20.6 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-
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.
at date Exercise Expected Fair value at
of grant* price Expected Exercise dividend Risk free measure-
Date of grant (in £) (in £) volatility multiple yield rate** ment 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.
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Group's principal financial instruments as at 31 December 2009 comprise cash and cash
equivalents. The main purpose of these financial instruments is to finance the Group's operations. The
Group has other financial instruments which mainly comprise receivables and payables, which arise
directly from its operations. Cash and cash equivalents and trade and other receivables have been
classified as loans and receivables and trade and other payables, and deferred consideration as
financial liabilities measured at amortised cost.
During the year, the Group did not use derivative financial instruments to hedge its exposure to
foreign exchange or interest rate risks arising from operational, financing and investment activities.
The Group does not hold or issue derivative financial instruments for trading purposes.
21.1 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Group's income or value of its holdings of financial instruments. Exposure to market risk
(which includes currency and interest rate risk) arises in the normal course of the Group's business.
21.2 Foreign exchange risk
Foreign exchange risk arises from transactions, recognised assets and liabilities and net investments in
foreign operations. The Group does not use foreign exchange contracts to hedge its currency risk. The
Group dividend is declared in the Euro as a Luxembourg company. Two weeks before the dividend is
due to be paid, the Company sells Euro and buys British Pounds for an amount equal to the dividend
net of withholding tax.