Barclays 2010 Annual Report Download - page 246

Notes to the financial statements
For the year ended 31st December 2010 continued
39 Share-based payments continued
Other schemes
In addition to the above schemes, the Group operates a number of other schemes including schemes operated by and settled in the shares of subsidiary
undertakings, none of which are individually or in aggregate material in relation to the charge for the year or the numbers of issued shares.
Share option plans
As noted above, the Group’s schemes include a number of share option schemes – including grants of nil cost options.
The weighted average fair value per option granted during the year is as follows:
2010
£m
2009
£m
SVP 3.54 –
ESAS 2.88 1.08
PSP 3.55 2.81
ISP 3.55 2.58
Sharepurchase 3.07 1.82
Sharesave 1.29 1.43
Sharepurchase, ISP, SVP 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.
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 2010 is £22m
(2009: £10m, 2008: £10m).
Fair values for Sharesave and PSP are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation.
The significant weighted average assumptions used to estimate the fair value of the options granted from 2007 to 2010 under the Group’s major share
schemes are as follows:
Weighted
average
share price
Weighted
average
exercise price
Expected
volatility
Expected
option life
2010
PSP 3.55 3.46 45% 2 years
Sharesave 3.21 2.67 45% 4 years
2009
PSP 2.34 1.77 45% 2 years
Sharesave 3.51 2.70 45% 4 years
2008
PSP 5.45 2.07 37% 3 years
Sharesave 3.11 2.51 37% 4 years
2007
PSP 7.07 – 25% 3 years
Sharesave 5.82 4.81 25% 4 years
Expected Volatility
Expected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP.
The assumed dividend yield for Barclays PLC is the average annual dividend yield on the date of grant of 2% (2009: 2%).
Discount Rate
The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 2% (2009: 3%) for Sharesave
and PSP. Option life is estimated based upon historical data for the holding period of options between grant and exercise dates.
Expected option life and number expected to vest
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.
244 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10