BP 2005 Annual Report Download - page 100

98 Making energy more
Notes on financial statements continued
45 Share-based payments continued
SAVINGS AND MATCHING PLANS
BP ShareSave Plan A savings-related share option plan, under which employees save on a monthly basis, over a three- or five-year period, towards
the purchase of shares at a fixed price determined when the option is granted. This price is usually set at a 20% discount to the market price at the
time of grant. The option must be exercised within six months of maturity of the savings contract; otherwise it lapses. The plan is run in the UK and
options are granted annually, usually in June. Until 2003, a three-year savings plan was also run in a small number of other countries. Options will
remain outstanding in respect of these countries until the end of June 2007. Participants leaving for a qualifying reason will have six months in
which to use their savings to exercise their options on a pro-rated basis.
BP ShareMatch Plans Matching share plans, under which BP matches employees’ own contributions of shares up to a predetermined limit. The
plans are run in the UK and in over 70 other countries. The UK plan is run on a monthly basis with shares being held in trust for five years before
they can be released free of any income tax and national insurance liability. In other countries, the plan is run on an annual basis with shares being
held in trust for three years. The plan is operated on a cash basis in those countries where there are regulatory restrictions preventing the holding
of BP shares. When the employee leaves BP, all shares must be removed from trust and units under the plan operated on a cash basis must be
encashed.
CASH PLANS
Cash Options/ Stock Appreciation Rights (SARs) These are cash-settled share-based payments available to certain employees that require the
group to pay the intrinsic value of the cash option/SAR to the employee at the date of exercise. There are no performance conditions; however,
participants must continue in employment with BP for the first three calendar years of the plan for the options/SARs to vest. Special arrangements
may apply for qualifying leavers. The options/SARs are exercisable between the third and 10th anniversaries of the grant date.
EMPLOYEE SHARE OWNERSHIP PLANS (ESOPS)
ESOPs have been established to acquire BP shares to satisfy any awards made to participants under EDIP, LTPP, MTPP, DAB and the BP ShareMatch
Plans. The ESOPs have waived their rights to dividends on shares held for future awards and are funded by the group. Until such time as the
company’s own shares held by the ESOP trusts vest unconditionally in employees, the amount paid for those shares is deducted in arriving at
shareholders’ interest. See Note 44, Capital and reserves. Assets and liabilities of the ESOPs are recognized as assets and liabilities of the group.
At 31 December 2005, the ESOPs held 14,560,003 shares (2004 8,621,219 shares and 2003 11,930,379 shares) for potential future awards,
which had a market value of $156 million (2004 $84 million and 2003 $96 million).
Share option transactions 2005 2004 2003
Weighted Weighted Weighted
Number average Number average Number average
of exercise of exercise of exercise
options price ($) options price ($) options price ($)
Outstanding at beginning of the period 470,263,808 7.16 461,885,881 6.76 410,986,179 6.70
Granted during the period 54,482,053 10.24 80,394,760 7.93 104,758,602 6.22
Forfeited during the period (4,844,827) 8.30 (7,043,911) 6.77 (20,412,529) 7.11
Exercised during the period (68,687,976) 6.40 (62,625,182) 5.18 (32,988,942) 4.11
Expired during the period (759,556) 6.75 (2,347,740) 7.55 (457,429) 6.40
Outstanding at end of the period 450,453,502 7.64 470,263,808 7.16 461,885,881 6.76
Exercisable at the end of the period 222,729,398 7.54 224,627,758 7.00 229,198,494 6.21
As share options are exercised continuously throughout the year, the weighted average share price during the year of $10.77 (2004 $8.95 and
2003 $6.81) is representative of the weighted average share price at the date of exercise. For the options outstanding at 31 December 2005, the
exercise price ranges and weighted average remaining contractual lives are shown below.
Options outstanding Options exercisable
Weighted Weighted Weighted
Number average average Number average
of remaining exercise of exercise
Range of exercise prices shares life (yrs) price ($) shares price ($)
$4.22–$6.14 74,255,790 1.88 5.51 52,734,810 5.44
$6.15–$8.06 151,161,264 6.15 7.02 36,840,758 7.70
$8.07–$9.99 176,892,928 5.95 8.29 133,128,330 8.32
$10.00–$11.92 48,143,520 9.19 10.45 25,500 10.53
450,453,502 5.69 7.64 222,729,398 7.54