405 / 488
394
Wiley IFRS: Practical Implementation Guide and Workbook
Valuation model and input variables
The weighted-ave rage fair value of the conditional shares granted in 2006 amounted to EUR6.35
per share for the three-year component (based on the share price on the measurement data) and EUR
6.39 per share for the five-year component (determined using a Monte Carlo simulation model). The
most important assumptions used in the valuation were as follows:
Weighted-average assumntions
Risk-free interest rate
Volatility
Assumed annual forfeitures
Assumed dividend yield
2006
3.8%
37.0%
6.0%
0.6%
Expected volatility has been determined as the average of the implied volatility and the historical
volatility, whereby the extraordinarily volatile month after February 24, 2003, has been excluded .
Conditional sha res
option
plans
Main characteristics
In 2005, Ahold had one global share option plan with a uniform set of rules and conditions (the
"2005 Plan") for all participants, except members of the Corporate Executive Board. The term of the
2005 share options is eight years, and the exercise of these options is conditional upon continued em–
ployment during a three-year vesting period. Upon termination of employment, share options that
have vested can be exercised during four weeks after termination and are forfeited thereafter, while
share options that have not vested will be forfeited immediately. In 2005, share options were granted
on the first Monday in April, and the exercise price of each share option equaled the closing market
price of Ahold's common shares on the last trading day prior to the grant date. A separate plan applies
to members of the Corporate Executive Board. The share option grant made in 2005 to members of
the Corporate Executive Board is subject to a performance criterion at vesting, being the average
economic value-added improveme nt versus targeted improvement over the three financial years prior
to vesting. The vested number of options will range from 80% to 120% of the targeted number of
options depending on performance against the vesting criteria. When performance against the vesting
criteria is below 80% of target, zero options will vest. Other characte ristics of the plan are the same as
for the 2005 Plan described above.
Until January 2, 2005, Ahold has three share option plans (the Dutch, US, and International Share
Option Plans [collectively the "Plans"]) . Under these Plans, participants were granted share options
with either a five- or IO-year term, generally exercisable after three years. Share options were granted
on the first business day of each year and the exercise price of each share option equaled the closing
market price of Ahold 's common shares on the last trading day prior to the grant date. Upon
termination of employment, all share options granted under the Dutch Plan can be exercised within
four weeks after termina tion and are forfeited thereafter. Share options granted under the US and
International Plan can, upon termination of employment, be exercised within four weeks after
termination provided they have vested and are forfeited thereafter, while share options that have not
vested will be forfeited immediately.
Under all option plans, upon termination of employment due to retirement, disability, or death all
share options are exercisable during their relevant exercise periods.
The following table summarizes the status of the share option plans during 2006. After the
introduction of GRO, options were discontinued as a remuneration component.