Notes to the consolidated financial statements

Stock option plans


Stock option plans

The following stock option plans are currently in force in relation to the shares in Grupo Ferrovial, S.A.:

Stock Option Plan

All stock option plans have a three-year vesting period as from issue followed by a three-year exercise period, provided certain minimum returns on consolidated equity are obtained by Grupo Ferrovial, except for the options granted in November 2007, for which the exercise period is five years.

The strike price is calculated as the arithmetic mean of weighted average changes in the previous 20 stock market sessions, each option being equivalent to an option exercised at that price.

Set out below is a summary of movements in the company's stock option plans for 2007 and 2006:

 stock option plans for 2007 and 2006

The main assumptions used to value the options granted in 2007 and 2006 are as follows:

 value the options granted

Equity swaps were contracted by Grupo Ferrovial at the grant date in order to hedge against possible losses resulting from the exercise of stock options. These hedges ensure that Grupo Ferrovial will collect an amount equal to the rise in the share price when the options are executed by employees.

Under the equity swap contract, the financial institution undertakes to pay to Grupo Ferrovial cash amounts equal to the return on Grupo Ferrovial's shares, in return for a payment by the company. The main features of equity swaps are as follows:

  • The number of shares used to calculate returns is equal to the number of options granted under each plan.

  • The share price used to calculate returns is the same as the strike price employed to calculate the increase in the share's value.

  • Grupo Ferrovial will pay a yield to the financial institution calculated by applying the EURIBOR rate plus a margin to the result of multiplying the number of shares by the strike price.

  • The financial institution will pay to Grupo Ferrovial an amount equal to all the dividends generated by those shares.

Grupo Ferrovial may opt to partially or totally terminate the contract, in which case:

  • If the share price is below the strike price at which the contract was concluded, the company must pay the difference to the financial institution.

  • If the share price is above the strike price, the company will receive the difference between the two amounts.

For accounting purposes, these contracts are treated as derivative financial instruments, this being the general treatment afforded to this type of financial products (Note 2.3.8). During 2007, a loss of 125 million euro was recognised in these contracts, as explained in Note 3.5 on market risk and in Note 27 on financial results.

In 2007, amounts received in the form of dividends generate by the shares and paid in the form of yield to the relevant financial institution, under the equity swap contracts described above (for both stock option plans and the systems referred to in the previous note) totalled 7 million euro (6 million euro in 2006) and 14 million euro (9 million euro in 2006), respectively.

Additionally, as indicated in Note 27 on financial results, a provision was recognised in 2007 for these equity swap contract in the amount of 125 million euro (124 million euro for stock option plans of Grupo Ferrovial, S.A. and 1 million euro for the stock option plans of Cintra, S.A. described below).

Ferrovial Group's staff expenses related to these remuneration systems are analysed in Note 26.

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