28 Share participation plans

Share-based payments charged to personnel expenses

Restricted share unit plan settled in medmix shares

This long-term incentive plan covers the Board of Directors. Restricted share units (RSUs) are granted annually. Awards to members of the Board of Directors automatically vest with the departure from the Board. The plan features graded vesting over a three-year period. One RSU award is settled with one medmix share at the end of the vesting period. The fair value of the RSUs granted is measured at the grant date closing share price of medmix Ltd, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds for the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. Consequently, the grant date fair value of the RSUs is reduced by the present value of the dividends expected to be paid during the vesting period.

Restricted share units

Performance share plan settled in Sulzer shares

Prior to the spin-off from the Sulzer group, employees of the group participated in the Sulzer long-term incentive plan. The share-based payment expenses have been calculated based on the number of Performance shre units (PSU) received under the Sulzer performance share plan (PSP) until the date of the spin-off. The PSP will vest at the end of the original vesting period on a pro rata temporis basis by comparing the effective service period until the date of the spin-off with the original service period of three years. The actual performance factors will be measured at the end of the vesting period. Accordingly, the group disclosed the relevant information for the Sulzer PSP.

Given the spin-off of medmix from the Sulzer group, the Sulzer group neutralized the consequences from the demerger for the PSP. The number of originally granted PSUs was recalculated to neutralize the effect of the spin-off on share price resulting in the same fair value before and after the spin-off. The target values of the Applicator Systems business for the PSP 2019, PSP 2020 and PSP 2021, as derived from their respective three-year financial plans, are deducted for the Sulzer group. As a result, the target values for the Sulzer group comprise only what remain as continuing businesses within the Sulzer group. Furthermore, for each non-market performance condition (i.e., operational profit growth and operational ROCEA) of PSP 2019, PSP 2020 and PSP 2021, the performance curve depicting the gradient formed from the threshold, target and cap performance level remains unchanged.

Vesting of the PSP is based on three performance conditions: operational income before restructuring, amortization, impairments and non-operational items (operational profit) growth over the performance period (weighted 25%), average operational return on capital employed (operational ROCEA) (weighted 25%), and Sulzer’s total shareholder return (TSR), compared to a selected group of peer companies (weighted 50%).

TSR is measured with a starting value of the volume-weighted average share price (VWAP) over the first three months of the first year, and an ending value of the VWAP over the last three months of the vesting period. The rank of Sulzer’s TSR at the end of the performance period determines the effective number of total shares. The exercise price of the PSU is zero.

The following inputs were used to determine the fair value of the PSUs at grant date using a Monte Carlo simulation:

The expected volatility of the Sulzer shares and the peer group companies is determined by the historical volatility. The zero-yield curves of those countries in which the companies and indices are listed were used as the relevant risk-free rates. Historical data was used to arrive at an estimate for the correlation between Sulzer and the peer companies. For the TSR calculation, all dividends paid during the vesting period are added to the closing share price.

Performance share units — terms of awards

Performance share units