Marks and Spencer 2010 Annual Report Download - page 99

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Directors’ report p01
Financial statements
Other information p117
To find out more, visit www.marksandspencer.com/annualreport2010 95
12 Share-based payments
The charge for share-based payments for the year was £28.5m (last year £14.3m). Further details of the option and share schemes that the
Group operates are provided in the Remuneration report on pages 58 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.
2010 2009
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at beginning of the period 57,863,061 252.2p 28,444,760 403.1p
Granted 8,566,762 292.0p 42,551,459 203.0p
Exercised (3,544,310) 260.9p (2,075,204) 232.7p
Forfeited (5,052,662) 277.6p (10,958,637) 456.4p
Expired (5,272,290) 309.8p (99,317) 261.8p
Outstanding at end of the period 52,560,561 249.9p 57,863,061 252.2p
Exercisable at end of period 1,705,532 486.7p 6,169,324 296.9p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 360.4p (last year 296.2p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2010 2009
3-year plan 3-year plan 5-year plan
Grant date Nov 09 Nov 08 Nov 08
Share price at grant date 365p 253p 253p
Exercise price 292p 203p 203p
Option life in years 3 years 3 years5 years
Risk-free rate 1.6% 2.9% 3.2%
Expected volatility 44.1% 39.2% 33.4%
Expected dividend yield 4.1% 8.9% 8.9%
Fair value of option 113p 54.6p 43.9p
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 2010 2009 2010 2009 Option price
January 2004 –2,748,699 – 0.3 228p
January 2005 312,805 2,705,890 0.2 1.3 280p
January 2006 1,471,579 5,089,994 1.2 0.9 349p
January 2007 2,016,402 2,381,588 0.9 2.0 559p
January 2008 2,440,739 3,114,069 2.0 3.0 517p
January 2009 38,009,851 41,822,821 3.0 4.0 203p
January 2010 8,309,185 –3.2 – 292p
52,560,561 57,863,061 2.9 3.3 250p