The majority of the pension obligations are a defined contribution obligation, so the impact of defined benefit obligations is limited.

Risks related to pension plans

Defined benefit plans

Nutreco has defined benefit plans in Belgium, Canada, France, Germany, Italy, the Netherlands, Norway and the United Kingdom. The plans cover approximately 1,877 (2008: 1,882) persons currently or previously employed within the Nutreco Group. These plans require detailed reporting and disclosure information for the financial statements.

The volatility of the financial markets requires Nutreco to closely monitor the development of the funded status of the defined benefit pension plans in order to forecast the financial consequences hereof and to take actions in time.

The 2010 estimated pension expense of EUR 3.3 million is higher than 2009 pension expense of EUR 2.6 million, primarily due to increases in the expected 2010 pension expense for the UK plan. Due to changes in discount rate and indexation assumptions, the UK year-end defined benefit obligation at 31 December 2009 has increased resulting in unrecognised actuarial losses of EUR 12.1 million. Part of these losses will be recognised in the 2010 pension expense and is subject to the 10% amortisation corridor.

Defined contribution plans

In addition to defined benefit plans Nutreco is engaged in defined contribution agreements with local pension funds of which the Dutch Nutreco Pension Fund is the most important one. The fund covers approximately 4,000 persons currently employed by Nutreco.
 

Share-based payments

Options

The Company had a share option plan effective as of 11 March 1998 on the basis of which options were granted up to and including 2003. Each option entitled the holder to purchase an ordinary share of EUR 0.24 par value at the exercise price corresponding to the closing price quoted seven days after publication of the annual results. In effect from 2001, the Company made a few changes to the regulations pertaining to the options granted since 2001. The exercise period was extended from five to seven years. None of the Executive Board members has any options outstanding. The movements in options held by other employees are shown further in this section.

Performance shares 2006 – Interim long-term incentive plan

The proposal to put in place an interim long-term incentive plan for the Executive Board for the year 2006 was adopted at the Annual General Meeting of Shareholders of 18 May 2006. For the year 2006 performance shares were granted, subject to the following conditions: (i) a number of performance targets were agreed with the Supervisory Board relating to the finalisation of the ‘Rebalancing for Growth’ strategy and the development of a new strategy, (ii) vesting would be subject to continued employment for at least two years, (iii) a lockup applies for a period of five years from the date of vesting with an allowance to sell shares in order to satisfy taxes with regard to such shares and (iv) the shares would qualify for dividends over the year 2006 and following. At the Annual General Meeting of Shareholders of 2008, the Supervisory Board reported on the achievement of the different performance targets and informed the Annual General Meeting of Shareholders that it had resolved to the vesting of 70,000 performance shares granted to the Executive Board under the interim long-term incentive plan 2006 effective 18 May 2008. A five-year lockup restriction applies to these shares until 18 May 2013 with an allowance to sell shares to satisfy tax obligations resulting from the vesting of the performance shares. In accordance herewith, a total of 26,931 shares were sold. During the course of the year Mr J.B. Steinemann left the Company’s Executive Board and is no longer employed by the Company. In accordance with the rules applying to long-term incentive plans, the lockup restriction applying to Mr J.B. Steinemann’s shares has lapsed.

Long-term incentive plan 2007 and following

At the Annual General Meeting of Shareholders, a new long-term incentive plan for the year 2007 and beyond received the approval of the General Meeting of Shareholders on 26 April 2007. The long-term incentive plan (LTI Plan) is designed to enhance the binding between the Executive Board’s remuneration and the implementation of the Company’s strategy over the longer term. The key terms of the approved LTI Plan applying as from 2007 are the following:

• On an annual basis, performance shares will be granted conditionally. The conditional grant will vest after a three-year performance period.
• The economic value at the moment of granting represents 85% (2008: 85%) of the base salary of the Chairman of the Executive Board, 80% (2008: 80%) of the base salary of the Chief Financial Officer and 50% of the base salary of the Executive Vice-Presidents, members of the Executive Board.
• The conditional grant will vest after a three-year performance period, subject to whether the Company achieves a pre-set level of Total Shareholder Return (TSR) relative to a peer group consisting of all companies listed on the Euronext Amsterdam AEX, AMX and AScX segments.
• No vesting takes place if the TSR achieved during the three-year vesting period is below the median position of the peer group. Vesting of 50% of the grant when the Company’s TSR is at the median position, linearly up to a maximum of 150% of the grant if the Company achieves the number one position within the peer group.
• A lockup will be effective for a period of two years after vesting, with an allowance to sell shares as from vesting to satisfy taxes due.
• Participants of the plan are entitled to dividends each year, starting 2007.

