Notes to the financial statements

24.Share capital and share premium

The total authorised number of ordinary shares is 306 million shares (2007: 306 million shares) with a par value of €0.06 per share (2007: €0.06 per share). All issued shares are fully paid.

Share options are granted to Directors and to employees. Movements in the number of share options outstanding are as follows:

Total options over 2,258,000 (2007: 2,467,000) ordinary shares were outstanding at 3 January 2009 under the 2002 Long Term Incentive Plan (the 2002 LTIP), at prices ranging between €1.55 and €4.03. Furthermore, in accordance with the terms of the 2002 LTIP, certain executives to whom options were granted in 2002 and 2004 are eligible to receive share awards related to the number of ordinary shares which they hold on the second anniversary of the exercise of the option, to a maximum of 118,600 (2007: 134,600) ordinary shares.

In May 2002, the Company established an Employee Share Trust to operate in connection with the Company's Sharesave Scheme. As detailed in note 27 to the financial statements, the Employee Share Trust held 570,054 (2007: 238,544) ordinary shares at 3 January 2009. The dividend rights in respect of these shares have been waived, save 0.001 pence per share.

Under the 2002 LTIP and the 1988 Share Option Scheme, options cannot be exercised before the expiration of three years from the date of grant and can only be exercised if a predetermined performance criterion for the Group has been achieved. The performance criterion is that there 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.

2007 Long Term Incentive Plan ('the 2007 LTIP') and 2008 Long Term Incentive Plan ('the 2008 LTIP')
In August 2007, arising from the review of the Group's compensation arrangements for executive Directors and senior managers, the Directors approved the introduction of the 2007 LTIP for selected senior managers in order to further align the interests of such senior managers with those of shareholders. Awards outstanding under the Company's 2007 LTIP as at 3 January 2009 amounted to 169,500 ordinary shares (2007: 183,500).

In August 2008, arising from the review of the Group's compensation arrangements for executive Directors and senior managers, the Directors approved the introduction of the 2008 LTIP for selected senior managers in order to further align the interests of such senior managers with those of shareholders. Awards outstanding under the Company's 2008 LTIP as at 3 January 2009 amounted to 583,000 ordinary shares (2007: nil).

The LTIP schemes are tied 50% to achievement of targeted EPS growth and 50% to Total Shareholder Return (TSR). The TSR element is assessed against a group of leading peer companies and the EPS element is measured against pre-set targeted adjusted EPS growth criteria for the Group. The maximum award under the LTIP schemes is 115% of base salary per annum in the form of conditional shares and the vesting period is three years.

Shares awarded under the Group's LTIP schemes are equity settled share based payments as defined in IFRS 2 - Share Based Payments. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of shares awarded and stipulates that this methodology should be consistent with methodologies used for pricing of financial instruments. The combined expense of €888,398 (2008 LTIP: €677,985, 2007 LTIP: €210,413) charged in the Group income statement has been arrived at through applying a Monte Carlo simulation technique to model the combination of market and non-market based performance conditions of the plan.

The 2007 LTIP
Impact on Group income statement

The total expense is analysed as follows:

Shares awarded under the 2007 LTIP are nil based payments. The 2007 awards will expire in 2011.

The fair value of the shares awarded were determined using a Monte Carlo simulation technique taking account of peer group total share return volatilities and correlations together with the following assumptions:

Expected volatility was determined by calculating the historical volatility of the Company's share price over a period equivalent to the expected life of the option.

The 2008 LTIP
Impact on Group income statement

The total expense is analysed as follows:

Shares awarded under the 2008 LTIP are nil based payments. The 2008 awards will expire in 2012.

The fair value of the shares awarded were determined using a Monte Carlo simulation technique taking account of peer group total share return volatilities and correlations together with the following assumptions:

Expected volatility was determined by calculating the historical volatility of the Company's share price over a period equivalent to the expected life of the option.

The Glanbia Employees' Share Trust ('the Trust') was retained during the year to manage the 2007 LTIP and 2008 LTIP. The Trust purchased the following shares:

These shares were accounted for as own shares in the Group balance sheet.

The fair value of share options has been calculated using the Trinomial Model. Options over 2,042,000 (2007: 2,576,000) ordinary shares were exercisable at 3 January 2009 at a weighted average price of €2.20 (2007: €2.42).

The weighted average life for share options outstanding is five years.