BAE-annual-report-2014

Financial statements
NOTES TO THE GROUP ACCOUNTS
CONTINUED
29. SHARE-BASED PAYMENTS
The Group has granted equity-settled share options and Long-Term Incentive Plan (LTIP) arrangements, and cash-settled share
appreciation rights to employees.
Equity-settled share options and LTIP arrangements are measured at fair value at the date of grant using an option pricing model.
The fair value is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that
will actually vest.
Cash-settled share options are measured at fair value at the balance sheet date. The Group recognises a liability at the balance sheet
date based on these fair values, and taking into account the estimated number that will actually vest and the relative completion of the
vesting period. Changes in the value of this liability are recognised in the income statement for the year.
Details of the terms and conditions of each share-based payment plan are given in the Annual Remuneration Report on pages 69 to 82.
Expense in year
2014 2013
Equity-settled
£m
Cash-settled
£m
Total
£m
Equity-settled
£m
Cash-settled
£m
Executive Share Option Plan 4 – 4 3 3 6
Performance Share Plan 5 – 5 8 – 8
Restricted Share Plan 5 – 5 7 – 7
14 – 14 18 3 21
The Group also incurred a charge of £28m (2013 £31m) in respect of the equity-settled all-employee free shares and matching
Partnership Shares elements of the Share Incentive Plan.
Executive Share Option Plan
2014 2013
Number of
shares
’000
Weighted
average
exercise
price
£
Number of
shares
’000
Total
£m
Weighted
average
exercise
price
£
Equity-settled options
Outstanding at the beginning of the year 30,959 3.52 23,014 3.24
Granted during the year 10,578 4.12 12,293 3.90
Exercised during the year (1,644) 3.07 (1,918) 2.37
Expired during the year (4,299) 3.71 (2,430) 3.62
Outstanding at the end of the year 35,594 3.70 30,959 3.52
Exercisable at the end of the year 3,633 4.30 5,674 3.95
Cash-settled share appreciation rights
Outstanding at the beginning of the year 1,802 2.38 4,063 2.20
Exercised during the year (1,078) 2.19 (2,125) 2.03
Expired during the year (30) 2.07 (136) 2.30
Outstanding at the end of the year 694 2.69 1,802 2.38
Exercisable at the end of the year 694 2.69 1,802 2.38
2014 2013
Equity-settled Cash-settled Equity-settled Cash-settled
Range of exercise price of outstanding options (£) 2.64 – 4.79 2.64 – 3.56 2.01 – 4.79 2.01 – 3.58
Weighted average remaining contracted life (years) 8 – 8 1
Weighted average fair value of options granted (£) 0.64 – 0.61 –
152
BAE Systems
Annual Report 2014