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Annual Report 2010

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Long-Term Incentive Plan

The LTIP consists of a mix of stock options and restricted share rights. It aims to align the interests of the participating employees with the shareholders’ interests and to attract, motivate and retain participating employees.

The stock option plan vests three years after grant, dependent upon employment on the vesting date. The exercise price is the share price upon grant, and the total option term is 10 years.

A restricted share right is a right to receive a share, subject to being employed with Philips on the vesting date. Vesting occurs in three equal tranches 1, 2 and 3 years respectively after grant. An additional 20% of the restricted share rights grant is deferred, subject to the condition that released shares are held for three years after vesting, and employment with Philips is continued during this period.

The actual number of stock options and restricted share rights to be granted to the board members is performance-related and depends on the ranking of Philips in the Total Shareholder Return (TSR) peer group and the realization of the team targets of the Board of Management. The peer group comprises the following companies: Electrolux, Emerson Electric, General Electric, Hitachi, Honeywell International, Johnson & Johnson, Matsushita, Philips, Schneider, Siemens, Toshiba and 3M.

The TSR ranking is the basis for the two different multipliers that apply to the grant of stock options and restricted share rights. The multipliers are determined in line with the table below.

TSR multiplier
Philips’ position ranking
1
2
3
4
5
6
restricted share rights
2.0
1.8
1.6
1.4
1.2
1.0
stock options
1.2
1.2
1.2
1.2
1.0
1.0

TSR multiplier
Philips’ position ranking
7
8
9
10
11
12
restricted share rights
1.0
0.8
0.6
0.4
0.2
0.0
stock options
1.0
1.0
0.8
0.8
0.8
0.8

Based on Philips’ share performance over the period December 2006 - December 2009, Philips ranked 9th in its peer group.

In 2010, members of the Board of Management were granted 276,000 stock options and 69,000 restricted share rights under the LTIP (excluding 20% premium shares deferred for a three-year holding period).

The following tables provide an overview of stock option grants made, but not yet vested (locked up), and of restricted share rights granted but not yet released. The reference date for board membership is December 31, 2010.

Stock options
in euros
 
grant date
number of stock options
value at grant date
end of lock up period
value at end of lock up period
 
 
 
 
 
 
G.J. Kleisterlee
2007
73,926
644,635
2010
179,655
 
2008
67,203
370,961
2011
n.a.
 
2009
67,200
186,144
2012
n.a.
 
2010
72,000
356,400
2013
n.a.
P-J. Sivignon
2007
42,903
374,114
2010
104,263
 
2008
38,403
211,985
2011
n.a.
 
2009
38,400
106,368
2012
n.a.
 
2010
40,800
201,960
2013
n.a.
G.H.A. Dutiné
2007
39,600
345,312
2010
96,236
 
2008
38,403
211,985
2011
n.a.
 
2009
38,400
106,368
2012
n.a.
 
2010
40,800
201,960
2013
n.a.
R.S. Provoost
2007
39,600
345,312
2010
96,236
 
2008
38,403
211,985
2011
n.a.
 
2009
38,400
106,368
2012
n.a.
 
2010
40,800
201,960
2013
n.a.
S.H. Rusckowski
2007
42,903
374,114
2010
104,263
 
2008
38,403
211,985
2011
n.a.
 
2009
38,400
106,368
2012
n.a.
 
2010
40,800
201,960
2013
n.a.

Restricted share rights
in euros
 
grant date
number of restricted share rights
value at grant date
number of restricted share rights released in 2010
value at release date in 2010
 
 
 
 
 
 
G.J. Kleisterlee
2007
24,642
762,916
8,214
203,954
 
2008
22,401
517,687
7,467
185,331
 
2009
17,922
226,355
5,974
148,275
 
2010
18,000
448,200
n.a.
n.a.
P-J. Sivignon
2007
14,301
442,759
4,767
118,365
 
2008
12,801
295,831
4,267
105,907
 
2009
10,242
129,356
3,414
84,735
 
2010
10,200
253,980
n.a.
n.a.
G.H.A. Dutiné
2007
13,200
408,672
4,400
109,252
 
2008
12,801
295,831
4,267
105,907
 
2009
10,242
129,356
3,414
84,735
 
2010
10,200
253,980
n.a.
n.a.
R.S. Provoost
2007
13,200
408,672
4,400
109,252
 
2008
12,801
295,831
4,267
105,907
 
2009
10,242
129,356
3,414
84,735
 
2010
10,200
253,980
n.a.
n.a.
S.H. Rusckowski
2007
14,301
442,759
4,767
118,365
 
2008
12,801
295,831
4,267
105,907
 
2009
10,242
129,356
3,414
84,735
 
2010
10,200
253,980
n.a.
n.a.

For more details of the LTIP, see note (29) Share-based compensation.

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This is an interactive electronic version of the Philips Annual Report 2010 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the full Philips Annual Report 2010. This printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, IFRS basis of presentation, use of non-GAAP information, statutory financial statements and management report, reclassifications and analysis of 2009 compared to 2008.