Philips 2013 Annual Report Download - page 177

11 Group financial statements 11.9 - 11.9
Annual Report 2013 177
A summary of the status of the Company’s restricted shares as of
December 31, 2013 and changes during the year are presented below:
Restricted shares (excluding Accelerate! shares)1)
shares
weighted average
grant-date fair
value
EUR-denominated
Outstanding at January 1, 2013 1,954,985 16.45
Granted 85,296 21.90
Vested/Issued 885,733 18.07
Forfeited 89,379 16.01
Outstanding at December 31, 2013 1,065,169 15.31
USD-denominated
Outstanding at January 1, 2013 1,924,156 20.99
Granted 114,127 31.48
Vested/Issued 795,668 23.14
Forfeited 102,369 20.18
Outstanding at December 31, 2013 1,140,246 20.33
1) Excludes 20% additional (premium) shares that may be received if shares
delivered under the restricted share rights plan are not sold for a three-
year period
At December 31, 2013, a total of EUR 16 million of unrecognized
compensation costs relate to non-vested restricted shares. These costs
are expected to be recognized over a weighted-average period of 1.8
years.
A summary of the status of the Company’s Accelerate! shares as of
December 31, 2013 and changes during the year are presented below:
Accelerate! shares
shares
weighted average
grant-date fair
value
EUR-denominated
Outstanding at January 1, 2013 2,927,000 13.75
Granted 152,000 21.68
Forfeited 225,000 13.75
Vested 2,854,000 14.17
Outstanding at December 31, 2013 − −
USD-denominated
Outstanding at January 1, 2013 860,000 18.05
Granted − −
Forfeited 65,000 18.05
Vested 795,000 18.05
Outstanding at December 31, 2013 − −
On January 28, 2014 the Supervisory Board resolved that all performance
targets under the Accelerate! program, which were based on the 2013 mid-
term financial targets, have been met. This means that in accordance with
IFRS accounting requirements the Accelerate! shares vested and that at
December 31, 2013 there are no unrecognized compensation costs to both
EUR and USD Accelerate! shares. After delivery an additional two-year
holding period applies, except for Accelerate! shares granted to the Board
of Management of which after delivery an additional four-year holding
period applies.
Performance shares
The performance is measured over a three-year performance period. The
performance shares have two performance conditions, relative Total
Shareholders’ Return compared to a peer group of 21 companies and
adjusted Earnings Per Share growth. The performance shares vest three
years after the grant date. The number of performance shares that will vest
is dependent on achieving the two performance conditions, which are
equally weighted, and provided that the grantee is still employed with the
Company.
The fair value of the performance shares is measured based on Monte-
Carlo simulation and the following weighted average assumptions:
2013
EUR-denominated
Risk-free interest rate 0.55%
Expected dividend yield 3.7%
Expected share price volatility 27%
USD-denominated
Risk-free interest rate 0.55%
Expected dividend yield 3.7%
Expected share price volatility 30%
The Company has based its volatility assumptions on historical
experience measured over a ten-year period.
A summary of the status of the Company’s performance share plans as of
December 31, 2013 and changes during the year are presented below:
shares
weighted
average grant-
date fair value
EUR-denominated
Granted 3,509,518 23.53
Forfeited 66,595 23.45
Outstanding at December 31, 2013 3,442,923 23.53
USD-denominated
Granted 2,419,445 30.77
Forfeited 121,219 30.70
Outstanding at December 31, 2013 2,298,226 30.77
At December 31, 2013, a total of EUR 116 million of unrecognized
compensation costs relate to non-vested performance shares. These
costs are expected to be recognized over a weighted-average period of
2.3 years.
Other plans
Employee share purchase plan
Under the terms of employee stock purchase plans established by the
Company in various countries, substantially all employees in those
countries are eligible to purchase a limited number of Philips shares at
discounted prices through payroll withholdings, of which the maximum
ranges from 10% to 20% of total salary. Generally, the discount provided to
the employees is in the range of 10% to 20%. A total of 1,425,048 shares
were bought by employees in 2013 under the plan at an average price of
EUR 21.92 (2012: 1,906,183 shares at EUR 15.69; 2011: 1,851,718 shares at
EUR 17.93).
Convertible personnel debentures
In the Netherlands, the Company issued personnel debentures with a 2-
year right of conversion into its common shares starting three years after
the date of issuance, with a conversion price equal to the share price on
that date. The last issuance of this particular plan was in December 2008.
From 2009 onwards, employees in the Netherlands are able to join an
employee share purchase plan as described in the previous paragraph. In