BASF Report 2021 Consoli dated Financial Statements – Notes 282 exercising an option is limited to five times the original individual The exercisable options had no intrinsic value as of Decem- weighted-average fair value on the grant date amounted to €67.71 investment. Option rights are nontransferable and are forfeited if the ber 31, 2021, or December 31, 2020. for the 2021 program, and €45.30 for the 2020 program. option holders no longer work for the BASF Group or have sold part of their individual investment before the expiry of the two-year BASF “Plus” Incentive Share Program The fair value of the free shares to be granted is recognized as an vesting period. They remain valid in the case of retirement. For the expense with a corresponding increase in capital reserves over the members of the Board of Executive Directors, the long-term The “plus” incentive share program was introduced in 1999 and is term of the program. orientation of the program was significantly strengthened compared currently available to employees in Germany, other European with the conditions applying to the other participants. Members of countries and Mexico. Simultaneous participation in both the “plus” Personnel expenses for BASF’s “plus” incentive share program the Board of Executive Directors were required to participate in the program and an LTI program is not permitted. totaled €27 million in 2021 and €28 million in 2020. BOP program with at least 10% of their actual annual variable compensation. In view of this binding personal investment (in the Employees who participate in BASF’s “plus” incentive share program form of BASF shares), an extended holding period of four years and acquire shares in BASF as a personal investment from their applies. Members of the Board of Executive Directors may only variable compensation. For every 10 BASF shares purchased in the exercise their option rights four years after they have been granted program, a participant receives one BASF share at no cost after at the earliest (vesting period). one, three, five, seven and 10 years of holding these shares. As a rule, the first and second block of 10 shares entitles the participant The models used in the valuation of the option plans are based on to receive one BASF share at no extra cost in each of the next the arbitrage-free valuation model according to Black-Scholes. The 10 years. fair values of the options were determined using the binomial model. Volatility was determined on the basis of the monthly closing prices The right to receive free BASF shares lapses if a participant sells the over a historical period corresponding to the remaining term of the individual investment in BASF shares, if the participant stops working options. for a Group company or one year after retirement. The number of free shares to be granted has developed as follows: As a result of a resolution by the Board of Executive Directors in 2002 to settle option rights in cash, all outstanding option rights Number of free shares to be granted under the 2014 to 2020 programs were valued at fair value as of Shares December 31, 2021. A proportionate provision is recognized for 2021 2020 programs in the vesting period. As of January 1 3,251,576 3,025,462 Newly acquired entitlements 498,765 942,685 The LTI provision for BOP decreased from €115 million as of Bonus shares issued –547,960 –490,050 December 31, 2020, to €110 million as of December 31, 2021, due Lapsed entitlements –123,258 –226,521 to lower fair values and a lower number of outstanding option rights. As of December 31 3,079,123 3,251,576 No utilizations were recognized in 2020, whereas €3 million was utilized in 2021 due to senior executives leaving the company. Income from the reduction in provisions totaled €2 million in 2021. The free shares to be provided by the company are measured at the The expense from the addition of provisions totaled €25 million in fair value on the grant date. Fair value is determined on the basis of 2020. €1 million was attributable to the disposal group for the the BASF share price, taking into account the present value of pigments business as of December 31, 2020. dividends, which are not paid during the term of the program. The