Aviva 2013 Annual Report Download - page 184

Aviva plc
Annual report and accounts 2013
182
Notes to the consolidated financial statements continued
32 – Group’s share plans continued
(i) Share options
The fair value of the options was estimated on the date of grant, based on the following weighted average assumptions:
Weighted average assumption 2013 2012
Share price 408p 326p
Exercise price 312p 266p
Expected volatility 38% 41%
Expected life 3.66 years 3.71 years
Expected dividend yield 3.58% 7.98%
Risk-free interest rate 0.92% 0.37%
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life of
the option prior to its date of grant. The risk-free interest rate was based on the yields available on UK government bonds as at the
date of grant. The bonds chosen were those with a similar remaining term to the expected life of the options. 2,442,874 options
granted after 7 November 2002 were exercised during the year (2012: 2,862,952).
(ii) Share awards
The fair value of the awards was estimated on the date of grant based on the following weighted average assumptions:
Weighted average assumption 2013 2012
Share price 295.37p 331.54p
Expected volatility1 35% 37%
Expected volatility of comparator companies’ share price1 31% 38%
Correlation between Aviva and competitors’ share price1 67% 63%
Expected life 3.00 years 3.00 years
Expected dividend yield2 — —
Risk-free interest rate1 0.29% 0.42%
1 For awards with market-based performance conditions.
2 The long term incentive plan awards granted in 2012 and 2013 include additional shares being provided to employees equal to dividend rights before vesting. As a result, no dividend yield assumption is required for these awards.
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life of
the share award prior to its date of grant. The risk-free interest rate was based on the yields available on UK government bonds as at
the date of grant. The bonds chosen were those with a similar remaining term to the expected life of the share awards.
33 – Shares held by employee trusts
We satisfy awards and options granted under the Group’s share plans primarily through shares purchased in the market and held
by employee share trusts. This note gives details of the shares held in these trusts. Movements in the carrying value of shares held
by employee trusts comprise:
2013 2012
Number £m Number £m
Cost debited to shareholders' funds
At 1 January 10,053,515 32 13,284,476 43
Acquired in the year 7,863,726 32 10,269,904 33
Distributed in the year (9,355,859) (33) (13,500,865) (44)
Balance at 31 December 8,561,382 31 10,053,515 32
The shares are owned by employee share trusts with an undertaking to satisfy awards of shares in the Company under the
Company’s share plans and schemes. Details of the features of the plans can be found in the directors’ remuneration report and
in note 32.
These shares were purchased in the market and are carried at cost. At 31 December 2013, they had an aggregate nominal
value of £2,140,346 (2012: £2,513,379) and a market value of £38,500,535 (2012: £37,499,611). The trustees have waived their
rights to dividends on the shares held in the trusts.
34 – Preference share capital
This note gives details of Aviva plc’s preference share capital.
The preference share capital of the Company at 31 December 2013 was:
2013
£m
2012
£m
Issued and paid up
100,000,000 8.375% cumulative irredeemable preference shares of £1 each 100 100
100,000,000 8.75% cumulative irredeemable preference shares of £1 each 100 100
200 200
Under its articles of association, the Company may issue and allot sterling new preference shares and euro new preference shares,
which, if issued and allotted, would rank, as to payment of a dividend and capital, ahead of the Company’s ordinary share capital
but behind the cumulative irredeemable preference shares currently in issue. The issued preference shares are non-voting except
where their dividends are in arrears, on a winding up or where their rights are altered.
On a winding up, they carry a preferential right of return of capital ahead of the ordinary shares. The Company does not have a
contractual obligation to deliver cash or other financial assets to the preference shareholders and therefore the directors may make
dividend payments at their discretion.