Marks and Spencer 2008 Annual Report Download - page 75

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12 Share-based payments
The charge for share-based payments for the year was £29.0m (last year £27.3m). Further details of the option and share
schemes that the Group operates are provided in the Remuneration report on pages 48 to 55.
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 HM Revenue & Customs (HMRC) approved Save As You Earn (SAYE) savings contract.
HMRC rules limit the maximum amount saved to £250 per month. The price at which options may be offered is 80% of the
average mid-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 or five years after entering the scheme.
2008 2007
Weighted Weighted
Number average Number average
of options exercise price of options exercise price
Outstanding at beginning of the period 33,241,616 327.6p 40,403,625 261.6p
Granted 7,716,437 517.0p 6,569,527 559.0p
Exercised (10,212,015) 234.8p (11,814,068) 232.4p
Forfeited (2,207,700) 450.7p (1,637,012) 325.5p
Expired (93,578) 235.2p (280,456) 258.0p
Outstanding at end of the period 28,444,760 403.1p 33,241,616 327.6p
Exercisable at end of period 948,372 262.9p 726,615 243.4p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 535.2p
(last year 698.8p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the
inputs shown below:
2008 2007
3-year plan 5-year plan 3-year plan 5-year plan
Grant date Nov 07 Nov 07 Nov 06 Nov 06
Share price at grant date 646p 646p 698p 698p
Exercise price 517p 517p 559p 559p
Option life in years 3 years 5 years 3 years 5 years
Risk-free rate 4.6% 4.6% 5.4% 5.3%
Expected volatility 21.6% 25.2% 21.5% 27.5%
Expected dividend yield 2.7% 2.7% 2.2% 2.2%
Fair value of option 167.5p 201.8p 200.6p 247.8p
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 20% of options will
lapse over the service period as employees leave the Group.
Outstanding options granted under the UK Employees’ SAYE Scheme are as follows:
Weighted average remaining
Number of options contractual life (years)
Options granted 2008 2007 2008 2007 Option price
January 2000 –161,410 –0.3 223p
January 2001 338,682 3,948,712 0.3 1.3 156p
January 2002 –227,479 –0.3 250p
January 2003 371,017 3,495,809 0.3 1.3 283p
January 2004 4,078,721 4,484,581 1.3 2.2 228p
January 2005 3,703,910 6,834,424 2.1 2.3 280p
January 2006 7,164,101 7,713,616 2.1 3.1 349p
January 2007 5,434,588 6,375,585 3.0 4.0 559p
January 2008 7,353,741 –4.0 –517p
28,444,760 33,241,616 2.6 2.5 328p
marksandspencer.com/annualreport08 MARKS AND SPENCER GROUP PLC 73
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