Barclays 2008 Annual Report Download - page 262

Notes to the accounts
For the year ended 31st December 2008
260 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
45 Share-based payments (continued)
The weighted average fair value per option granted during the year is as follows:
2008 2007
££
Sharesave 0.92 1.25
Sharepurchase 3.38 6.84
ISP 4.22 n/a
ESAS 4.09 6.96
PSP 4.89 8.03
BGI EOP n/a 22.18
AGLSIT n/a 3.18
AGLESAS 7.17 n/a
Fair values for Sharesave, PSP, BGI EOP and AGLSIT are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation.
No further grants have been made under the BGI EOP since 2008. Sharepurchase, ESAS, and AGLESAS 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.
As described above, the terms of the ESAS scheme require shares to be held for a set number of years from the date of vest. The calculation of the vest
date fair value of such awards includes a reduction for this post-vesting restriction. This discount is determined by calculating how much a willing market
participant would rationally pay to remove the restriction using a Black-Scholes option pricing model. The total discount required in 2008 is £10m (2007:
£66m, 2006: £62m).
The significant weighted average assumptions used to estimate the fair value of the options granted in 2008 are as follows:
2008
Sharesave PSP AGLESAS
Weighted average share price 3.11 5.45 7.17
Weighted average exercise price 2.51 2.07 –
Expected volatility 37% 37% 0%
Expected option life 4 years 3 years 5 years
The significant weighted average assumptions used to estimate the fair value of the options granted in 2007 are as follows:
2007
Sharesave PSP BGI EOP AGLSIT
Weighted average share price 5.82 7.07 95.33 9.18
Weighted average exercise price 4.81 – 95.33 7.62
Expected volatility 25% 25% 20% 30%
Expected option life 4 years 3 years 4 years 5 years
The significant weighted average assumptions used to estimate the fair value of the options granted in 2006 are as follows:
2006
Sharesave PSP BGI EOP AGLSIT
Weighted average share price 6.20 6.74 81.12 8.92
Weighted average exercise price 5.11 – 81.12 6.57
Expected volatility 25% 25% 24% 29%
Expected option life 4 years 3 years 4 years 5 years
Expected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP.
Expected volatility has been determined using historical volatility of its peers over the expected life of the options for BGI EOP and AGLSIT applies
a five-year rolling period.
The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 4% for all schemes other than
AGLSIT. Option life is estimated based upon historical data for the holding period of options between grant and exercise dates. The risk-free rate on the
AGLSIT scheme represents the yield, recorded on date of option grant, on South African government zero coupon bond of a term commensurate to the
expected life of the option.