Marks and Spencer 2009 Annual Report Download - page 99

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9
5
12 Share-based payments
The charge for share-based payments for the year was £14.3m (last year £29.0m). Further details of the option and share schemes that the
Group operates are provided in the Remuneration report on pages 62 to 71.
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.
2009 2008
Number of
options
Weighted
average exercise
price Number of
options
Weighted
average exercise
price
Outstanding at beginning of the period 28,444,760 403.1p 33,241,616 327.6p
Granted 42,551,459 203.0p 7,716,437 517.0p
Exercised (2,075,204) 232.7p (10,212,015) 234.8p
Forfeited (10,958,637) 456.4p (2,207,700) 450.7p
Expired (99,317) 261.8p (93,578) 235.2p
Outstanding at end of the period 57,863,061 252.2p 28,444,760 403.1p
Exercisable at end of period 6,169,324 296.9p 948,372 262.9p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 296.2p (last year 535.2p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2009 2008
3-year plan 5-year plan 3-year plan 5-year plan
Grant date Nov 08 Nov 08 Nov 07 Nov 07
Share price at grant date 253p 253p 646p 646p
Exercise price 203p 203p 517p 517p
Option life in years 3 years 5 years 3 years 5 years
Risk-free rate 2.9% 3.2% 4.6% 4.6%
Expected volatility 39.2% 33.4% 21.6% 25.2%
Expected dividend yield 8.9% 8.9% 2.7% 2.7%
Fair value of option 54.6p 43.9p 167.5p 201.8p
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:
Number of options Weighted average remaining
contractual life (years)
Options granted 2009 2008 2009 2008 Option price
January 2001 –338,682 – 0.3 156p
January 2003 –371,017 – 0.3 283p
January 2004 2,748,699 4,078,721 0.3 1.3 228p
January 2005 2,705,890 3,703,910 1.3 2.1 280p
January 2006 5,089,994 7,164,101 0.9 2.1 349p
January 2007 2,381,588 5,434,588 2.0 3.0 559p
January 2008 3,114,069 7,353,741 3.0 4.0 517p
January 2009 41,822,821 –4.0 – 203p
57,863,061 28,444,760 3.3 2.6 252p