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Notes to the consolidated accounts Unilever Group
Unilever Annual Report and Accounts 2007 117
Financial statements continued
29 Share-based compensation plans
As at 31 December 2007, the Group had share-based compensation plans in the form of Share Option Plans, Performance Share Plans, and
Other Plans.
The numbers in this note include those for Executive Directors shown in the report of the Remuneration Committee on pages 49 to 61
and those for key management personnel shown in note 31 on page 120. No awards were made to Executive Directors in 2005, 2006
and 2007 under the North America Performance Share Programme, the Restricted Share Plan 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 option pricing models and the resulting cost is recognised as remuneration cost
amortised over the vesting period of the grant.
Disclosures, 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, for NV, PLC and New York shares on a combined basis.
Unilever will not grant share options 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.
The actual remuneration cost charged in each period is shown below, and relates almost wholly to equity settled plans:
€ million € million € million
Income statement charge 2007 2006 2005
Share option plans (16) (41) (76)
Performance share plans (103) (48) (78)
Other plans(a) (33) (31) (38)
(152) (120) (192)
(a) The Group also provides a Share Matching Plan, a Restricted Share Plan, TSR-LTIP (no awards after 2006) and a cash-settled share-based
retention plan.
(i) Share Option Plans
Unilever has All-Employee Share Option Plans in 15 countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
the Netherlands, Portugal, Spain, Sweden and Switzerland, and with a share save element in South Africa and the United Kingdom. Generally
the vesting periods range between three and five years and the maximum term is five years.
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. The options become exercisable after a three-year period from the date of grant and have a maximum term of ten
years. In view of the introduction of the Global Performance Share Plan in 2005, no further grants were made under the Executive Option Plans
after 2005. The plans consist of the NV, the PLC Plans and the North America Programme which is covered by the Unilever North America 2002
Omnibus Equity Compensation Plan.
The fair value per option is estimated using the Black-Scholes option pricing method. The expected option terms are based 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. Forfeiture rates are set annually with regard to historic forfeiture rates.
Managers working in India can participate in an Executive Option Plan relating to Hindustan Unilever 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 2007 were €1 million (2006: €1 million; 2005:
€2 million) and are included in the costs of share option plans in the table above.
A summary of the status of the All-Employee and Executive Option Plans as at 31 December 2007, 2006 and 2005 and changes during the
years ended on these dates is presented below:
2007 2006 2005
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 96 296 565 €17.58 114 772 471 €18.33 128 972 689 €18.28
Granted 2 626 506 €22.10 4 356 278 €17.65 5 878 792 €17.53
Exercised (33 535 234) €17.53 (14 380 347) €16.87 (9 464 155) €15.42
Forfeited (3 877 793) €18.75 (5 171 316) €19.57 (9 045 452) €19.13
Expired (2 815 087) €22.01 (3 280 521) €21.22 (1 569 403) €17.93
Outstanding at 31 December 58 694 957 €17.53 96 296 565 €18.35 114 772 471 €18.42
Exercisable at 31 December 47 975 809 €17.35 71 189 331 €18.57 66 586 233 €18.65
The weighted average market price of the shares at the time of exercise was €23.02 (2006: €19.68; 2005: €18.66).