Annual Report & Accounts 2010

Notes to the Accounts

19 Share capital

	2010 £m	2009 £m
Authorised share capital of the Company 140,000,000 Ordinary Shares at 5p each	7.0	7.0
Allotted, called up and fully paid At 1 April (123,493,126 shares)	6.2	6.1
Employee share option schemes (871,249 shares for a total consideration of £0.9m)	–	0.1
At 31 March (124,364,375 shares)	6.2	6.2

The Company has one class of Ordinary Share that carries no right to fixed income. The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Treasury Shares

The Group sold nil (2009: 90,000) shares from treasury, which were all purchased on 30 November 2005 at a cost of nil (2009: 285p) per share. No purchases or sales of own shares have been made in the current financial year (2009: no shares purchased, 90,000 sold). All rights attaching to own shares are suspended until the shares are re-issued. The Group did not hold any treasury shares at 31 March 2010 (2009: £nil).

Potential issues of Ordinary Shares

Under the provisions of the employee share option schemes there were options for a total of 3.5m outstanding at 31 March 2010 (2009: 3.4m). The number of options outstanding relating to options granted in the last financial year was 1.5m (2009: 1.2m).

Share options accounted for under IFRS 2

The number of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below:

Date of grant	Scheme	Exercise price £	Exercise period	2010 Number (000)	2009 Number (000)
10 June 2003	EXEC	1.3542	10 June 06 – 10 June 13	62	62
1 June 2004	EXEC	1.7583	1 June 07 – 1 June 14	248	282
21 June 2006	PSP	0.0000	31 March 2009	–	337
21 June 2007	PSP	0.0000	31 March 2010	253	295
20 June 2008	PSP	0.0000	31 March 2011	546	638
19 June 2009	PSP	0.0000	31 March 2012	812	–
24 June 2004	SAYE	1.4066	24 June 09 – 24 December 09	–	402
22 June 2005	SAYE	2.5275	22 June 10 – 22 December 10	110	134
28 June 2006	SAYE	2.8913	28 June 09 – 28 December 09	–	222
28 June 2006	SAYE	2.8913	28 June 11 – 28 December 11	172	195
28 June 2007	SAYE	4.5126	28 June 10 – 28 December 10	133	166
28 June 2007	SAYE	4.5126	28 June 12 – 28 December 12	140	166
27 June 2008	SAYE	3.2756	27 June 11 – 27 December 11	213	301
27 June 2008	SAYE	3.2756	27 June 13 – 27 December 13	179	227
02 July 2009	SAYE	2.4737	2 July 12 – 2 January 13	415	–
02 July 2009	SAYE	2.4737	2 July 14 – 2 January 15	229	–

PSP shares only vest after approval by the Remuneration Committee, whose meeting is scheduled towards the end of May.

Options were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations. The inputs into the model expressed as weighted averages are as follows:

	2010 Executive options	2009 Executive options	2010 SAYE options	2009 SAYE options
Share price at grant date (pence)	241.9	243.7	306.4	260.8
Option exercise price (pence)	78.4	87.8	283.1	230.6
Expected volatility	32.5%	27.1%	30.6%	24.5%
Option life (years)	3.5	3.6	4.3	4.2
Risk free interest rate	4.2%	4.6%	4.4%	4.7%
Expected dividends expressed as a dividend yield	2.3%	2.3%	2.0%	2.2%

The expected volatility is based on historical share prices over a period of time equal to the vesting period. The option life used is the average expected period to exercise, based upon historic patterns where appropriate. The risk free interest rate of return is the yield on zero-coupon UK government bonds on a term consistent with the assumed option life. Dividends used are based on actual dividends where data is known and future dividends based upon a 10% growth in dividends policy. Also assumed is that performance conditions in respect of the executive share options will be met and that 0% of the 2007, 0% of the 2008 and 50% of the 2009 performance share plan will vest.

A reconciliation of option movements over the year to 31 March 2010 is shown below:

	2010 Number (000)	2010 Weighted average exercise price (pence)	2009 Number (000)	2009 Weighted average exercise price (pence)
Outstanding at 1 April	3,427	169.2	3,201	173.7
Granted during the year	1,612	104.0	1,231	144.6
Forfeited during the year	(656)	190.9	(284)	315.2
Exercised during the year	(871)	103.7	(721)	89.9
Outstanding at 31 March	3,512	151.4	3,427	169.2
Exercisable at 31 March	310	167.8	344	168.6

Details of share options outstanding at the end of the year are shown below:

	2010 Executive options	2009 Executive options	2010 SAYE options	2009 SAYE options
Range of exercise prices	175.8 to nil	175.8 to nil	451.3 to 247.4	451.3 to 140.7
Weighted average exercise price	27.1	35.9	301.5	287.9
Number of shares	1,921	1,614	1,591	1,813
Weighted average expected remaining life (years)	1.4	1.5	2.3	1.9
Weighted average contractual remaining life (years)	1.9	2.1	2.6	2.2

The weighted average share price during the period for options exercised over the year was 290.57p (2009: 322.62p).

Executive performance share plan options were granted on 19 June 2009. SAYE options were granted on 2 July 2009.

The aggregate of the estimated fair values of the options granted on those dates is £2.9m. During the year ended 31 March 2009 executive options were granted on 20 June 2008 and SAYE options were granted on 27 June 2008. The aggregate of the estimated fair values of the options granted on those dates is £2.6m.

The total charge for the year relating to employee share based payment plans was £0.4m (2009: £1.1m), all of which related to equity-settled share based payment transactions.