Glanbia plcAnnual Report 2011Financial statementswww.glanbia.comNote 22 (a): Capital reserve2011Company?'0002011Group?'0002010Company?'0002010Group?'000At the beginning and the end of the year 4,227 2,825 4,227 2,825The capital reserve comprises of a capital redemption reserve and a capital reserve which arose due to the re-nominalisationof the Company's share capital on conversion to the euro.2011?'0002010?'000Share premium - representing excess of fair value over nominal value of ordinary sharesissued in connection with the merger of Avonmore Foods plc and Waterford Foods plc 355,271 355,271Merger adjustment1(327,085)(327,085)Share premium and other reserves relating to nominal value of shares in Waterford Foods plc 84,962 84,962 113,148 113,148Note 22 (b): Merger reserve1 The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc and the fair value of the shares issued by Avonmore Foods plc (now named Glanbia plc) in 1997.Note 22 (c): Currency reserveThe currency reserve reflects the foreign exchange gains and losses that form part of the net investment in foreign operations.See note 32 - derivative financial instruments for further details. In addition, where Group companies have a functionalcurrency different from the presentation currency, their assets and liabilities are translated at the closing rate at the reportingdate, income and expenses in the income statement are translated at the average rate for the year and resulting exchangedifferences are taken to the currency reserve within equity.Note 22 (d): Hedging reserveThe hedging reserve reflects the effective portion of changes in the fair value of derivatives that are designated and qualify ascash flow hedges. Amounts accumulated in the hedging reserve are recycled to the income statement in the periods whenthe hedged item affects income or expense.Note 22 (e): Available for sale financial asset reserveUnrealised gains and losses arising from changes in the fair value of available for sale financial assets are recognised in theavailable for sale financial asset reserve. When such available for sale financial assets are sold or impaired, the accumulatedfair value adjustments are recycled to the income statement.Note 22 (f): Own sharesThe amount included as own shares relates to 740,576 (2010: 485,304) ordinary shares in Glanbia plc held by an EmployeeShare Trust which was established in May 2002 to operate in connection with the Company's Saving Related Share OptionScheme ('Sharesave Scheme'). The trustee of the Employee Share Trust is Halifax EES Trustees International Limited; aJersey based trustee services company.The shares included in the Employee Share Trust at 31 December 2011 cost ?2.8 million (2010: ?1.6 million) and had amarket value of ?3.4 million (2010: ?1.8 million). The dividend rights in respect of these shares have been waived, save 0.001pence per share.Shares purchased under the 2007 LTIP scheme and the 2008 LTIP scheme are deemed to be own shares in accordancewith IAS 32 - Financial Instruments: Presentation.Note 22 (g): Share based payment reserveThe share based payment reserve reflects charges relating to granting of both shares and options under the 2002 LTIP,2007 LTIP and 2008 LTIP schemes.2011Company?'0002011Group?'0002010Company?'0002010Group?'000At the beginning of the year 4,729 4,729 2,217 2,448Transfer of reserves between Group companies-- 231-Transfer on exercise, vesting or expiry of share based payments(1,974)(1,974)(656)(656)Cost of share based payments 2,388 2,388 2,937 2,937At the end of the year 5,143 5,143 4,729 4,729
Glanbia plcAnnual Report 2011Financial statementswww.glanbia.com2002 Long Term Incentive Plan ('the 2002 LTIP')Movement in the 2002 LTIP for the year ended 31 December 2011 and 1 January 2011 is as follows:2011Averageexercise pricein ? per share2011Numberofoptions2010Averageexercise pricein ? per share2010NumberofoptionsAt the beginning of the year2.37 1,980,0002.35 2,308,000Granted4.22 270,000--Exercised(1.75)(697,000)(1.86)(280,000)Expired--(4.03)(48,000)At the end of the year2.97 1,553,0002.37 1,980,000Expiry date inExercise price?2011201020121.55- 577,00020131.90 160,000 160,00020142.47 100,000 100,00020142.73 805,000 925,00020162.87 50,000 50,00020174.03 118,000 118,00020192.29 50,000 50,00020202.6520,000-20213.6820,000-20213.9520,000-20214.3890,000-20214.3055,000-20214.7045,000-20214.6320,000- 1,553,000 1,980,000Total options of 1,553,000 (2010: 1,980,000) ordinary shares were outstanding at 31 December 2011 under the 2002 LongTerm Incentive Plan ('the 2002 LTIP'), at prices ranging between ?1.90 and ?4.70. In accordance with the terms of the2002 LTIP, certain executives to whom options were granted in 2002 and 2004 are eligible to receive share awards relatedto the number of ordinary shares which they hold on the second anniversary of the exercise of the option, to a maximum of32,900 (2010: 90,600) ordinary shares. The cost of the 2002 LTIP charged in the Group income statement was ?80,613(2010: credit of ?15,761).Under the 2002 LTIP, options cannot be exercised before the expiration of three years from the date of grant and can onlybe exercised if a predetermined performance criterion for the Group has been achieved. The performance criterion is thatthere has been an increase in the adjusted earnings per share of the Group of at least the Consumer Price Index plus 5%over a three year period.The fair value of share options granted of ?2.00 per share has been calculated using the Binomial Model. Options over1,233,000 (2010: 1,930,000) ordinary shares were exercisable at 31 December 2011 at a weighted average price of ?2.73(2010: ?2.38). The weighted average share price at the date of exercise for share options exercised was ?4.65. Theweighted average life for share options outstanding is four years.2007 Long Term Incentive Plan ('the 2007 LTIP') and 2008 Long Term Incentive Plan ('the 2008 LTIP')Arising from a review of the Group's compensation arrangements for senior managers and executive Directors, theDirectors approved the introduction of the 2007 LTIP for selected senior managers and the shareholders approved theintroduction of the 2008 LTIP for selected senior managers and executive Directors. Awards outstanding under the 2007LTIP and the 2008 LTIP at 31 December 2011 amounted to nil (2010: nil) and 2,476,500 ordinary shares (2010: 2,283,000)respectively.The performance criteria for the LTIP schemes are tied 50% to achievement of targeted EPS growth and 50% to TotalShareholder Return (TSR).