APC 2015 Annual Report Download - page 223

2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 221
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER31,2015
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.5.1 Valuation of performance shares
In accordance with the accounting policies described in note1.20,
the stock grant plans have been valued on the basis of an average
estimated life of between four and fi ve years using the following
assumptions:
•a payout rate of between 3.0% and 3.5%;
•a discount rate of between 0.7% and 1.0%, corresponding to a
risk-free rate over the life of the plans (source: Bloomberg).
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:
Full year 2015 Full year 2014
Plan 11 -7
Plan 14 and 14 bis 58
Plan 15 and 15 bis 416
Plan 16 and 16 bis 17 20
Plan 17 and 17 bis 16 15
Plan 18 and 18 bis 21 20
Plan 20 1-
Plan 21 and 21 bis 14 -
Plan 22, 22 bis and 22 ter 19 -
TOTAL 97 86
21.5.2 Worldwide Employee Stock Purchase Plan
Schneider Electric gives its employees the opportunity to become
group shareholders thanks to employee share issues. Employees
in countries that meet legal and fi scal requirements have been
proposed the classic plan.
Under the classic plan, employees may purchase Schneider
Electric shares at a 15% to 20% discount 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 determined on the basis
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 classic 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.
As regards the fi rst semester of 2015, Schneider Electric gave
its employees the opportunity to purchase shares at a price of
EUR58.21 or EUR54.79 per share, depending on the country, as
part of its commitment to employee share ownership, on May26,
2015. This represented a 15% to 20% discount to the reference
price of EUR68.48 calculated as the average opening price quoted
for the share during the 20days preceding the m anagement board’s
decision to launch the employee share issue.
Altogether, 2.4 million shares were subscribed, increasing the
Company’s capital by EUR135 million as of July 8, 2015. Due
to signifi cant changes in valuation assumptions, specifi cally the
interest rate available to market participant, the value of the lock-up
period is higher than the discount cost since 2012. Therefore the
Group did not recognize any cost related to the transaction.
The tables below summarize the main characteristics of the plans,
the amounts subscribed, the valuation assumptions and the plans’
cost for 2015 and 2014.