sold in the open market on 7 and 8
September 2010 at an average price of EUR 7.39 per share.
Changes in option rights outstanding
Options outstanding (in numbers) Weighted average exercise price (in euros)
2011 2010 2009 2011 2010 2009
Opening balance 124,836,694 122,334,486 87,263,381 15.73 17.31 25.93
Granted 19,434,097 14,803,109 0.00 7.35 3.93
Exercised –1,111,930 –1,070,630 –22,757 3.97 3.03 5.33
Forfeited –2,698,596 –3,666,001 –5,974,275 12.78 13.23 26.30
Rights issue 28,395,811
Expired –12,887,617 –12,195,258 –2,130,783 22.03 20.52 32.11
Closing balance 108,138,551 124,836,694 122,334,486 15.20 15.73 17.31
As per 31 December 2011 total options outstanding consists of 90,620,708 options (2010: 105,036,931; 2009: 103,523,988) relating to
equity-settled share-based payment arrangements and 17,517,843 options (2010: 19,799,763; 2009: 18,810,498) relating to cash-settled
share-based payment arrangements.
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
193ING Group Annual Report 2011