Consolidated Financial Statements Notes Other notes 34. Stock options 
34. STOCK OPTIONS
COMPENSATION COST IN CONNECTION WITH THE STOCK OPTION PLANS OF THE FRESENIUS GROUP
The Fresenius Group recognized compensation cost in an amount of € 33 million for stock options granted since 2004. For stock incentive plans which are performance based, the Fresenius Group recognizes compensation cost over the vesting periods, based on the then current market values of the underlying stock.
FAIR VALUE OF STOCK OPTIONS
The Fresenius Group elected to adopt FAS123(R) prospectively.
The Fresenius Group uses a binomial option pricing model in determining the fair value of stock options granted under the stock option plans of Fresenius SE and Fresenius Medical Care. Option valuation models require the input of highly subjective assumptions including expected stock price volatility. Fresenius Group’s assumptions are based upon its past experiences, market trends and the experiences of other entities of the same size and in similar industries. To incorporate the effects of expected early exercise in the model, an early exercise of vested options was assumed as soon as the share price exceeds 150% of the exercise price. Fresenius Group’s stock options have characteristics that vary significantly from traded options and changes in subjective assumptions can materially affect the fair value of the option.
The weighted-average assumptions for the calculation of the fair value of grants of Fresenius SE stock option plans made during the years 2008 and 2007 are as follows:
| 2008 | 2007 | ||
|
December Grant |
August Grant |
||
| Expected dividend yield | 2.39% | 1.63% | 0.94% |
| Risk-free interest rate | 2.88% | 4.20% | 4.48% |
| Expected volatility | 28.91% | 27.82% | 29.06% |
| Life of options | 7 years | 7 years | 10 years |
| Exercise price per option in € |
43.52 | 53.56 | 56.74 |
The expected volatility results from the historical volatility calculated over the expected life of options. The volatility was determined when the fair value of stock options was calculated for the first time and since then has been controlled every year upon issuance of a new tranche.
FRESENIUS SE STOCK OPTION PLANS
Description of the Fresenius SE stock option plans in place
On December 31, 2008, Fresenius SE had three stock option plans in place; the Fresenius AG stock option based plan of 1998 (1998 Plan), the Fresenius AG Stock Option Plan 2003 (2003 Plan) which is based on convertible bonds and the new stock option based Fresenius SE Stock Option Plan 2008 (2008 Plan). The latter is the only plan under which stock options were granted during 2008.
Stock Option Plan 2008
On May 21, 2008, Fresenius SE’s Annual General Meeting has
resolved upon the Fresenius SE Stock Option Plan 2008
(2008 Plan) by authorizing the granting of subscription rights
to members of the Management Board and managerial
employees of the Company and affiliated companies. To fulfill
the subscription rights under the 2008 Plan, the subscribed
capital of Fresenius SE was increased conditionally by up to
€ 6.2 million through the issue of up to 3.1 million no par
value bearer ordinary shares and 3.1 million no par value
bearer preference shares.
