BP 2007 Annual Report Download - page 164

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41 Share-based payments continued
Savings and matching plans
BP ShareSave Plan
This is a savings-related share option plan, under which employees save on a monthly basis, over a three- or five-year period, towards the purchase of
shares at a fixed price determined when the option is granted. This price is usually set at a 20% discount to the market price at the time of grant. The
option must be exercised within six months of maturity of the savings contract; otherwise it lapses. The plan is run in the UK and options are granted
annually, usually in June. Participants leaving for a qualifying reason will have six months in which to use their savings to exercise their options on a
pro-rated basis.
BP ShareMatch Plans
These are matching share plans, under which BP matches employees’ own contributions of shares up to a predetermined limit. The plans are run in
the UK and in more than 70 other countries. The UK plan is run on a monthly basis with shares being held in trust for five years before they can be
released free of any income tax and national insurance liability. In other countries, the plan is run on an annual basis with shares being held in trust for
three years. The plan is operated on a cash basis in those countries where there are regulatory restrictions preventing the holding of BP shares. When
the employee leaves BP, all shares must be removed from trust and units under the plan operated on a cash basis must be encashed.
Local plans
In some countries, BP provides local scheme benefits, the rules and qualifications for which vary according to local circumstances.
The above share plans are indicated as being equity-settled. In certain countries, however, it is not possible to award shares to employees owing to
local legislation. In these instances the award will be settled in cash, calculated as the cash equivalent of the value to the employee of an equity-
settled plan.
Cash plans
Cash-settled share-based payments / Stock Appreciation Rights (SARs)
These are cash-settled share-based payments available to certain employees that require the group to pay the intrinsic value of the cash option/SAR/
restricted shares to the employee at the date of exercise or on maturity. The cash options/SARs have the same rules as the BPSOP plan and the cash
restricted share plans (MTPP, DAB, PSP, RSP) have the same rules as their equity-settled counterparts.
Employee Share Ownership Plans (ESOPs)
ESOPs have been established to acquire BP shares to satisfy any awards made to participants under EDIP, MTPP, LTPP, DAB and the BP
ShareMatch Plans. The ESOPs have waived their rights to dividends on shares held for future awards and are funded by the group. Until such time as
the company’s own shares held by the ESOP trusts vest unconditionally to employees, the amount paid for those shares is deducted in arriving at
shareholders’ equity. See Note 40. Assets and liabilities of the ESOPs are recognized as assets and liabilities of the group.
At 31 December 2007, the ESOPs held 6,448,838 shares (2006 12,795,887 shares and 2005 14,560,003 shares) for potential future awards, which
had a market value of $79 million (2006 $142 million and 2005 $156 million).
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Share option transactions 2007 2006 2005
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Weighted Weighted Weighted
Number average Number average Number average
of exercise price of exercise price of exercise price
options $ options $ options $
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Outstanding at beginning of the year 426,471,462 8.25 450,453,502 7.64 470,263,808 7.16
Granted during the year 6,004,025 9.11 53,977,639 11.18 54,482,053 10.24
Forfeited during the year (3,924,714) 9.10 (7,169,710) 8.69 (4,844,827) 8.30
Exercised during the year (69,715,558) 6.94 (70,658,480) 6.52 (68,687,976) 6.40
Expired during the year (740,972) 8.68 (131,489) 7.99 (759,556) 6.75
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Outstanding at the end of the year 358,094,243 8.51 426,471,462 8.25 450,453,502 7.64
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Exercisable at the end of the year 238,707,055 7.70 236,726,966 7.41 222,729,398 7.54
As share options are exercised continuously throughout the year, the weighted average share price during the year of $11.72 (2006 $11.85 and 2005
$10.77) is representative of the weighted average share price at the date of exercise. For the options outstanding at 31 December 2007, the exercise
price ranges and weighted average remaining contractual lives are shown below.
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Options outstanding Options exercisable
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Weighted Weighted Weighted
Number average average Number average
of remaining life exercise price of exercise price
Range of exercise prices shares Years $ shares $
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$5.10 – $6.79 66,360,194 3.88 6.15 55,509,664 6.23
$6.80 – $8.50 162,364,928 4.00 8.02 156,236,204 8.04
$8.51 – $10.21 55,021,656 4.89 9.28 26,961,187 8.78
$10.22 – $11.92 74,347,465 7.80 11.13 – –
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358,094,243 4.90 8.51 238,707,055 7.70