121 Financial Statements Notes to the Consolidated Financial Statements (continued) 19. Share-Based Payments Founder Shares A valuation exercise was undertaken in 2015 to fair value the Founder Shares (the terms of which are outlined in Note 18), which resulted in a non-cash charge in the period to 31 December 2015 of €29.1 million, with a corresponding increase in the share-based payment reserve in equity such that there was no overall impact on total equity. This non-cash charge to profit or loss for the period ended 31 December 2015 was for the full fair value of the award relating to the Founder Shares, all of which was required to be recognised up front under the terms and conditions of the Founder Share agreement. No charge has been or will be recognised in subsequent years. The valuation exercise was completed using the “Monte Carlo” simulation methodology and the following key assumptions: • Share price volatility of 25% per annum, based on a basket of comparative UK listed entities; • Risk free rate of 0.1% per annum; • Dividend yield of 3% per annum, effective from 2018; and • 15% discount based on restrictions on sale once Founder Shares convert to Ordinary Shares. As detailed in Note 18, during the year ended 31 December 2017, 38,685,292 Founder Shares were converted to ordinary shares and a proportionate amount of the €29.1 million amount referred to above, totalling €11.3 million, was transferred from the share-based payment reserve to retained earnings. In the year ended 31 December 2016, 15,021,937 Founder Shares were converted to ordinary shares and a proportionate amount of the €29.1 million amount referred to above, totalling €4.4 million, was transferred from the share-based payment reserve to retained earnings. Long Term Incentive Plan The Group operates an equity settled Long Term Incentive Plan (LTIP), which was approved at its May 2017 Annual General Meeting, under which conditional awards of 1,465,909 shares have been made to senior executives. The shares will vest on satisfaction of service and performance conditions attaching to the LTIP. Vesting of 80% of the awards will be based on Earnings per Share (EPS) performance and 20% will be based on Total Shareholder Return (TSR) over the 3 years 2017, 2018 and 2019. The EPS-related performance condition is a non-market performance condition and does not impact the fair value of the EPS-based awards at the grant date, which is equivalent to the share price at grant date. A valuation exercise was undertaken in 2017 to fair value the TSR-based LTIP awards. The valuation exercise was completed using the “Monte Carlo” simulation methodology and the following key assumptions: • Share price volatility of 30% per annum; • Risk free rate of 0% per annum; • Dividend yield of 3% per annum, effective from 2018; • Share price at date of grant €1.60; and • Share price at beginning of performance period €1.35.
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