Nokia 2004 Annual Report Download - page 162

Notes to the Consolidated Financial Statements (Continued)
22. The shares of the Parent Company (Continued)
These stock options are included in the table ‘‘The options outstanding by range of exercise price
at December 31, 2004.
Performance shares
In 2004, we introduced performance shares as the main element to our broad-based equity
compensation program, as approved by the Board of Directors.
A total number of 3.9 million Performance Share Units were granted to a wide number of selected
employees on many levels of the organization in 2004. Performance Share Units represent a
commitment by the company to deliver Nokia shares to employees at a future point in time,
subject to the company’s fulfillment of pre-defined performance criteria: the company’s Average
Annual Net Sales Growth and EPS Growth (basic) for 2004 to 2007. If the required performance
level is achieved, the first payout will take place in 2006. The second and final payout, if any, will
be in 2008.
Both the EPS and Average Annual Net Sales Growth criteria have an equal weight of 50%. The
initial threshold for the Average Annual Net Sales Growth criteria is 4% resulting in the vesting of
up to 1.95 million performance phares. Similarly, the first threshold for the annual EPS Growth
criteria is EUR 0.84 in 2007 resulting in the vesting of up to 1.95 million performance shares. The
maximum performance for Average Annual Net Sales Growth criteria is 16% resulting in the
vesting of up to 7.8 million performance shares. Similarly, the maximum performance threshold
for the annual EPS Growth criteria is EUR 1.18 in 2007 resulting in the vesting of up to 7.8 million
performance shares.
The maximum performance level for both criteria will result in the vesting of the maximum of
15.6 million performance shares. For performance between the threshold and maximum
performance levels the payout follows a linear scale. Performance exceeding the maximum criteria
does not increase the number of shares vesting.
The company will determine later the method by which the shares are obtained for delivery,
which may also include cash settlement. Until the shares are transferred and delivered, the
recipients will not have any shareholder rights, such as voting or dividend rights associated with
respect to the Performance Share Units.
Restricted shares
In 2004, we granted a total of 1.9 million restricted shares to recruit, retain, reward and motivate
selected high potential employees, who are critical to the future success of Nokia. The restricted
shares granted during 2004 will vest in October 2007, after which time the shares will be
transferred and delivered to the recipients. Until the shares are transferred and delivered, the
recipients will not have any shareholder rights, such as voting or dividend rights associated with
these restricted shares.
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