The number of performance shares conditionally awarded to the Executive Board which can only be vested when performance targets are met amounted to 103,900 (2008: 50,000), of which shares granted to Mr W. Dekker amounted to 32,000 (2008: 21,000), and to Mr J.B. Steinemann and Mr C.J.M. van Rijn to 22,000 (2008: 14,500). Each of the Executive Vice-Presidents was granted 9,300 performance shares. In addition, a total of 112,400 (2008: 85,700) performance shares were awarded to a number of senior executives of the Group.

The performance shares for senior executives of the Group were subject to similar terms and conditions as those applying to the Executive Board with as main difference that no lockup period applies.

In 2009 it was decided that the lockup period for the non-Executive Board members will be abandoned, it was also decided that for the calculation of the TSR performance versus the peer group for non-Executive Board members for the year 2007 and 2008 another method would be used than for Executive Board members. This will result in a vesting percentage of the grant of 2007 per 1 April 2010 of 82.26% for Executive Board members and 91.67% for the other participants.

As part of the severance agreement with Mr J.B. Steinemann, it was agreed that for the performance shares granted in 2007, 2008 and 2009 article 9.3 of the Performance Share Plan Regulations applies, which means that the number of performance shares that vest shall be decreased proportionally for months Mr J.B. Steinemann is not employed with the Company during the respective performance periods for these grants. The provision of article 12.2 of the Performance Share Plan Regulations applies accordingly, which means that the lockup period lapsed on the date of termination of the employment of Mr J.B. Steinemann.

Movements in the options of other (former) employees

The movements in the options of other (former) employees may be summarised as follows:

All of the 7,600 outstanding options were exercisable. Options exercised in 2009 resulted in 2,700 shares being delivered out of the own shares held in treasury.

Performance conversion plan

A performance conversion plan was introduced in 2007 for a limited group of senior executives. Under the terms of the plan, the eligible managers, with the exclusion of the members of the Executive Board, are entitled, but not obliged, to invest part of the proceeds of the variable payment which is awarded to them (if any) in shares of the Company. After a three-year period, the Company will match the eligible managers’ investment in a ratio ranging from a guaranteed 25% linearly up to a maximum of 300% depending on the Company’s TSR performance over the three-year period. In 2009 it was decided that there is no lockup period for these shares.

For the three years ending with the year under review, the independent consultant calculated a matching percentage of 139.58%.

In the year under review, 51 participants (2008: 53) invested in a total of 11,994 (2008: 9,365) shares.

Employee share participation scheme

On 15 March 1999, the Company introduced an employee share participation scheme. Each year, the Supervisory Board decides whether the Company’s performance allows execution of the employee share participation scheme. In any year in which the employee share participation scheme is allowed, each employee of a Nutreco company is granted the opportunity to buy Nutreco shares up to a maximum of EUR 1,800 during a defined period. Everyone who subscribes also receives additional shares of 25% (or less, depending on restrictions imposed by national legislation for certain foreign staff) on the subscription. Conditions may change from one year to another. The purchase price per share equals the closing market price 21 days after publication of the annual results. The shares bought under the employee share participation scheme are put in a stock deposit during a period of three years. During this period, these shares cannot be sold or transferred.

In 2009, the Supervisory Board decided that the 2008 results of the Company allowed the execution of the employee share participation scheme. Under this plan, employees bought 35,919 shares during 2009 (2008: 17,218).

Remuneration of members of the Executive Board and of the Supervisory Board
 

Remuneration for the members of the Executive Board