Experian 2011 Annual Report Download - page 136
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134 Experian Annual Report 2011
Notes to the Group nancial statements continued
33. Share-based payments (continued)
(ii) Information relating to option valuation techniques
Black-Scholes models are used to determine an appropriate value of the option grants and inputs into the models are calculated as follows:
Expected volatility
- Calculated as an average over the expected life with an assumption made for volatility in each year of the expected life.
Volatility in the rst year is assumed to be the same as implied volatility on grant date. Volatility for year 4 and beyond is assumed to remain at
the long run historic volatility. Linear interpolation is assumed for years 2 and 3.
Expected dividend yield
- Yields are based on the current consensus analyst forecast gures at the time of grant. The inputs utilised are an
average of the forecasts for the next three nancial years.
Risk-free rate
- Rates are obtained from the UK Government Debt Management Ofce website which details historical prices and yields for gilt
strips.
Expected option life to exercise
- Options under the Experian Share Option Plan vest after 3 years and their expected life is 4 years. Options
under the Experian Sharesave Plans have expected lives of 1, 3 or 5 years.
Share price on grant date
- The closing price on the day the options were granted.
Option exercise price
- Exercise price as stated in the terms of each award.
(iii) Inputs into the Black-Scholes models and the weighted average estimated fair values
Experian Share Option Plan1 Experian Sharesave Plans
2011 2010 2011 2010
Share price on grant date (£) 4.66 6.14 4.39
Exercise price (£) 4.66 4.85 3.51
Expected volatility (%) 39.6 24.5 40.8
Expected dividend yield (%) 2.7 2.8 2.8
Risk-free rate (%) 2.9 1.7 3.2
Expected option life to exercise (years) 4.0 3.6 3.8
Fair value (£) 1.30 1.50 1.54
1. No such options were granted in the year ended 31 March 2011.
(iv) Movement in number of options and weighted average exercise price
Number
2011
million
Price
2011
£
Number
2010
million
Price
2010
£
Options outstanding at 1 April 35.3 4.42 33.8 4.37
Grant of options 0.7 4.85 12.3 4.59
Forfeiture and cancellation of options1(1.8) 4.01 (2.8) 4.67
Exercise of options2(8.9) 4.94 (7.2) 4.40
Expiry of options (0.5) 4.91 (0.8) 4.38
Options outstanding at 31 March 24.8 4.27 35.3 4.42
Options exercisable at 31 March 5.9 5.16 8.0 4.95
1. For plans of a ‘save as you earn’ nature, forfeitures include non-leavers who have not completed the savings requirement.
2. The weighted average share price of options exercised during the year was £6.90 (2010: £5.69).