Marks and Spencer 2013 Annual Report Download - page 97

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Financial statements Marks and Spencer Group plc Annual report and financial statements 2013 95
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 (the Partnership). As such, the Partnership is consolidated into the results of the Group.
The Partnership holds £1.6bn (last year £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.
In 2009 it was agreed with the Trustee that this distribution was discretionary at the instance of Marks and Spencer plc. The
discretionary right was exercisable if the Group did not pay a dividend or make any other form of return to its shareholders. On this
basis, the future value of total discretionary scheduled payments was an an equity instrument, disclosed within other reserves.
On 21 May 2012 the Group changed the terms of the Partnership to waive the Group’s limited discretionary right over the annual
distributions from the Partnership to the Pension Trustee.
The change has been reflected by the derecognition of the related equity instruments and recognition of a financial liability. The
financial liability has been initially measured at fair value of £606.0m, representing the present value of the remaining ten years of
distributions of £71.9m per annum. The difference between the value of the derecognised equity instrument of £427.9m and the fair
value of the liability has been recognised in equity in accordance with IAS 32. The change has no impact on the cash flows of
the Group.
During the year to 30 March 2013 an interest charge of £16.6m was recognised in the income statement representing the
unwinding of the discount included in this obligation.
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 £645.7m (last year £664.8m). The market value of this non-quoted financial asset is
measured based on the expected cash flows and benchmark asset-backed credit spreads.
13 Share-based payments
The charge for share-based payments for the year was £25.8m (last year £32.5m). Of the total share-based payments charge,
£13.4m (last year £15.0m) 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 60 to 62.
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.
2013 2012
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Outstanding at beginning of the year 47,245,342 259.3p 54,295,921 249.9p
Granted 9,977,206 312.0p 18,366,990 258.0p
Exercised (7,369,406) 266.0p (19,345,308) 205.6p
Forfeited (3,575,404) 273.3p (4,327,447) 285.6p
Expired (1,004,451) 418.0p (1,744,814) 481.8p
Outstanding at end of the year 45,273,287 265.2p 47,245,342 259.3p
Exercisable at end of year 1,700,575 366.9p 2,803,103 278.9p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 370.4p (last year
325.0p).