National Grid 2008 Annual Report Download - page 690

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19684
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 163
Description: EXHIBIT 15.1
0/5359.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/359/5*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19684
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 163 Description: EXHIBIT 15.1
0/5359.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/359/5*
Table of Contents
Annual Report and Accounts 2007/08
171
36. Share options and reward plans continued
Awards under share option plans
The average share prices at the date of options being granted, the average exercise prices of the options granted and the
estimated average fair values of the options granted during each of the three financial years ended 31 March were as follows:
These amounts have been calculated in respect of options where the exercise price is less than the market price at the date of
grant.
The fair values of the options granted were estimated using the following principal assumptions:
The fair values of awards under the Sharesave scheme have been calculated using the Black-Scholes European model for
awards made prior to 1 April 2006. This is considered appropriate given the short exercise window of sharesave options. The
fair value of awards made in 2007 onwards have been calculated by reference to the prior year’s Black-Scholes European
model calculation.
Volatility was derived based on the following and is assumed to revert from its current implied level to its long run mean, based
on historical volatility under (ii) below:
Awards under other share scheme plans
The avera
g
e share prices and fair values at the date share awards were
g
ranted durin
g
each of the three financial years ended
31 March were as follows:
The fair values of the awards granted were estimated using the following principal assumptions:
Fair values have been calculated using a Monte Carlo simulation model for awards with total shareholder return performance
conditions made prior to 1 April 2006. The fair value of awards made in 2007 onwards has been calculated by reference to the
prior year’s Monte Carlo simulation model calculation. Fair values of awards with performance conditions based on earnings
per share have been calculated using the share price at date of grant less the present value of dividends foregone during the
performance period.
For other share scheme awards, where the primary vesting condition is that employees complete a specified number of years
service, the fair value has been calculated as the share price at date of grant, adjusted to recognise the extent to which
participants do not receive dividends over the vestin
g
period. Volatility for share awards has been calculated on the same basis
as used for share options, as described above.
2008 2007 2006
Avera
g
e share
p
rice 846.0
p
746.0
p
569.0
p
Avera
g
e exercise
p
rice 655.0
p
558.0
p
434.0
p
Average fair value 190.0p 166.8p 128.0p
2008 2007 2006
Dividend
y
ield
(
%
)
4.5 4.5 4.5
Volatility (%) 15.6-18.9 15.6-18.9 15.6-18.9
Ris
k
-free investment rate
(
%
)
4.2 4.2 4.2
Avera
g
e life
(y
ears
)
4.1 3.9 4.3
(i) implied volatility in traded options over the Company’s shares;
(ii) historical volatility of the Company’s shares from October 2002 (the date of the business combination with Lattice Group
p
lc
)
; and
(iii) implied volatility of comparator companies where options in their shares are traded.
2008 2007 2006
Avera
g
e share
p
rice 766.9
p
594.0
p
535.6
p
Avera
g
e fair value 522.8
p
403.1
p
358.0
p
2008 2007 2006
Dividend
y
ield
(
%
)
4.4 4.4 4.4
Volatilit
y
(
%
)
19.9 19.9 19.9
Risk-free investment rate (%) 4.1 4.1 4.1