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Notes to the Financial Statements
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42 Fair value of share options and assumptions: Date of grant Share Exercise Expected Exercise Expected Risk free Fair value at Price at date price volatility multiple dividend rate** measurement of grant* (in £) yield date 1 Mar 2007 1.08 1.00 65% 2 8% 5.02% 0.46 15 May 07 1.22 1.29 50% 2 8% 5.33% 0.40 13 Jul 07 1.42 2.98 60% 2 8% 5.63% 0.53 13 Jul 07 1.42 1.60 60% 2 8% 5.63% 0.53 21 Aug 07 1.25 1.29 60% 2 8% 5.07% 0.48 21 Sep 07 1.32 1.35 55% 2 8% 5.08% 0.48 24 Nov 07 1.33 1.33 50% 2 8% 4.80% 0.44 26 Feb 08 1.35 1.3816 50% 2 12% 4.53% 0.35 12 Dec 08 1.05 1.26 50% 2 12% 3.02% 0.17 * This is the bid price, not the mid-market price, at market close, as sourced from Bloomberg. ** The measurement of the risk-free rate was based on rate of UK sovereign debt prevalent at each grant date over the expected term of the option. The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There are no market conditions associated with the share option grants. 22.6 Options granted before 1 January 2007 Black-Scholes valuation method The fair value of services received in return for share options granted prior to 2007 were measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured on a Black-Scholes valuation model. The contractual life of the option (10 years) is used as an input into this model. Expectations of early exercise are incorporated into the Black- Scholes model. The option exercise price for individuals who were employed at 21 December 2004 was the market price on admission to AIM of £4.20 and for all other individuals was a range of prices, not being lower than the mid-market price of the shares on the three days immediately before the grant date. Date of grant Share Exercise Expected Option Expected Risk free Fair value at Price at date price volatility Life dividend rate** measurement of grant* (in £) (in years) yield date 21 Dec 04 £4.20 £4.20 45% 4.8 4% 4.51% £1.33 28 Sep 05 £5.50 £5.50 45% 4.8 5% 4.22% £1.58 28 Sep 05 £5.50 £4.20 45% 4.8 5% 4.22% £1.95 23 Jan 06 £3.89 £3.59 45% 4.8 8% 4.16% £0.94 23 Jan 06 £3.89 £2.98 45% 4.8 8% 4.16% £1.10 16 May 06 £3.83 £4.20 65% 4.8 8% 4.70% £1.23 The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There are no market conditions associated with the share option grants.