Nokia 2005 Annual Report Download - page 100

Share Purchase Plan in the United States, which permits all full-time Nokia employees located in
the United States to acquire Nokia ADSs at a 15% discount. The ADSs to be purchased are funded
through monthly payroll deductions from the salary of the participants, and the ADSs are
purchased on a monthly basis. As of December 31, 2005, a total of 1 866 518 ADSs had been
purchased under the plan since its inception, and there were a total of approximately 1 000
participants. For more information of these plans, see Note 24 ‘‘Share-based payment’’ to the
consolidated financial statements included in Item 18 of this annual report on Form 20-F.
Equity-based compensation program 2006
Nokia’s Equity Program 2006
The Board of Directors announced its proposed scope and design for the 2006 Equity Program on
January 26, 2006. The main equity instrument in 2006 will be performance shares. In addition,
stock options will be granted to a more limited population, and restricted shares will be used for
a small number of high potential and critical employees.
The Performance Share Plan in 2006 will cover a performance period of three years (2006-2008)
with no interim measurement period as compared with the 2004 and 2005 plans with four-year
performance periods and two-year interim measurement periods. No performance shares will vest
unless the company performance reaches at least one of the threshold levels measured by two
independent, pre-defined performance criteria: the company’s average annual net sales growth
and earnings per share (‘‘EPS’’) (basic) growth for 2006 to 2008.
The performance criteria of the Performance Share Plan 2006 are:
(1) Average Annual Net Sales Growth: 5% (threshold) and 20% (maximum), and
(2) Annual EPS Growth: EUR 0.96 (threshold) and EUR 1.41 in 2008 (maximum).
EPS growth is calculated based on the compounded annual growth rate over the performance
period (2006-2008) compared to 2005 EPS of 0.83. Average Annual Net Sales Growth is calculated
as an average of the net sales growth rates for the years 2005 through 2008. Both the EPS and
Average Annual Net Sales Growth criteria are equally weighted and performance under each of
the two performance criteria are calculated independent of each other.
Achievement of the maximum performance for both criteria will result in the vesting of the
maximum of 32.6 million Nokia shares. Performance exceeding the maximum criteria does not
increase the number of performance shares that will vest. Achievement of the threshold
performance for both criteria will result in the vesting of 8.15 million shares. If only one of the
threshold levels of performance are achieved, only 4.08 million of the performance shares will
vest. If none of the threshold levels are achieved, then none of the performance shares will vest.
For performance between the threshold and maximum performance levels the settlement follows
a linear scale. If the required performance levels are achieved, the settlement will take place in
2009. Until the shares are transferred and delivered, the recipients will not have any shareholder
rights, such as voting or dividend rights associated with these performance shares.
The stock options to be granted in 2006 will be primarily out of the Stock Option Plan 2005,
approved by the Annual General Meeting, on April 7, 2005. Each stock option would entitle the
option holder to subscribe for one newly issued Nokia share. The share subscription price
applicable upon exercise of the stock options will be determined on a quarterly or, subject to the
Board’s decision, a monthly basis. The intention is to determine the exercise prices at fair market
value. The share subscription price for each subcategory of stock options to be issued will equal
the trade volume weighted average price of Nokia shares on the Helsinki Stock Exchange for the
first whole week of the second month of the calendar quarter (i.e. February, May, August or
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