AVESCOGROUPPLC ANNUAL REPORT 2009 57
www.avesco.com
29. Share based payment
The Company operates an executive share option scheme, established in 1997, and a long term incentive plan (“LTIP”), established in 2007.
In any 10 year period no more than 15 percent of Avesco's issued share capital from time to time may be issued or put under option to be issued for the
purposes of the LTIP and the share option scheme. No awards may be made under either scheme more than 10 years after its adoption.
Share option scheme
At 30 September 2009, there were 1,142,141 (2008: 1,142,141) options outstanding under the 1997 unapproved executive share option scheme at 71.1667 pence
each. During the year ended 30 September 2009, no options lapsed (2008: 326,326 options lapsed). These options are exercisable between 24 February 2007
and 24 February 2011. The right to exercise these options was subject to a performance condition that has now been satisfied. These options were valued using
the Black-Scholes option-pricing model. The assumptions used in this calculation were:
Grant date 24-Feb-04
Share price at grant date £0.75
Exercise price £0.71
Expected volatility 35%
Expected life 7 years
Risk free rate 5.00%
Expected dividends expressed as a dividend yield 7.33%
Assumptions on expected volatility and expected option term were made on the basis of historical data, wherever available, for the period corresponding with
the vesting period of the option. Best estimates were used where historical data was not available in this respect.
Long Term Incentive Plan (“LTIP”)
Under the LTIP, which is operated in conjunction with an employee trust, awards are made to employees under which they can receive Avesco shares at no cost
to themselves based on the achievement of a pre-determined and stretching performance condition. No individual may receive awards in any financial year
with an aggregate value at the time of grant in excess of 100 per cent of the employee's annual basic salary although this limit may increase to 200 per cent of
the employee's basic annual salary if the remuneration committee decides that exceptional circumstances exist.
The performance condition applicable to the first award of 964,000 rights to shares made under the LTIP is that a cumulative adjusted earnings per share
(calculated by dividing the consolidated Group profits of the period after taxation and preference dividends and exceptional items by the weighted average
number of ordinary shares in issue during the year) of at least 45p is achieved over the three years ending 30 September 2010. The performance condition
applicable to the second award of 455,500 rights to shares made under the LTIP is that a cumulative adjusted earnings per share (calculated by dividing the
consolidated Group profits of the period after taxation and preference dividends and exceptional items by the weighted average number of ordinary shares in
issue during the year) of at least 50p is achieved over the three years ending 30 September 2010. The remuneration committee has discretion to adjust the
earnings per share in relation to exceptional and/or non-recurring events. Subject to the rules of the LTIP and the fulfilment of the performance condition, 50 per
cent of the shares will be released on the date of the preliminary announcement of the results of the Company for the year ending 30 September 2010 and,
subject to continuing service of the award holder, 50 per cent of the shares will be released on the first anniversary of that announcement date or, if later, the
date of the announcement by the Company of its results for the year ending 30 September 2011.
For shares granted to employees under the LTIP, the fair value of the shares is measured at the market price of the entity’s shares, adjusted to take into account
the terms and conditions upon which the shares were granted. As the performance conditions attached to the shares are not market performance related, the
best estimate of fair value is considered to be market value at date of grant. No changes are subsequently made for changes in the share price after the grant
date. The charge is spread over the term to vesting date.
The table below presents the awards outstanding with an analysis of the movements in the number of awards during the year and the charge to the income
statement.
Fair value
Share per Charge/(credit) to the income
price granted Granted Granted statement for the
Number of at date instrument instruments Forfeitures instruments year ended
Date of instruments of at date of outstanding during the outstanding 30/09/2009 30/09/2008
grant granted grant grant at 1/10/08 year at 30/09/09 £’000 £’000
06/08/2007 964,000 114p 114p 913,500 (20,000) 893,500 - (45)
03/01/2008 455,500 106.5p 106.5p 439,000 (9,000) 430,000 --
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