Marks and Spencer 2013 Annual Report Download - page 98

Financial statements Marks and Spencer Group plc Annual report and financial statements 2013 96
Notes to the financial statements continued
13 Share-based payments continued
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2013 2012
3-year plan 3-year plan
Grant date Nov 12 Nov 11
Share price at grant date 389p 322p
Exercise price 312p 258p
Option life in years 3 years 3 years
Risk-free rate 0.3% 0.5%
Expected volatility 25.2% 31.4%
Expected dividend yield 4.4% 5.4%
Fair value of option 74p 67p
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 10% (last year 15%) 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 2013 2012 2013 2012 Option price
January 2007 – 583,961 – 0.2 559p
January 2008 617,258 655,213 0.3 1.2 517p
January 2009 12,912,056 15,727,797 1.3 1.9 203p
January 2010 941,711 6,349,388 0.3 1.2 292p
January 2011 5,315,855 6,016,473 1.3 2.2 319p
January 2012 15,817,394 17,912,510 2.3 3.2 258p
January 2013 9,669,013 – 3.3 – 312p
45,273,287 47,245,342 2.0 2.3 265p
B. Performance Share Plan*
The Performance Share Plan is the primary long-term incentive plan for approximately 100 of the most senior managers and was
first approved by shareholders in 2005. Under the plan, annual awards, based on a percentage of salary, may be offered. The extent
to which the awards vest is based on underlying basic earnings per share growth over three years. The value of any dividends
earned on the vested shares during the three years will also be paid on vesting. Further details are set out in the Remuneration
report on page 61. Awards under this scheme have been made in each year since 2005.
During the year, 9,333,652 shares (last year 7,887,169) were awarded under the Plan. The weighted average fair value of the shares
awarded was 329.7p (last year 350.8p). As at 30 March 2013, 21,492,589 shares (last year 19,651,115) were outstanding under
the scheme.
C. Deferred Share Bonus Plan*
The Deferred Share Bonus Plan was introduced in 2005/06 as part of the Annual Bonus Scheme for approximately 450 of the most
senior managers. As part of the scheme, the managers are required to defer a proportion of any bonus paid into shares which will
be held for three years. There are no further performance conditions on these shares, other than continued employment and the
value of any dividends earned during the deferred period will be paid on vesting.
During the year, 1,181,637 shares (last year 2,366,847) have been awarded under the plan in relation to the annual bonus. The fair
value of the shares awarded was 325.1p (last year 378.4p). As at 30 March 2013, 6,576,038 shares (last year 6,396,018) were
outstanding under the scheme.
D. Restricted Share Plan*
The Restricted Share Plan was established in 2000 as part of the reward strategy for retention and recruitment of senior managers
who are vital to the success of the business. The Plan operates for senior managers below executive director level. Awards under
the Plan are made as part of ongoing reviews of reward packages, and for recruitment. The shares are held in trust for a period of
between one and three years, at which point they are released to the employee subject to them still being in employment. The value
of any dividends earned during the restricted period will also be paid at the time of vesting.
During the year, 1,257,044 shares (last year 1,356,046) have been awarded under the plan. The weighted average fair value of the
shares awarded was 371.0p (last year 356.9p). As at 30 March 2013, 3,177,564 shares (last year 2,364,183) were outstanding
under the scheme.