Siemens 2008 Annual Report Download - page 299

Notes to Consolidated Financial Statements 203
(in millions of €, except where otherwise stated and per share amounts)
Employee share purchase program
Under an employee share purchase program with compensation character, employees may purchase a limited
number of shares in the Company at preferential prices once a year. Up to a stipulated date in the rst quarter
of each scal year, employees may order the shares, which are usually issued in the second quarter of the scal
year. The employee share purchase program is measured at fair value. During the years ended September 30,
2008 and 2007 the Company incurred compensation expense (before income taxes) of €27 and €27, respectively,
related to the sale of repurchased shares to employees, based on a preferential employee share price of €69.19
and €51.20, respectively, and a grant-date fair value of €37.20 and €20.79, respectively, per share.
II. Cash-settled awards
Stock appreciation rights (SARs)
Where local regulations restrict the grant of stock options in certain jurisdictions, the Company grants SARs to
employees under the same conditions as the 2001 Siemens Stock Option Plan except that SARs are exercisable
in cash only.
Details on SARs activity and weighted average exercise prices are summarized in the table below:
For purposes of determining the fair value of SARs in scal 2008 and 2007, the expected volatility is based on
historical volatility of Siemens shares, implied volatility for traded Siemens options with similar terms and fea-
tures, and certain other factors. The expected term is derived by applying the simplied method and is deter-
mined as the average of the vesting term and the contractual term. The risk-free interest rate is based on appli-
cable governmental bonds. Changes in subjective assumptions can materially affect the fair value of the SARs.
Phantom stock
Where local regulations restrict the grants of stock awards in certain jurisdictions, the Company grants phantom
stock to employees under the same conditions as the Siemens stock awards, except that grantees receive the share
prices’ equivalent value in cash only at the end of the four, respectively, three year vesting period. In scal 2007,
36,962 phantom stock rights were granted and 9,087 phantom stock rights forfeited/were settled, resulting in a
balance of 88,460 phantom stock rights as of September 30, 2007. In scal 2008, 24,303 phantom stock rights
were granted and 19,469 phantom stock rights forfeited/were settled, resulting in a balance of 93,294 phantom
stock rights as of September 30, 2008. None of the phantom stock rights were vested as of September 30, 2008.
Year ended September 30,
2008 2007
SARs
Weighted
average
exercise price SARs
Weighted
average
exercise price
Outstanding, beginning of period 198,280 €73.63 349,900 €73.47
Granted – – – –
SAR’s exercised (40,555) €73.72 (106,280) €73.06
SAR’s forfeited/settled (19,240) €73.79 (45,340) €73.72
Outstanding, end of period 138,485* €73.58 198,280 €73.63
Exercisable, end of period 138,485 €73.58 123,335 €73.05
* Thereof 23,825 SARs with a €72.54 exercise price and a weighted average remaining life of 1.1 years, 67,700 SARs with a €73.25 exercise
price and a weighted average remaining life of 0.1 years and 46,960 SARs with a €74.59 exercise price and a weighted average remaining
life of 2.1 years.