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National Grid Gas plc Annual Report and Accounts 2009/10 71
29. Share options and reward plans continued
Share-based payment charge
s
Awards under share option plans
2010 2009
A
verage share price 676.0p 684.0p
A
verage exercise price 520.0p 488.0p
A
verage fair value 287.9p 166.8p
These amounts have been calculated in respect of options where the exercise price is less than the market price at the date of grant.
2010 2009
Dividend yield (%) 5.0 5.0
Volatility (%) 22.4-26.1 22.4-26.1
Risk-free investment rate (%) 2.5 2.5
A
verage life (years) 4.0 3.9
(i) implied volatility in traded options over National Grid plc's shares;
(ii)
(iii) implied volatility of comparator companies where options in their shares are traded.
Awards under other share scheme plans
2010 2009
A
verage share price 598.2p 670.1p
A
verage fair value 355.6p 458.1p
2010 2009
Dividend yield (%) 4.4 4.4
Risk-free investment rate (%) 2.5 2.5
The average share prices at the date of options being granted, the average price of the options granted and their estimated average fair
values during each of the two financial years ended 31 March were as follows:
historical volatility of National Grid plc's shares from October 2002 (the date of the business combination of National Grid Group plc and
Lattice Group plc), and
Volatility was derived based on the following and is assumed to revert from its current implied level to its long run mean based historical
volatility under (ii) below:
The charge to the income statement for the year ended 31 March 2010 was £8m (2009: £6m).
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. This is considered
appropriate given the short exercise window of sharesave options. The fair values of awards made in 2009 and 2008 onwards have been
calculated by reference to the 2006 Black-Scholes European model calculation.
The average share prices and fair values at the date share awards were granted during each of the 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 2008 and 2007 has been calculated by reference to the 2006 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 vesting period. Volatility for share awards has been calculated on the same basis as used for share options as described above.