APC 2010 Annual Report Download - page 190

CONSOLIDATED FINANCIAL STATEMENTS
5NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Based on these assumptions, the amount recorded under “Selling, general and administrative expenses” for stock grant plans set up after
November7, 2002 breaks down as follows:
2010 2009
Plan 1 -1
Plan 2 --
Plan 3 --
Plan 4 -1
Plan 5 22
Plan 6 22
Plan 7 --
Plan 8 5-
Plan 9 6-
Plan 10 1-
Plan 11 --
16 6
21.5.2 Worldwide Employee Stock Purchase Plan
Schneider Electric gives its employees the opportunity to participate
in employee share issues reserved for them. Employees in countries
that meet legal and fi scal requirements have the choice between a
nonleveraged and a leveraged plan.
Under the nonleveraged plan, employees may purchase Schneider
Electric shares at a 15% to 17% discount (depending on the country)
to the price quoted for the shares on the stock market. Employees
must then hold their shares for fi ve years except in certain cases
provided for by law. The share-based payment expense recorded in
accordance with IFRS2 is measured by reference to the fair value of
the discount on the locked-up shares. The lock-up cost is defi ned as
the cost of a two-step strategy that involves fi rst selling the locked-up
shares on the forward market and then purchasing the same number
of shares on the spot market (i.e. shares that may be sold at any
time) using a bullet loan.
This strategy is designed to refl ect the cost the employee would
incur during the lock-up period to avoid the risk of carrying the
shares subscribed under the nonleveraged plan. The borrowing cost
corresponds to the cost of borrowing for the employees concerned,
as they are the sole potential buyers in this market. It is based on the
average interest rate charged by banks for an ordinary, non-revolving
personal loan with a maximum maturity of fi ve years granted to an
individual with an average credit rating.
Under the leveraged plan, employees may also purchase
Schneider Electric shares at a 15% to 17% discount (depending on
the country) to the price quoted on the stock market. However, these
plans offers a different yield profi le as a third-party bank tops up the
employee’s initial investment, essentially multiplying the amount paid
by the employee. The total is invested in Schneider Electric shares
at a preferential price. The bank converts the discount transferred
by the employee into funds with a view to securing the yield for the
employee and increasing the indexation (by a factor of 3.4 in 2010)
on a leveraged number of directly subscribed shares.
As with the nonleveraged plan, the IFRS2 expense, like the share-
based payment expense, is determined by reference to the fair value
of the discount on the locked-up shares (see above). In addition,
it includes the value of the benefi t corresponding to the issuer’s
involvement in the plan, which means that employees have access
to share prices with a volatility profi le adapted to institutional investors
rather than to the prices and volatility profi le they would have been
offered if they had purchased the shares through their retail banks.
The volatility differential is treated as a discount equivalent that refl ects
the opportunity gain offered to employees under the leveraged plan.
In 2010, as part of its commitment to employee share ownership,
Schneider Electric gave its employees the opportunity to purchase
on June8shares at a price of EUR65.85 or EUR67.44 per share,
depending on the country. This represented a discount of 15% to
17% to the average opening price of EUR79.34 quoted for the share
during the 20 days preceding the Management Board’s decision to
launch the employee share issue.
In all, 2.2million shares were subscribed, increasing the Company’s
capital by EUR143million as of July8, 2010. The issue represented
a total cost of EUR3.4million, taking into account the fi ve year lockup
period.
2010 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC188