DOOSAN HEAVY INDUSTRIES & CONSTRUCTION CO., LTD. AND ...

Doosan Heavy Industries & Construction Co., Ltd. and SubsidiariesNotes to the Consolidated Financial StatementsFor the years ended December 31, 2012 and 201121. Other Capital Adjustments, Continued(ii) Change in the stock options for the year ended December 31, 2012 is summarized as follows:Date of grantNumber of stocksto be issuedFebruary27, 2006March16, 2007March21, 2008March27, 2009March26, 2010March25, 2011March30, 2012Balance at beginning 11,300 34,600 65,100 39,700 82,100 132,200 -Newly granted - - - - - - 275,200Exercise of rights (6,100) (6,700) - - - - -Cancellation of grant - - (17,300) (7,200) (6,700) -Ending balance 5,200 27,900 47,800 39,700 74,900 125,500 275,200Valuation(In millions of won)Balance at beginning ₩ 146 781 3,227 1,294 2,984 1,259 -Increase in stock options - - - - 388 1,585 1,706Exercise of rights (79) (151) - - - - -Cancellation of grant - - (858) - (295) (103) -Ending balance ₩ 67 630 2,369 1,294 3,077 2,741 1,706The Controlling Company’s weighted average share price at the dates of exercise is ₩ 57,628 and weightedaverage expected duration of share based payment (from December 31, 2012 to the date of maturity) is 1.7years.The compensation expenses associated with stock option for the years ended December 31, 2012 and 2011are ₩ 3,281 million and ₩ 2,781 million, respectively and ₩ 2,743 million will be recognized in the future.(iii) The estimated fair value was calculated using the modified fair value method and the assumptionsapplied to this method are summarized as follows:February27, 2006March16, 2007March21, 2008March27, 2009March26, 2010March25, 2011March30, 2012Date of grantRisk free rate (*1) 5.01% 4.79% 5.25% 3.71% 3.82% 3.66% 3.57%Expected exercise period 3 years 3 years 3 years 3 years 3 years 3 years 3 yearsExpected volatility 53.87% 49.33% 56.02% 65.15% 66.45% 53.12% 38.21%Expected dividend yield 1.69% 5.67% 7.33% 9.00% 10.00% 10.00% 13.33%(*1) Based on three-year government bonds.64