163www.tullowoil.comFINANCIAL STATEMENTS5 Note 9. Shareholders' funds Sharecapital$m Share premium $mOther reserves (note 10) $m Profit and loss account $m Total $mAt 1 January 2010 130.1242.3850.8 1,037.62,260.8Total recognised income and expense for the year --- (47.1)(47.1)Issue of share capital 13.12.1- 1,432.91,448.1New shares issued in respect of employee share options 0.37.1- -7.4Vesting of PSP shares --- (0.2)(0.2)Share-based payment charges --- 25.925.9Dividends paid --- (79.2)(79.2)Translation reserve At 1 January 2011 143.5 251.5 850.8 2,369.9 3,615.7 Total recognised income and expense for the year - - - (16.5) (16.5)Issue of share capital 2.2 285.5 - - 287.7 New shares issued in respect of employee share options 0.5 14.8 - - 15.3 Vesting of PSP shares - - - (0.1) (0.1)Share-based payment charges - - - 38.1 38.1 Dividends paid - - - (114.2) (114.2) At 31 December 2011 146.2 551.8 850.8 2,277.2 3,826.0 During 2011 the Company issued 3,531,546 ordinary shares via an equity placing in Ghana and 10,137,196 ordinary shares in respect of the EO Group Limited transaction (2010: 80,431,796 ordinary shares via equity placing). In accordance with the provisions of Section 612 of the Companies Act 2006, the Company has transferred the premium on the shares issued of $nil million ($nil million net of expenses) (2010: $1,464.8 million, $1,432.9 million net of expenses) using the market value at the date of acquisition, to retained earnings as the premium is considered to be realised. Note 10. Other reserves Merger reserve $mTreasury shares $m Foreign currency translation reserve $mTotal $mAt 1 January 2011 and 31 December 2011 671.6(14.2) 193.4850.8The treasury shares reserve represents the cost of shares in Tullow Oil plc purchased in the market and held by the Tullow Oil Employee Trust to satisfy options held under the Group's share incentive plans (see note 11).
164Tullow Oil plc 2011 Annual Report and AccountsNotes to the Group financial statements continued Year ended 31 December 2011 Note 11. Share-based payments 2005 Performance Share Plan (PSP) Under the PSP, senior executives can be granted nil exercise price options (normally exercisable between three to ten years following grant. At the 2011 Annual General Meeting, the annual grant limit for an individual was increased to 300,000 shares. Awards made before 8 March 2010 were made as conditional awards to acquire free shares on vesting. To provide flexibility to participants, those awards have been converted into nil exercise price options. Awards vest subject to a Total Shareholder Return (TSR) performance condition. 50% (70% for awards granted to Directors in 2011) of an award is tested against a comparator group of oil and gas companies. The remaining 50% (30% for awards granted to Directors in 2011) is tested against constituents of the FTSE 100 index (excluding investment trusts). Performance is measured over a fixed three-year period starting on 1 January prior to grant, and an individual must normally remain in employment for three years from grant for the shares to vest. No dividends are paid over the vesting period. There are further details of PSP award measurement in the Directors' Remuneration Report on pages 88 to 99. The shares outstanding under the PSP are as follows: 2011 PSP shares2011 Average weighted share price at grant p2010 PSP shares2010 Average weighted share price at grant p 2009 PSP shares2009 Average weighted share price at grant pOutstanding at 1 January 4,101,876978.64,305,486687.0 3,856,913552.9Granted 2,173,9541342.61,274,9711281.0 1,572,567785.8Exercised during the year (389,126)942.5(1,441,136)371.2 (1,095,350)354.1Forfeited/expired during the year (29,170)1249.8(37,445)1120.7 (28,644)780.3 Outstanding at 31 December 5,857,5341116.04,101,876978.6 4,305,486687.0 The inputs of the option valuation model were: Risk free interest rate 1.6% pa1.9% pa 1.9% paExpected volatility 49%52% 54%Dividend yield 0.4% pa0.5% pa 0.8% paThe expected life is the period from date of grant to vesting. Expected volatility was determined by calculating the historical volatility of the Company's share price over a period commensurate with the expected life of the awards. The weighted average fair value of the awards granted in 2011 was 728.8 per award (2010: 700.8p). The Company recognised a total charge of $17.0 million (2010: $12.6 million) in respect of the PSP. 2005 Deferred Share Bonus Plan (DSBP) Under the DSBP, the portion of any annual bonus above 75% of the base salary of a senior executive nominated by the Remuneration Committee is deferred into shares. Awards normally vest following the end of three financial years commencing with that in which they are granted. They are granted as nil exercise price options, normally exercisable from when they vest until 10 years from grant. Awards granted before 8 March 2010 as conditional awards to acquire free shares have been converted into nil exercise price options to provide flexibility to participants. The shares outstanding under the DSBP are as follows: 2011DSBP shares2011 Share price at grant p 2010 DSBP shares2010 Share price at grant p 2009 DSBP shares2009 Share price at grantpOutstanding at 1 January 301,951896.6231,457716.3 200,633507.9Granted 65,9261362.092,9391281.0 135,291778.0Exercised during the year --(22,445)629.5 (104,467)396.0 Outstanding at 31 December 367,877980.0301,951896.6 231,457716.3 The inputs of the option valuation model were: Dividend yield 0.4% pa0.5% pa 1.0% paThe expected life is the period from the date of grant to the vesting date. The fair value of the awards granted in 2011 was 1344.1p per share subject to an award (2010: 1263.1p). The Company recognised a total charge of $1.7 million (2010: $1.3 million) in respect of the DSBP.