0175 Geely Automobile Holdings Limited Annual Report 2011

Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 201133. Share-based Payment Transactions (Continued)Equity-settled share option scheme (Continued)No option was granted during the year ended 31 December 2011. During the year ended 31 December 2010,515,800,000 options and 16,900,000 options were granted on 18 January 2010 and 21 April 2010 with estimatedtotal fair values of approximately RMB893 million and RMB26 million respectively. The closing prices of theCompany’s shares immediately before the date on which the options were granted were HK$3.96 and HK$3.62for option lots of 515,800,000 options and 16,900,000 options respectively. The exercise price of the shareoptions granted is HK$4.07 per share for both option lots of 515,800,000 options and 16,900,000 options. Theshare options for option lots of 515,800,000 options and 16,900,000 options are valid for a period of 10 yearsfrom 18 January 2010 to 17 January 2020 and 21 April 2010 to 20 April 2020 respectively and one-tenth ofoptions granted will vest in every year from the grant date with one-tenth of options being vested immediatelyat the date of grant.The fair values were calculated using the Binomial Option Pricing Model. The inputs into the model were asfollows:Grant date 18 January 2010 21 April 2010Exercise price HK$4.07 HK$4.07Expected volatility 58.07% 57.95%Expected life 10 years 10 yearsRisk-free rate 2.742% 2.879%Expected dividend yield 0.4% 1.15%Dilution discount 3.51% N/AExpected volatility was determined by using historical volatility of the Company's share price, adjusted for anyexpected changes to future volatility based on publicly available information. The expected life used in the modelhas been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictionsand behavioural considerations.The Group recognised a total expense of RMB137,150,000 (2010: RMB273,437,000) for the year ended 31December 2011 in relation to share options granted by the Company.34. WarrantsAs set out in note 24, during the year ended 31 December 2009, the Company issued 299,526,900 warrants tocertain investors with a subscription price of HK$1 for all the warrants. The warrants are convertible into fully paidordinary shares of HK$0.02 each of the Company at an initial exercise price of RMB2.0262 (equivalent to HK$2.3)per share, subject to adjustment in certain events. Upon the payment of final dividends for the year ended 31December 2010, the exercise price of the warrants were adjusted to RMB1.9986 (equivalent to HK$2.2687) pershare from 30 June 2011 in accordance with the provisions of the warrants. The warrants are exercisable in partor in whole at any time from the issue date of the warrants on 11 November 2009 to the fifth anniversary of theissuance of the warrants and are freely transferable, but in minimum tranches of 250,000 warrants. The warrantshave been classified as equity instruments of the Company.During the year, none of the warrants issued has been exercised (2010: nil).112