Siemens 2007 Annual Report Download - page 304

304 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
Fair value information
The Company’s determination of the fair value of grants is based on an option
pricing model which was developed for use in estimating the fair values of options
that have no vesting restrictions. Option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Assumptions made in estimating the fair value of grants made during the year
ended September 30, 2006 are as follows:
Stock awards
In the fi rst quarter of fi scal 2005, the Company introduced stock awards and
phantom stock as another means for providing share-based compensation to
members of the Managing Board and other eligible employees. Stock awards are
subject to a four year vesting period. Upon expiration of the vesting period, the
recipient receives Siemens shares without payment of consideration. Stock awards
are forfeited if the grantee’s employment with the Company terminates prior to
the expiration of the vesting period. During the vesting period, grantees are not
entitled to dividends. Stock awards may not be transferred, sold, pledged or other-
wise encumbered. Stock awards may be settled in newly issued shares of common
stock of Siemens AG, treasury stock or in cash. The settlement method will be
determined by the Managing Board and the Supervisory Board.
Each fi scal year, the Company decides whether or not to grant Siemens stock
awards. Siemens stock awards may be granted only once a year within thirty days
following the date of publication of the business results for the previous fi scal
year. The Supervisory Board decides annually after the end of each fi scal year how
many stock awards to grant to the Managing Board and the Managing Board
decides annually how many stock awards to grant to members of the top manage-
ment of domestic and foreign subsidiaries and eligible employees.
Assumptions at grant date
2006
Risk-free interest rate 2.99%
Expected dividend yield 2.41%
Expected volatility 18.30%
Expected option life 3.5 yrs.
Estimated weighted average fair value per option €4.06
Fair value of total options granted during fi scal year €11