Vodafone 2002 Annual Report Download - page 136

Vodafone Group Plc Annual Report & Accounts and Form 20-F Notes to the Consolidated Financial Statements134
Notes to the Consolidated Financial Statements continued
37. US GAAP information continued
The Vodafone Group Plc 1999 Long Term Stock Incentive Plan was introduced in 1999 to provide share incentives for employees of AirTouch and eligibility
for participation in this plan was extended to non-US employees in July 2000. In July 1999, July 2000 and July 2001, all employees of AirTouch were
granted share options under the Long Term Stock Incentive Plan which vest over a four year period. Options granted to AirTouch employees are exercisable
in respect of American Depositary Shares. In July 2000 and July 2001, options were also granted under this plan to a small number of senior executives of
the Company under the Company’s global market-related remuneration (GMR) policy and under the executive option programme. The exercise of these
options is subject to the satisfaction of demanding corporate performance targets. In July 2001, under the terms of this plan, the Company granted Global
Employee (“GEM”) share options to more than 42,000 employees in twelve subsidiaries. The grant involved approximately 238 million ordinary shares, the
exercise price of the options being determined by reference to the market value of ordinary shares at the time of grant, giving a provisional grant value of over
£375 million. The share options can be exercised after three years and up to ten years after the grant date, subject to performance criteria having been met.
The Company has two other share plans that it uses to grant awards of restricted shares and performance shares to directors. Under the Vodafone Group
Short Term Incentive Plan, which was introduced in 1998, shares are conditionally awarded to directors based on achievement of one-year performance
targets. Release of the shares is deferred for a further two years and is subject to continued employment. Additional shares are released at this time if a
further performance condition has been satisfied over the two year period. Under the Vodafone Group Long Term Incentive Plan, which was introduced in
1998, awards of performance shares are granted to directors. The release of these shares is conditional upon achievement of performance targets measured
over a three year period.
Following the merger with AirTouch, some rights to acquire AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan options were converted into
rights to acquire shares in the Company. No further awards will be granted under this scheme.
Movements in ordinary share options and ADS options outstanding during the years ended 31 March 2002, 2001 and 2000 are summarised as follows:
Number of ADS options Number of ordinary share options
2002 2001 2000 2002 2001 2000
(millions) (millions) (millions) (millions) (millions) (millions)
At 1 April 55.1 63.3 — 211.0 154.6 160.8
Granted 4.1 2.0 107.5 332.8 77.5 21.8
Exercised (7.4) (6.1) (41.0) (13.2) (18.8) (22.4)
Forfeited (8.0) (4.1) (3.2) (42.3) (2.3) (5.6)
At 31 March 43.8 55.1 63.3 488.3 211.0 154.6
Exercisable at 31 March 39.7 54.6 31.2 82.1 32.2 15.7
Weighted average price:
Granted during year $29.31 $44.66 $23.26 £1.56 £2.82 £2.46
Exercised during year $14.14 $14.92 $13.65 £0.77 £0.54 £0.47
Forfeited during year $41.00 $42.09 $38.91 £1.79 £2.62 £1.43
Outstanding at 31 March $29.74 $29.82 $28.71 £1.71 £1.90 £1.29
Exercisable at 31 March $29.64 $29.65 $14.78 £1.33 £0.68 £0.46
SFAS No. 123 establishes a fair value based method of accounting for stock based compensation plans and encourages the recognition of the compensation
cost on this basis in the income statement. Where the cost is not recognised, the pro forma effect of the valuation method on net (loss)/income must be
disclosed. Under UK GAAP the compensation element is not required to be recognised in net income. The disclosure only provisions of SFAS No. 123 have
been adopted.
ADS options Ordinary share options
2002 2001 2000 2002 2001 2000
Weighted average fair value $8.24 $13.45 $11.57 £0.56 £0.95 £0.86
Weighted average assumptions:
Implied volatility 36.02% 36.34% 26.0% 36.07% 36.17% 26.57%
Expected dividend yield 0.58% 0.82% 0.50% 0.57% 0.79% 0.50%
Risk-free interest rate 5.37% 4.58% 6.50% 5.45% 4.92% 6.55%
Expected option lives 3.5 years 3.5 years 3.5 years 3.5 years 3.6 years 3.7 years