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20. SHARE-BASED REMUNERATION SCHEMES
A remuneration scheme linked to the listed value of shares approved in May 2007 was in force in the Group at 31 December 2012. The changes in the number
of rights granted within the framework of this Remuneration Scheme in 2012 and 2011 were as follows:
Plan 2007
In force at 31 December 2010 3,123,517
Cancelled options (941,913)
In force at 31 December 2011 2,181,604
Cancelled options (118,075)
In force at 31 December 2012 2,063,529
On 29 May 2007, the General Shareholders’ Meeting announced and approved a stock option plan called “Plan 2007” for specific employees of the Group,
dividing them into two groups. Upon maturity of the scheme in April 2013, these employees will have received, as appropriate, remuneration equivalent to the
difference between the exercise or “strike” price of the option and the settlement price, this being the list price of the shares over the last ten stock market
sessions prior to the exercise date.
The main characteristics of the Plan are as follows:
- Beneficiaries: Employees of NH Hoteles, S.A. and its group of companies who have been designated by the Appointments and Remuneration Committee.
At 31 December 2012, 103 Group employees benefited from the scheme. These employees have been awarded a total of 2,063,529 options.
- Maximum number of assignable options: 3,790,000 options.
- Strike price: €17.66 for the first group, comprising 20 executives, and €15.27 for the second group, made up of 83 executives.
As required by the Master Plan, this exercise price must be reduced by €0.71, the theoretical value of the preferential subscription right of the capital increase
carried out in June 2009.
This Plan is valued and booked in the consolidated comprehensive profit and loss statement, as indicated in Note 4.16. The impact of the Plan on the
consolidated comprehensive profit and loss statement for 2012 led to a reduction of €400,000 (a reduction of €136,000 in 2011) in personnel expenses The
main hypotheses used in the valuation of this Plan, which was granted in 2007, are as follows:
- Period of employment before being able to exercise the option: Up to five years, the Plan’s maximum term (“equity swap”). The Plan may be
exercised in thirds on an annual basis.
- Risk-free rate: 1.59%
- Return per dividend: 0.16%
The Group entered into an equity swap arrangement in November 2007 to hedge against any possible financial liabilities arising from the exercise of this
Incentive Plan linked to the listed value of shares. Subsequently, a novation amending this agreement was signed on 13 June 2009 to complement the financial
hedge and adjust it to new market conditions.
The main features of this agreement, after it was amended, are as follows:
- The number of shares, which were initially equivalent to the maximum number of options granted, was increased to a total of 6,316,666 after the
capital increase approved by the Parent Company General Shareholders’ Meeting on 16 June 2009.
- The Group will pay the financial institution a return based on Euribor plus a spread to be applied on the result of multiplying the number of units
by the initial price.
- The Group may totally or partially rescind the agreement in advance, and should this be the case, if the share is listed below its initial price, the
Group will pay the financial institution this difference. Should the list price be above the initial price, but below the strike prices, the Group will
receive the difference between both amounts.
Applying accounting standards, the Group allocated a provision of €40.34 million under liabilities in the consolidated balance sheet at 31 December 2012, in order to
hedge against any eventual loss the bank could suffer as a result of the negative evolution of the price of the shares covered by the swap (see Note 25). The change
in fair value of this financial instrument contributed €3 million to the consolidated comprehensive profit and loss statement in 2012 (a loss of €9.2 million in 2011).
The details of the provision’s calculation at 31 December 2012 are as follows:
€ Million
Old shares New shares Total
Number of stock options in the plan 3.79 2.53 6.32
Required provision 50.60 5.68 56.28
Transfer price 13.35 2.25 8.91
Listing December 2012 - - 2.61
Share price at end of December 2012 - - 16.49
Provision to be allocated - - 39.79
Updated financial flows - - 0.55
Total provision - - 40.34
The Company has entirely provisioned the aforementioned amount (Note 25).
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 93