46 Share-Based Payments

Management Board

Under the long-term incentive plan (LTIP), the former Management Board members were granted a total of 931,030 notional shares (SARs = stock appreciation rights) in 2013. These are paid out in five annual tranches with a cliff vesting of 20% per calendar year of the total number of notional shares granted. In this context, the corresponds to the actuarial fair value of the remuneration expected over the total five-year period. These notional shares will be converted into payout amounts for each annual tranche on the basis of a formula laid down in the LTIP agreement. Therefore, this LTIP qualifies as a cash-settled share-based payment plan in accordance with IFRS 2.

In connection with the conclusion of new employment contracts with Klaus Freiberg and Dr. A. Stefan Kirsten, an agreement was reached that there would be no further vesting after the vesting in the 2017 fiscal year.

The value of the total notional shares that had been granted but not paid out from the LTIP as of December 31, 2016, was calculated by an external expert based on recognized actuarial principles. The obligation disclosed as of the reporting date breaks down as follows:

Tranche

 

End of vesting period

 

Rolf Buch

 

Klaus Freiberg

 

Dr. A. Stefan Kirsten

 

 

 

 

 

 

 

 

 

2016

 

Feb. 28, 2017

 

2,837,789

 

 

2016

 

July 11, 2017

 

 

1,723,684

 

1,723,684

2017

 

Feb. 28, 2018

 

2,169,378

 

 

The LTIP program results in expense pursuant to IFRS 2 totaling € 3.9 million in the 2016 reporting year (2015: € 5.7 million), with € 2.1 million attributable to Rolf Buch, € 0.5 million attributable to Klaus Freiberg and € 1.3 million attributable to Dr. A. Stefan Kirsten.

As a result of the departure of Monterey Holdings S.à r.l. (MHI) as a majority shareholder in 2014, key criteria of this LTIP were met, meaning that it once again had to be replaced by a new variable long-term incentive plan (LTIP “Plan“).

As part of the new LTIP “Plan“, the Management Board members are granted on January 1 of the calendar year, with effect from January 1, 2015, a fixed number of phantom stocks (performance share units or “PSU”), which are paid out at the end of a four-year performance period based on the extent to which a pre-defined target achievement level has been reached. The level of target achievement that determines the payout amount under the new LTIP “Plan“ is calculated based on the following parameters: Relative Total Shareholder Return (RTSR), Performance of NAV per Share, Performance of I per Share and the Customer Satisfaction Index (), which are all assigned an equal weighting of 25%. As a result, this new LTIP “Plan“ constitutes a form of cash-settled share-based payment pursuant to IFRS 2; in turn, the payout claim can be lost entirely if the defined target achievement level has not been reached.

The value of the total notional shares that had been granted but not paid out from the new LTIP “Plan“ as of December 31, 2016, was calculated by an external expert based on recognized actuarial principles. The obligation disclosed as of the reporting date breaks down as follows:

Tranche

 

End of vesting period

 

Rolf Buch

 

Thomas Zinnöcker

 

Klaus Freiberg

 

Dr. A. Stefan Kirsten

 

Gerald Klinck

 

 

 

 

 

 

 

 

 

 

 

 

 

2015–2017

 

Dec. 31, 2017

 

 

 

302,998

 

302,998

 

216,919

2015–2018

 

Dec. 31, 2018

 

688,246

 

461,702

 

229,424

 

229,424

 

160,597

2016–2018

 

Dec. 31, 2018

 

 

 

72,205

 

72,205

 

72,205

2016–2019

 

Dec. 31, 2019

 

367,073

 

26,064

 

163,142

 

163,142

 

163,142

The LTIP “Plan“ program resulted in expenses pursuant to IFRS 2 totaling € 2.5 million in the 2016 reporting year (2015: € 1.2 million), with € 0.7 million attributable to Rolf Buch, € 0.5 million attributable to Klaus Freiberg, Dr. A. Stefan Kirsten and Gerald Klinck and € 0.3 million attributable to Thomas Zinnöcker.

For further information, please refer to the remuneration report.

