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TomTom Annual Report and Accounts 2012
62
Notes to the Consolidated Financial Statements | continued
22. SHARE-BASED COMPENSATION (CONTINUED)
A summary of the group’s stock option plans and the movements during the years 2012 and 2011 are presented below:
Option plans 2012
Weighted
average exercise
price 2011
Weighted
average exercise
price
Outstanding at the beginning of the year 16,724,749 9.25 17,188,562 11.06
Granted 4,335,000 3.50 3,164,950 6.11
Exercised 0 na – 84,428 5.72
Expired – 1,969,560 16.10 0na
Forfeited – 1,407,527 7.53 – 3,544,335 15.31
OUTSTANDING AT THE END OF THE YEAR 17,682,662 7.21 16,724,749 9.25
Performance share plan
The cash settled performance shares are conditional on the employee completing three years of service (the vesting period).
On 31 December 2012 the liability with regard to the performance share plan was €1.8 million (2011: €0.3 million).
The following table provides the movement in the number of performance shares.
Performance share plans 2012 2011
Outstanding at the beginning of the year 534,667 363,000
Exercised – 4,967 – 280,390
Granted 1,054,150 571,800
Cancelled 0 – 24,833
Forfeited – 176,100 – 94,910
OUTSTANDING AT THE END OF THE YEAR 1,407,750 534,667
Restricted stock plan
In 2011 the group introduced a restricted stock plan to retain a selected group of young talented employees. Each restricted-stock unit
gives the right to receive one TomTom share after a three-year vesting period and qualifi es as an equity-settled plan. In 2012 an additional
grant with the same conditions was made. The costs that arise from this plan are spread over the vesting period and have been determined
based on TomTom’s share price on the grant date. Total 2012 stock compensation expenses charged to the stock compensation reserve for
this plan amounted to €133 thousand (2011: €60 thousand). As this plan is not material, no further disclosures are provided.
Valuation assumptions
The fair value of the performance shares was determined using the applicable share price at the grant date and subsequent reporting date.
The fair value of the share options granted in May 2012 and May 2011 was determined by the binomial tree model. This model contains
the input variables, including the risk-free interest rate, volatility of the underlying share price, exercise price, and share price at the date
of grant. The fair value calculated is allocated on a straight-line basis over the vesting period, based on the group’s estimate of equity
instruments that will eventually vest.
The input into the stock option valuation model is as follows:
2012 2011
Share price at grant date (€) 3.49 6.04
Weighted average exercise price (€) 3.34 – 3.51 6.08 – 6.20
Weighted average expected volatility 52% 50%
Expected average option life 5.3 5.3
Weighted average risk free rate 0.99% 2.82%
Expected dividends Zero Zero
The option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Volatility
is determined using industry benchmarking for listed peer group companies, as well as the historic volatility of the TomTom NV stock.
The group’s employee stock options have characteristics signifi cantly different from those of traded options, and changes in the subjective
input assumptions can affect the fair value estimate.