2009 Annual Report - CRH

7. Share-based Payment Expense continued
80 CRH
Denominated in
€ € Stg£* Stg£*
3-year 5-year 3-year 5-year
Granted during 2009 (amounts in €) 6.86 6.92 5.67 5.77
Granted during 2008 (amounts in €) 5.85 6.41 5.98 6.56
* € equivalents at the date of grant
The fair values of these options were determined using the following assumptions:
2009 2008
3-year 5-year 3-year 5-year
Weighted average exercise price (amounts in €) 12.04 11.82 20.72 20.57
Risk-free interest rate (%) 1.80 2.40 3.95/3.58 4.00/3.69
Expected dividend payments over the expected life (€ cent) 188.75 320.10 219.73 401.26
Expected volatility (%) 28.1 24.5 21.6/21.8 20.9/21.7
Expected life in years 3 5 3 5
The expected volatility was determined using an historical sample of 37 month-end CRH share prices in respect of the three-year savings-related share options and
61 month-end share prices in respect of the five-year savings-related share options. The expected lives of the options are based on historical data and are therefore
not necessarily indicative of exercise patterns that may materialise.
Other than the assumptions listed above, no other features of option grants were factored into the determination of fair value. The terms of the options issued under
the savings-related share option schemes do not contain any market conditions within the meaning of IFRS 2. No relevant modifications were effected to the savingsrelated
share option schemes during the course of 2009 or 2008.
Performance Share Plan
The Group operates a Performance Share Plan which was approved by shareholders in May 2006. The general terms and conditions applicable to shares awarded
by CRH under this Plan are set out in the Report on Directors’ Remuneration on pages 51 to 59.
Shares awarded under the Group’s Performance Share Plan are equity-settled share-based payments as defined in IFRS 2 Share-based Payment. IFRS 2 requires
that a recognised valuation methodology be employed to determine the fair value of shares awarded and stipulates that this methodology should be consistent with
methodologies used for the pricing of financial instruments. The expense of €10 million (2008: €7 million) reported in the Consolidated Income Statement has been
arrived at through applying a Monte Carlo simulation technique to model the combination of market-based and non-market-based performance conditions in the
Plan.
Number of Shares
Period to
Share price earliest
Rights Cumulative
at date release Initial Issue lapses/releases Net Fair
of award* date award adjustment to date** outstanding value
Granted in 2006 €24.82 3 years 627,750 62,249 689,999 - €12.11
Granted in 2007 €33.29 3 years 594,750 60,122 45,218 609,654 €17.14
Granted in 2008 €23.45 3 years 741,000 76,331 43,272 774,059 €10.27
Granted in 2009 €17.00 3 years 1,658,000 - - 1,658,000 €8.29
* Share prices in respect of awards prior to the Rights Issue have not been rights adjusted.
** In March 2009, 474,997 (74.99% of the initial award net of lapses and adjusted for the Rights Issue) of the shares awarded under the Performance Share Plan in
2006 vested and accordingly were released to the participants of the scheme.
The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer group total shareholder return, volatilities and
correlations, together with the following assumptions:
2009 2008
Risk-free interest rate (%) 1.77 3.49
Expected volatility (%) 28.1 21.8
The expected volatility was determined using an historical sample of 37 month-end CRH share prices.