Marks and Spencer 2011 Annual Report Download - page 93

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91
Financial statements
12 Marks & Spencer UK Pension Scheme interest in the Scottish Limited Partnership continued
As general partner, Marks and Spencer plc has a right of pre-emption in respect of a transfer by the Pension Scheme of its limited
partnership interest to another party. This allows the general partner to direct that, instead of transferring the limited partnership interest
to such a party, the general partner can instead nominate the transferee. In addition, the partnership agreement includes a clause such
that, following a default event (including the appointment of an administrator, liquidator, receiver or similar officer in respect of Marks
and Spencer plc or Marks and Spencer Group plc) or on a relevant change of law, the net present value of the outstanding distributions
becomes payable to the Pension Scheme by the Scottish Limited Partnership at the option of the Pension Scheme. On the basis of the
expected cash flows associated with such an event, the related financial liability has been fair valued at £nil.
13 Share-based payments
The charge for share-based payments for the year was £31.7m (last year £28.5m). Of the total share-based payments charge £11.4m
relates to the Save As You Earn Share Option scheme. The remaining charge is spread over the other schemes. Further details of the
option and share schemes that the Group operates are provided in the Remuneration report on pages 52 to 67.
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
ther three or five years after entering the scheme.
2011 2010
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at beginning of the year 52,560,561 249.9p 57,863,061 252.2p
Granted 8,162,499 319.0p 8,566,762 292.0p
Exercised (1,210,770) 324.7p (3,544,310) 260.9p
Forfeited (3,755,659) 266.4p (5,052,662) 277.6p
Expired (1,460,710) 530.6p (5,272,290) 309.8p
Outstanding at end of the year 54,295,921 249.9p 52,560,561 249.9p
Exercisable at end of yea
r
2,150,364 446.6p 1,705,532 486.7p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 366.3p (last
year 360.4p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2011 2010
3-year plan 3-year plan
Grant date Nov 10 Nov 09
Share price at grant date 399p 365p
Exercise price 319p 292p
Option life in years 3 years 3 years
Risk-free rate 1.5% 1.6%
Expected volatility 44.5% 44.1%
Expected dividend yield 4.0% 4.1%
Fair value of option 125p 113p
Volatility has been estimated by taking the historic volatility in the Company’s share price over a three year period.
The resulting fair value is expensed over the service period of three 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 2011 2010 2011 2010 Option price
January 2005 –312,805 – 0.2 280p
January 2006 538,403 1,471,579 0.2 1.2 349p
January 2007 630,926 2,016,402 1.2 0.9 559p
January 2008 2,178,087 2,440,739 0.9 2.0 517p
January 2009 35,826,944 38,009,851 2.0 3.0 203p
January 2010 7,253,289 8,309,185 2.2 3.2 292p
January 2011 7,868,272 – 3.2 – 319p
54,295,921 52,560,561 2.2 2.9 250p
six month
period after the completion of the SAYE contract, ei
,