Annual Report 2012 - Development Securities PLC

Financial Statements
Any options granted on or before 7th November 2002 have not been recognised under FRS 20 under the exemption in that standard. These options have
not been subsequently modified and therefore do not need to be accounted for in accordance with FRS 20.
The weighted average fair value of options granted during the period was £0.50 (31st December 2010: £0.50). The average share price during the period
was 194.1 pence (31st December 2010: 255.0 pence). Of the 571,361 (31st December 2010: 528,647) outstanding options at 29th February 2012,
155,753 were exercisable (31st December 2010: 229,166).
The options outstanding at 29th February 2012 were exercisable between 152.0 pence and 559.8 pence per share and have a weighted average remaining
contractual life of 5.3 years (31st December 2010: 4.2 years).
The fair value of grants is measured at the grant date using a Black-Scholes pricing model, taking into account the terms and conditions upon which the
instruments were granted. The services received and a liability to pay for those services are recognised over the expected vesting period. The main
assumptions of the Black-Scholes pricing model are as follows:
Grant date 24.10.11 31.08.10 08.05.09 28.10.08 28.04.06 27.10.05 19.04.04
Exercise price (pence) 152.0 248.0 275.0 274.16 559.75 430.25 347.5
Term (years) 3 7 7 3 7 7 7
Expected volatility 41% 23% 79% 90% 22% 20% 10%
Expected dividend yield p.a. 3.2% 1.9% 2.0% 2.0% 1.5% 1.5% 1.5%
Risk-free rate 0.9% 2.9% 1.5% 3.5% 4.5% 4.5% 4.5%
Expected forfeiture p.a. Nil Nil Nil Nil Nil Nil Nil
Expected volatility was determined by calculating the historical volatility of the Development Securities PLC share price over multiple time periods.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.
Conditional awards under the Performance Share Plan
The terms of the Performance Share Plan are set out in the Remuneration Report on pages 57 to 64.
Ordinary shares conditionally awarded under the Performance Share Plan are valued at their fair value on the date of the award, using an Equal Probability
Model, which takes into account the probability of the Ordinary shares vesting based on an equal probability of achieving appropriate total shareholder return
ranking as determined under the performance condition.
The principal assumptions for calculating the fair value of the Ordinary shares conditionally awarded are:
29th February
2012
31st December
2010
Ordinary shares conditionally awarded (no. of shares) 624,508 527,621
Date of award 22nd March 23rd April
Share price (pence) 229.3 264.0
Percentage probability applied for fair value 52.00% 36.88%
Vesting period (months) 32 32
The expense recognised for equity-settled share-based payments in respect of employee services received during the period is £21,000 (31st December
2010: £nil). The credit recognised for cash-settled share-based payments during the period due to historic cash-settled options lapsing is £15,000
(31st December 2010: expense of £19,000).
Development Securities PLC / Annual Report 2012 113