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69Marks and Spencer Group plc
12 SHARE-BASED PAYMENTS
The charge for share-based payments under IFRS arises across the following schemes:
2006 2005
Notes £m £m
Save As You Earn Share Option Scheme 12A 10.2 10.8
Executive Share Option Scheme 12B 6.5 8.7
Performance Share Plan 12C 2.5 –
Deferred Bonus Plan 12D 2.0 –
Restricted Share Plan 12E 1.8 0.8
Executive Share Matching Plan 12F 0.4 0.6
Share Incentive Plan 12G 1.3 1.3
24.7 22.2
Details of the option and share schemes that the Group operates are provided in the Remuneration report on pages 40 to 48.
A Save As You Earn Share Option Scheme
Under the terms of the Scheme, the Board may offer options to purchase ordinary shares in the Company once in each financial
year to those employees who enter into an Inland Revenue approved Save As You Earn (SAYE) savings contract. Inland Revenue
rules limit the maximum amount saved to £250 per month. The price at which options may be offered is 80% of the market price
for three consecutive dealing days preceding the offer date. The options may normally be exercised during the period of six months
after the completion of the SAYE contract, either three, five or seven years after entering the Scheme.
2006 2005
Number of Weighted average Number of Weighted average
options exercise price options exercise price
Outstanding at beginning of the period 52,188,263 235.0p 64,873,219 234.4p
Granted 8,528,770 349.0p 8,241,836 280.0p
Exercised (14,658,839) 206.9p (11,329,689) 225.2p
Forfeited (4,270,037) 253.6p (6,474,910) 252.5p
Expired (1,384,532) 397.7p (3,122,193) 339.4p
Outstanding at end of the period 40,403,625 261.6p 52,188,263 235.0p
Exercisable at end of period 3,897,065 226.7p 2,476,297 220.5p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 472.5p
(last year 345.5p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2006 2005
3 year plan 5 year plan 3 year plan 5 year plan
Grant date Nov 05 Nov 05 Nov 04 Nov 04
Share price at grant date 436p 436p 350p 350p
Exercise price 349p 349p 280p 280p
Option life in years 3 years 5 years 3 years 5 years
Risk free rate 4.3% 4.2% 4.6% 4.6%
Expected volatility 25.8% 29.8% 31.3% 37.3%
Expected dividend yield 2.7% 2.7% 3.3% 3.3%
Fair value of option 120.6p 143.6p 103.0p 125.7p
Volatility has been estimated by taking the historic volatility in the Company’s share price over a three or five-year period.
The resulting fair value is expensed over the service period of three or five years on the assumption that 15% of three-year options
and 20% of five-year options will lapse over the service period as employees leave the Company.