Executives Below Management Board Level

In 2014, Vonovia resolved a virtual share program (LTIP) for executives at the highest level of management below the Management Board with effect from January 1, 2014. The executives receive notional shares on January 1 of each calendar year. The terms and conditions of the LTIP are basically the same as those for the Management Board LTIP. The LTIP has a term of three years.

The level of target achievement is calculated every year based on three equally weighted targets (, NAV, TSR) and is capped at 150% for each target. An amount is accumulated over the three-year period. For the notional shares granted on January 1, 2014, the waiting period is three calendar years, meaning that it ends on December 31, 2016.

The value of the total notional shares that had been granted but not paid out as of December 31, 2016, was calculated by an external expert based on recognized actuarial principles. The obligation disclosed as of the reporting date breaks down as follows:

Tranche

 

End of vesting period

 

Dec. 31, 2016

 

 

 

 

 

2014

 

Dec. 31, 2016

 

1,016,086

2015

 

Dec. 31, 2017

 

683,193

The LTIP program results, in accordance with IFRS, in expenses of € 1.0 million in the 2016 reporting year (2015: € 0.7 million).

In 2016, a new LTIP “Plan“ was launched for the first level of management, replacing the LTIP that was launched in 2014, to bring the targets for the Management Board and other employees in management positions below Management Board level even closer into line with shareholder interests.

The LTIP “Plan“ is based largely on the LTIP “Plan” launched for the Management Board in 2015, also regarding the identical performance objectives and the calculation of the objective values with regard to the minimum value, the “target achievement value”, and the maximum value.

The value of the total notional shares that had been granted but not paid out from the new LTIP “Plan“ as of December 31, 2016, was calculated by an external expert based on recognized actuarial principles. The obligation disclosed as of the reporting date breaks down as follows:

Tranche

 

End of vesting period

 

Dec. 31, 2016

 

 

 

 

 

2016

 

Dec. 31, 2019

 

369,574

The LTIP “Plan“ program results, in accordance with IFRS, in expenses of € 0.4 million in the 2016 reporting year (2015: € - million).

As part of the acquisition of GAGFAH, share-based remuneration programs for GAGFAH managers were assumed. These are remuneration plans featuring cash compensation. The virtual stocks are granted over a period of three consecutive years, with one tranche being granted per year. The conditions for exercise are the corresponding target achievement level and an uninterrupted length of service in each vesting period.

The value of the total notional shares that had been granted but not paid out as of December 31, 2016, was calculated by an external expert based on recognized actuarial principles. The obligation disclosed as of the reporting date breaks down as follows:

Tranche

 

End of vesting period

 

Dec. 31, 2016

 

 

 

 

 

2014

 

Dec. 31, 2016

 

78,125

2015

 

Dec. 31, 2017

 

83,312

The LTIP program results, in accordance with IFRS, in total expenses of € 0.0 million in the 2016 reporting year (2015: € 0.5 million).

Employees

An employee share program was resolved on the basis of a works agreement in 2014. The program started in the first quarter of 2015 and the shares granted are subject to a vesting period of six months. The costs associated with the securities deposit account are borne by Vonovia. Shares with a value of between € 90.00 and € 360.00 at the most are granted to the eligible employees, depending on their gross annual salary, without the employees having to make any contribution of their own.

The new employee share program results, in accordance with IFRS, in total expenses of € 1.9 million in the 2016 reporting year (2015: € 0.7 million), which have been offset directly against the capital reserves.

Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
FFO (Funds From Operations)
FFO reflects the recurring earnings from the operating business. In addition to adjusted EBITDA, FFO allow for recurring cash-effective net interest expenses from non-derivative financial instruments as well as income taxes. This key figure is not determined on the basis of any specific international reporting standard but is to be regarded as a supplement to other performance indicators determined in accordance with IFRS.
CSI (Customer Satisfaction Index)
The CSI is determined at regular intervals by means of systematic customer surveys and reflects how our services are perceived and accepted by our customers. The CSI is determined on the basis of points given by the customers for our properties and their neighborhood, customer service and commercial and technical support as well as maintenance and modernization management.
AFFO
AFFO refers to capex-adjusted FFO 1 in which FFO 1 is adjusted for capitalized maintenance.