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Notes to the Financial Statements 149 34.5.1 Share based payments Certain key management employees are entitled to participate in the share based payment plans of SAG. Under the arrangements, Stock Appreciation Rights (SARs) and / or phantom stocks are granted to these employees. Both these plans are cash settled plans. On exercising, the related share based payments are made by the Company. Stock appreciation rights The grant of SARs to employees are subject to a two year vesting period, after which they may be exercised for a period of upto three years and are settled in cash only. Compensation in cash shall be equal to the difference between the exercise price and the opening market price of the SAG's stock on the day of exercising the stock option. The number and weighted average exercise prices of SARs are as follows: 2008 2007 Weighted Number of Weighted Number of average SARs average SARs exercise price exercise price Euro Euro Outstanding at beginning of the year 73.81 17,790 73.55 24,415 Exercised during the year 72.89 (8,145) 72.86 (6,625) Outstanding at end of the year 74.59 9,645 73.81 17,790 Exercisable at end of year 74.59 9,645 72.89 8,145 The share price at the date of exercise for SARs exercised during the year ended September 30, 2008 was Euro 107.29 (September 30, 2007: Euro 89.97). The determination of the fair value of grants is based on a Black-Scholes option pricing model, which was developed for use in estimating the fair values of options that have no vesting restrictions. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Assumptions made in estimating the fair value of grants made are as follows: Assumption at grant date 2006 Risk-free interest rate 2.99% Expected dividend yield 2.41% Expected volatility 18.30% Expected option life 3.5 years Estimated weighted average fair value per option Euro 4.06 Fair value of total options granted during the year Euro 11 No SARs were granted during the years ended September 30, 2007 and 2008. The expected volatility is based on historical volatility of SAG shares, implied volatility of traded options with similar terms and features and certain other factors. The expected term is derived by applying the simplified method and is determined as the average of the vesting term and the contractual term. The risk-free interest is based on the applicable government bonds. Changes in subjective assumptions can materially affect the fair value of the option.
150 Notes to the Financial Statements Phantom stocks Phantom stocks are subject to a four year vesting period and the grantees receive the share prices equivalent value in cash at the end of four year vesting period. Details of phantom stocks rights are as follows: 2008 2007 Number of phantom stocks Balance as at beginning of the year 3,639 2,034 Granted during the year 1,266 1,755 Expired during the year -.... (150) Balance as at end of the year 4,905 3,639 Phantom stock rights are remeasured to their fair value at each reporting date until the award is settled. Total reversal of expense for share based payments during the year ended September 30, 2008 was Rs 5.868 million (2007: expense of Rs 39.228 million). The liabilities for cash settled arrangements as of September 30, 2008 aggregated to Rs 25.627 million (2007: Rs 50.000 million). 35. TRANSACTIONS WITH RELATED PARTIES Related parties comprise of <strong>Siemens</strong> AG, its subsidiaries and associates and other companies with common directorship with significant influence on other companies, employees retirement benefit funds and key management employees. Transactions with related parties can be summarised as follows: 2008 2007 Note (Rupees in ‘000) Parent company Sales of goods and rendering of services 147,231 2,261,081 Purchases of goods and receipt of services 3,542,509 2,964,281 Commission and allowances earned 91,141 184,196 Dividends 490,601 298,420 Issuance of shares under a scheme of amalgamation - . 614,465 Associated companies Sales of goods and rendering of services 1,065,705 441,937 Purchases of goods and receipt of services 1,205,790 1,318,637 Proceeds from sales of discontinued operations - . 2,450,694 Commission and allowances earned 64,428 53,471 Commission paid - . 1,834 Financial expenses 73,819 111,932 Financial income 6,867 23,375 Rental income - . 7,982 Others Dividends 45 30 Donations 698 1,655 Contribution to employees retirement benefits 62,169 27,398 Compensation to key management personnel 34.5 178,681 194,584 35.1 Transactions with related parties were carried out on commercial terms and conditions and at prices agreed based on inter company prices. Shared services are charged at uniform rates to all locations in the region.
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1 Annual Report 2008 Pakistan Answe
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Mission 3 Mission To realize our vi
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Contents 5 Corporate Governance At
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Corporate Strategies 7 Overall Corp
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Our Values 9 Our values Highest per
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Code of conduct and ethics 11 We ar
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14 Board of Directors Board of Dire
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16 Board of Directors Mr. Klaus Ste
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18 Committees Board Committees Mana
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20 Information to Stakeholders Key
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22 Information to Stakeholders Vert
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24 Directors’ Report Dear Shareho
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26 Directors’ Report Performance
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28 Directors’ Report Industry Sec
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30 Directors’ Report Within Count
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32 Directors’ Report Corporate Go
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34 Directors’ Report Board of Dir
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36 Directors’ Report Changes in t
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38 Directors’ Report Reviewed aud
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42 Directors’ Report Corporate Co
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44 Directors’ Report
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46 Directors’ Report 2,500 Nation
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48 Directors’ Report Human Excell
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50 Directors’ Report Investment i
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52 Directors’ Report 3i Program S
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54 Directors’ Report Cash Flow Ma
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56 Directors’ Report Acknowledgem
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58 Fit4 2010 Fit4 2010 - Tapping th
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60 Fit4 2010 Operational Excellence
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62 Fit4 2010 We succeed through our
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64 Fit4 2010 Leadership Excellence
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66 Innovation at Siemens "Companies
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68 Power Transmission & Distributio
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82 Industry, Infrastructure & Power
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94 Automation & Drives
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96 Automation & Drives Generating S
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98 Automation & Drives Standard Pro
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Page 122 and 123: Statement of Compliance 121 16. All
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Page 126 and 127: Balance Sheet 125 Siemens (Pakistan
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Page 130 and 131: Notes to the Financial Statements 1
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