Nokia 2012 Annual Report Download - page 258

Nokia calculates the fair value of stock options using the Black-Scholes model. The fair value of the
stock options is estimated at the grant date using the following assumptions:
2012 2011 2010
Weighted average expected dividend yield ....... 7.96% 7.37% 4.73%
Weighted average expected volatility ............ 65.97% 36.95% 52.09%
Risk-free interest rate ......................... 0.70% - 1.60% 1.71% - 2.86% 1.52% - 2.49%
Weighted average risk-free interest rate .......... 1.13% 2.68% 1.78%
Expected life (years) .......................... 4.70 4.70 3.59
Weighted average share price, EUR ............. 2.42 5.46 8.27
Expected term of stock options is estimated by observing general option holder behavior and actual
historical terms of Nokia stock option plans.
Expected volatility has been set by reference to the implied volatility of options available on Nokia
shares in the open market and in light of historical patterns of volatility.
Performance shares
During 2012, Nokia administered four global performance share plans, the Performance Share Plans
of 2009, 2010, 2011 and 2012, each of which, including its terms and conditions, has been approved
by the Board of Directors.
The performance shares represent a commitment by Nokia Corporation to deliver Nokia shares to
employees at a future point in time, subject to Nokia’s fulfillment of pre-defined performance criteria.
No Nokia shares will be delivered unless the Group’s performance reaches at least one of the
threshold levels measured by two independent, pre-defined performance criteria. The below table
illustrates the performance criteria of the Performance Share Plans from 2009 through 2012.
Performance Share Plan
Performance Criteria 2012 2011 2010 2009
Average Annual Net Sales Growth (Nokia Group) ....................... — Yes Yes Yes
EPS at the end of performance period (Nokia Group) .................... — — Yes Yes
Average Annual Net Sales (Nokia Group excluding NSN) ................ Yes — — —
Average Annual EPS (Nokia Group) .................................. Yes Yes — —
The 2009, 2010 and 2011 plans have a three-year performance period. The shares vest after the
respective performance period. The 2012 plan has a two-year performance period and a subsequent
one-year restriction period, after which the shares vest. The shares will be delivered to the participants
as soon as practicable after they vest. Until the Nokia shares are delivered, the participants will not
have any shareholder rights, such as voting or dividend rights associated with the performance shares.
The performance share grants are generally forfeited if the employment relationship terminates with
Nokia prior to vesting. The term “vesting” means that the performance period and/or restriction period
specified in the plan rules has ended and does not indicate that actual share delivery took place.
The following table summarizes our global performance share plans.
Plan
Performance
shares
outstanding
at threshold(1)(2)
Number of
participants (approx.)
Performance
period Settlement
2009 .............................. 0 4000 2009-2011 2012
2010 .............................. 0 3000 2010-2012 2013
2011 .............................. 3346428 3000 2011-2013 2014
2012 .............................. 5226959 3000 2012-2013(3) 2015
(1) Shares under Performance Share Plan 2010 vested on December 31, 2012 and are therefore not
included in the outstanding numbers.
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