Barclays 2005 Annual Report Download - page 214

53 Share-based payments (continued)
In addition, options remain outstanding under the following closed schemes:
Executive Share Option Scheme (ESOS)
The ESOS is a long-term incentive scheme and was available by invitation to certain senior executives of the Group with grants usually made
annually. Options were issued at the market price at the date of the grant without any discount, calculated in accordance with the rules of the
Scheme, and are normally exercisable between three and ten years from that date. No further awards are made under ESOS.
Woolwich Executive Share Option Plan (Woolwich ESOP)
Options originally granted over Woolwich PLC shares at market value were exercised in 2001 or exchanged, in accordance with the proposals made
under the offer to acquire the Woolwich, for options over Barclays PLC shares. Under the rules of ESOP, the performance conditions attached to the
exercise of options were disapplied on acquisition of Woolwich PLC by Barclays.
Woolwich Save As You Earn Scheme (Woolwich SAYE)
Under this Scheme, employees entered into contracts to save up to £250 per month and, at the expiry of a fixed term of three, five or seven years,
have the option to use these savings to acquire the shares in the Company at a discount calculated in accordance with the rules of the Scheme.
The discount was 20% of the market price at the date the options were granted.
The weighted average fair value per option granted during the year is as follows:
2005 2004
££
Sharesave 1.29 1.48
Sharepurchase 5.57 –
ESAS 5.03 4.45
PSP 3.99 –
ISOP 2.78 2.49
BGI EOP 10.41 5.59
AGLSIT 10.13 –
Fair values for Sharesave, PSP, ISOP, BGI EOP and AGLSIT are calculated at the date of grant using either a Black-Scholes or Monte Carlo model.
Sharepurchase and ESAS are nil cost awards on which the performance conditions are substantially completed at the date of grant. Consequently
the fair value of these awards is based on the market value at that date.
The significant weighted average assumptions used to estimate the fair value of the options granted in 2005 are as follows:
2005
Sharesave PSP ISOP BGI EOP AGLSIT
Weighted average share price 5.71 5.33 5.73 39.09 8.25
Exercise price 4.44 n/a 5.66 39.09 8.41
Expected volatility 24% 20% 34% 25% n/a
Option life 4 years 3 years 5 years 4 years 5-8 years
Implied volatility and dividend yield on the date of grant has been used as inputs into the respective valuation models for Sharesave, PSP and ISOP.
Expected volatility has been determined using historical volatility over the last three years for BGI EOP and AGLSIT applies a five-year rolling period
(eight years for Executive members).
BBA Libor interest rate curve has been used to derive a risk-free discount rate for all schemes other than BGI EOP and AGLSIT. The risk-free interest
rate for BGI EOP uses the US Treasury rate corresponding to the expected option life at the date of grant. The risk-free rate on the AGLSIT represents
the yield, recorded on date of option grant, on South African government zero coupon bond of a term equal to the expected life of the option.
For the purposes of determining the expected life and number of options to vest, historical exercise patterns have been used, together with an
assumption that a certain percentage of options will lapse due to leavers.
The expected dividends for all schemes are assumed to grow in line with the expected increases in share prices for the industry sector until exercise.
Notes to the accounts
For the year ended 31st December 2005
Barclays PLC
Annual Report 2005
212