Annual Report 2003 2004

156
Dividend proposal
The Executive Board and Supervisory Board have agreed to propose to
the stockholders‘ meeting a dividend in the amount of €0.60 per share
entitled to dividend to be distributed from unappropriated net income
of the stand-alone entity ThyssenKrupp ag for fiscal 2003/2004 as
determined in conformity with the principles of the German Commercial
Code (hgb).
19 Share-based compensation programs
Management incentive plans
In 1999, ThyssenKrupp introduced a performance-based long-term
management incentive plan (the “incentive plan”) of which Executive
Board members as well as selected managerial employees in Germany
and foreign countries are eligible to participate. In accordance with
the incentive plan, over a period of five years, beneficiaries are granted
appreciation rights (“phantom stocks”) annually with a performance
period of approximately three years. These appreciation rights will
be remunerated in cash at the end of each performance period if
certain performance hurdles are met. These performance hurdles
require that either the market price of ThyssenKrupp stock must have
increased at least 15% or that the market price of ThyssenKrupp
stock has outperformed the dj stoxx index during the performance
period. If at least one of the two performance hurdles is met, then
remuneration is calculated based on the difference between the
current market price and the base price of stock. The current market
price is calculated based on the average of the first five trading days
after the regular stockholders’ meeting with which the respective
installment of the incentive plan occurs. The base price is derived
from the current market price decreased by a market price/index
performance deduction and a price change deduction. The market
price/index performance deduction is determined by multiplying the
percentage of over or underperformance of the ThyssenKrupp stock
in relation to the dj stoxx by the current stock price during the
particular performance period. The price change deduction is equal
to one-half of the absolute change in ThyssenKrupp stock price
during a particular performance period. The two deductions are
combined and then deducted from the current stock price to obtain
the base price. The remuneration per appreciation right during any
performance period is limited to €25. If the performance hurdles are
not met at the end of the performance period, no payment or expense
is recorded by the Group.
To exclude measurement-date influences, the ThyssenKrupp stock
price as well as the dj stoxx is based on averages both for the start
and the end of the reference period of the performance period. For
the fourth installment, at the start of the reference period, the average
ThyssenKrupp stock price was €17.89 and the average value of the
dj stoxx was 393.03. For the fifth installment, at the start of the
reference period, the average ThyssenKrupp stock price was €8.06
and the average value of the dj stoxx was 239.51. The comparable
values as of September 30, 2004, are €16.55 for ThyssenKrupp’s
stock price applicable to the fourth installment (adjusted by the
dividend payments for the 2001/2002 and 2002/2003 fiscal years)
and €16.15 for the fifth installment (adjusted by the dividend payment
for the 2002/2003 fiscal year). The comparable value of the dj stoxx
as of September 30, 2004, was 334.22.
As of September 30, 2004, 2.7 million appreciation rights were
granted to 549 beneficiaries in the fourth installment and 2.7 million
appreciation rights were granted to 554 beneficiaries in the fifth
installment. The performance periods for the fourth and fifth installments
are from March 04, 2002 through the regular stockholders’ meeting
in 2005 and from February 24, 2003 through the regular stockholders’
meeting in 2006, respectively.
The first and second installments expired in 2001/2002 and
2002/2003 without any payment because none of the performance
hurdles were met at the end of the respective performance periods.
The 2.8 million appreciation rights granted in the third installment of
the incentive plan were settled in the 2nd quarter of 2003/2004 with
payment of €11.1 million as result of the performance hurdles being
met at the end of the performance period. As of September 30,
2004, the performance hurdles for the fourth and fifth installments
of the long-term management incentive plan were met. In total in
2003/2004, the Group recorded compensation expense for the long
term management incentive plan in the amount of €27.7 million
(2002/2003: €3.9 million).