Carphone Warehouse 2011 Annual Report Download - page 64

60 Carphone Warehouse Group plc Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 SHAREBASED PAYMENTS CONTINUED
f) Other Old Carphone Warehouse share option schemes
Old Carphone Warehouse had a savings-related share option scheme which permitted the grant to employees of options linked to
a bank save-as-you-earn contract for a term of three or five years, with contributions from employees of between £5 and £250 per
month. Options could be exercised at the end of the three or five year period at a subscription price not less than 80% of the middle
market quotation on the date of grant. All save-as-you-earn schemes were forfeited on Demerger. Market priced options were also
granted during the year ended 31 March 2009 by Old Carphone Warehouse to certain senior employees within Old Carphone
Warehouse Group. These awards were subject to internal performance conditions, principally in relation to earnings and cash
generation, over a period to March 2010. The performance conditions were met and the options vested during the year.
Number
million
2011
WAEP
£
Number
million
2010
WAEP
£
Outstanding at the beginning of the year 3.6 0.75 4.7 0.90
Lapsed during the year – – (0.9) 1.40
Exercised during the year (2.4) 0.74 (0.2) 0.96
Outstanding at the end of the year 1.2 0.76 3.6 0.75
Exercisable at the end of the year 1.2 0.76 – –
The options outstanding at 31 March 2011 had a weighted average remaining contractual life of 7.6 years (2010: 8.7 years). The
options exercised during the year were exercised at a weighted average market price of £2.39 (2010: £1.60).
g) Carphone Warehouse Group plc Long-Term Incentive Plan 2010
In March and April 2010 the Group made awards under a Long-Term Incentive Plan, which uses share options to provide long-
term incentives to employees of the Group. The options were granted at a combination of market price and zero price and are
subject to TSR performance targets and are measured over a performance period to 29 March 2013.
An average annual TSR of 20% is required for all options in the scheme to vest. Subject to performance, 60% of options will vest on
29 March 2013, with the remaining 40% vesting on 29 March 2014.
Number
million
2011
WAEP
£
Number
million
2010
WAEP
£
Outstanding at the beginning of the year 1.4 1.35 – –
Granted during the year 0.7 0.77 1.4 1.35
Outstanding at the end of the year 2.1 1.17 1.4 1.35
Exercisable at the end of the year – – – –
The options outstanding at 31 March 2011 had a weighted average remaining contractual life of 9.0 years (2010: 10.0 years).
h) Fair value models
The fair value of options with external performance targets was estimated at the date of grant using a Monte Carlo model. The
model combines the market price of a share at the date of grant with the probability of meeting performance criteria, based on the
historical performance of Old Carphone Warehouse shares. For share options granted in the year, a volatility of 36.0% and a
dividend yield of 2.2% was assumed.
The VES shares described in notes 6a and 6b above were acquired by participants at market value as calculated by third party
valuation experts using option pricing methodology, cross checked to an expected returns approach adopting discounted cash flow
methodology. The discount rates and discounts for lack of marketability employed, where appropriate, reflected the market risk and
volatility of the VES shares in question over their expected vesting period. An accounting charge arises on the respective schemes
since the loans provided to acquire the shares are in certain circumstances not fully repayable. The charge has been derived using a
Black Scholes option pricing model, reflecting equity volatilities specific to the relevant shares.