Unilever 2003 Annual Report Download - page 120

Unilever Annual Report & Accounts and Form 20-F 2003 117
Notes to the consolidated accounts
Unilever Group
29 Equity-based compensation plans continued
From 1 January 2003, for US GAAP purposes, Unilever has adopted SFAS 123. 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. Variable plans, being those with performance criteria other than a service period, are also
accounted for in accordance with SFAS 123. The actual remuneration cost charged in each period is shown below. Amounts for prior years
have been restated to reflect compensation costs for all the employee awards granted or modified in fiscal years beginning after 1994.
€ million € million € million
2003 2002 2001
Restated Restated
All-Employee Option Plans 19 22 25
Executive Option Plans 101 88 56
Share Matching Plans 18 12 2
TSR Long-Term Incentive Plan 842
Restricted Share Plan 366
North American Performance Share Plan 59 53 15
208 185 106
The change in accounting policy has reduced operating profit in 2003 by €116 million (2002: €99 million; 2001: €60 million). Basic earnings per
NV ordinary €0.51 share is reduced by €0.12 (2002: €0.10; 2001: €0.06). Basic earnings per PLC ordinary 1.4p share is reduced by €0.02
(2002: €0.02; 2001: €0.01).
The disclosures required by SFAS 123, including a description of the method and significant assumptions used to estimate the fair values of
options and the weighted average information, are given below for each type of plan, on a combined basis.
(i) All-Employee Option Plans
Unilever has All-Employee Plans in 16 countries, which can be grouped together as follows:
(a) Plans which follow a standard framework: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain,
Sweden and Switzerland.
(b) Other plans: North America, South Africa and United Kingdom.
Group (a):
The standard framework for these countries means, in principle, an annual grant of options over NV shares (Ireland: NV or PLC shares), at the
same grant date, exercise price (the market price on the grant date) and grant size (including part-time employees pro rata) and with the same
eligibility criteria (all permanent employees in a country). There are no vesting conditions other than being continuously employed by a Group
company until the vesting date.
Group (b):
The UK and South Africa plans annually offer options over PLC shares, combined with a compulsory (UK) or optional (South Africa) savings plan.
The exercise price is the market price at date of grant. In 2003, Unilever UK introduced ‘ShareBuy’, an All-Employee Share Incentive Plan. It is
currently only being used as a tax efficient savings plan for employees, for which Unilever neither gives nor receives value. Accordingly, no
figures for this plan are included in this note.
The North American plan is a share purchase offering, with a compulsory savings plan, under which up to 10% of the salary of eligible
employees is withheld. At the end of the period employees can use the savings to buy NV New York shares at a discount. The maximum
number of shares made available under the plan is 8.9 million. Until 2001 the plan had an offering period of two years, thereafter one year.
The table below summarises the main country-specific differences between the plans applicable in 2003:
Maximum term Vesting period
Country (year of introduction) Years Years Exercise period Remarks
Austria (2001) 5 3 24 months
Belgium (2001) 5 3.5 18 months
Denmark (2001) 5 3 24 months
Finland (2001) 5 3 24 months On 3rd, 4th or 5th anniversary
France (2000) 5 4 12 months
Germany (2000) 5 3 24 months
Ireland (2002) 5 3 24 months
Italy (2001) 5 3 24 months
Netherlands (1995) 5 0 5 years Keep shares during the first 3 years after grant
Portugal (2001) 3.5 3 6 months
Spain (2001) 5 3 24 months
Sweden (2001) 5 5 1 day Partly convertible bonds
Switzerland (2001) 5 3 24 months
UK (1985) 5.5 5 6 months ShareSave plan
South Africa (2001) 3.5 3 6 months Optional sharesave plan
North America (1995) 1 1 1 day Purchase plan