Marks and Spencer 2012 Annual Report Download - page 93

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Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 91
Overview Strategic review Financial review Governance Financial statements and other information
12 Marks & Spencer UK Pension Scheme interest in the Scottish Limited Partnership
Marks and Spencer plc is a general partner and the Marks & Spencer UK Pension Scheme is a limited partner of the Marks
and Spencer Scottish Limited Partnership. As such, the partnership is consolidated into the results of the Group.
The Marks and Spencer Scottish Limited Partnership holds £1.5bn of properties which have been leased back to Marks and
Spencer plc at market rates. The Group retains control over these properties, including the flexibility to substitute alternative
properties. The limited partnership interest (held by the Marks & Spencer UK Pension Scheme) entitles the Pension Scheme
to receive an annual distribution of £71.9m from the profits of the Partnership earned from rental income, discretionary at the
instance of Marks and Spencer plc.
The discretionary right is exercisable if the Group does not pay a dividend or make any other form of return to its shareholders.
This is an equity instrument, disclosed within other reserves. Since the Group has paid an interim dividend in relation to 2011/12,
the associated distribution of £71.9m is payable to the Pension Scheme and has been recognised as a liability (last year £71.9m),
and is reflected as reduction in other reserves. When such reserves are no longer sufficient, this distribution will be charged to
retained earnings. The future value of total discretionary scheduled payments is approximately £719m (last year £791m).
Under IAS 19, the partnership interest of the Pension Scheme in the Marks and Spencer Scottish Limited Partnership is included
within the UK pension scheme assets, valued at £664.8m (last year £656.0m). For further details see note 11. The market value
of this non-quoted financial asset is measured based on the expected cash flows and benchmark asset-backed credit spreads.
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.
On 21 May 2012 the terms of the Scottish Limited Partnership were changed. See note 29.
13 Share-based payments
The charge for share-based payments for the year was £32.5m (last year £31.7m). Of the total share-based payments charge,
£15.0m (last year £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 59 to 60.
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 six
month period after the completion of the SAYE contract, either three or five years after entering the scheme.
2012 2011
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at beginning of the year 54,295,921 249.9p 52,560,561 249.9p
Granted 18,366,990 258.0p 8,162,499 319.0p
Exercised (19,345,308) 205.6p (1,210,770) 324.7p
Forfeited (4,327,447) 285.6p (3,755,659) 266.4p
Expired (1,744,814) 481.8p (1,460,710) 530.6p
Outstanding at end of the year 47,245,342 259.3p 54,295,921 249.9p
Exercisable at end of year 2,803,103 278.9p 2,150,364 446.6p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 325.0p (last
year 366.3p).