Financial Statements

Notes to the Consolidated Financial Statementsfor the year to 31 December 2008

35. Share-based payments

Equity-settled share option plan

Details of all equity-settled share-based payment arrangements in existence during the year are set out in the paragraphs on 'Executive share-based reward' in the Directors' Remuneration Report page of this report.

2008 2007
Schemes requiring consideration from participants: Options Weighted average exercise price
(in £)
Options Weighted average exercise price
(in £)
Outstanding at beginning of period 15,460,002 2.72 6,956,315 2.28
Granted during the period 42,697,752 0.69 2,640,216 2.65
Lapsed during the period (11,273,011) 2.07 (421,974) (2.94)
Exercised during the period (242,076) 1.92 (2,142,532) (2.00)
Acquired with subsidiary 8,427,977 2.93
Outstanding at the end of the period 46,642,667 1.01 15,460,002 2.72
Exercisable at the end of the period 2,649,887 2.58 3,222,426 2.04

The weighted average share price at the date of exercise for share options exercised during the period was £1.73 (2007: £3.30). The options outstanding at 31 December 2008 had a range of exercise prices from £0.16 to £4.57 (2007: £1.27 to £4.57) and a weighted average remaining contractual life of 6.3 years (2007: 4.8 years).

Schemes not requiring consideration from participants include the George Wimpey Long Term Incentive Plan and the Performance Share Plan.

2008 2007
Schemes requiring consideration from participants: Options Weighted average exercise price
(in £)
Options Weighted average exercise price
(in £)
Outstanding at beginning of period 10,091,435 8,428,486
Granted during the period 9,695,831 2,062,377
Lapsed during the period (9,047,250) (2,230,286)
Exercised during the period (7,720) (2,204,708)
Acquired with subsidiary 4,035,566
Outstanding at the end of the period 10,732,296 10,091,435
Exercisable at the end of the period 175,153 88,538

The options outstanding at 31 December 2008 had a weighted average remaining contractual life of 8.2 years (2007: 4.2 years).

For share options with non-market conditions granted during the current and preceding year, the fair value of the options at grant date was determined using the Binomial model. The inputs into that model were as follows:

2008 2007
Weighted average share price £0.38 £2.81
Weighted average exercise price £0.69 £2.65
Expected volatility 37% 30%
Expected life 3/5 years 3/5 years
Risk free rate 4.4% 5.1%
Expected dividend yield 0.5% 3.6%

The weighted average fair value of share options granted during the year is £0.10 (2007: £0.69).

Expected volatility was determined by calculating the historical volatility of the Group's share price over the expected term.

For share options with market conditions granted during the current year, the fair value of the options was determined using the Monte Carlo simulation model. The inputs into that model were as follows:

2008 2007
Weighted average share price £0.69 £4.92
Weighted average exercise price £nil £nil
Expected volatility 40% 26%
Expected life 3 years 3 years
Risk free rate 4.3% 5.4%
Expected dividend yield 0.9% 3.6%

The weighted average fair value of share options granted during the year is £0.33 (2007: £4.35).

Expected volatility was determined by calculating the historical volatility of the Group's share price over the expected term, however due to the exceptional volatility in this financial year we have excluded the period between 1 May 2008 and 31 October 2008 as allowed by IFRS 2 Share based payment. The expected life used in the model is based on historical exercise patterns.

The Group recognised total expenses of £6.0m and £0.6m related to equity-settled share-based payment transactions in 2008 and 2007 respectively. Of this amount, £1.6m related to the accelerated vesting of share options held by employees of Taylor Wimpey Construction, which was disposed of on 9 September 2008, and which is included in profit from discontinued operations in the income statement.