Marks and Spencer 2015 Annual Report Download - page 110

108
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
12 MARKS AND SPENCER 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 £1.6bn) of properties which have been leased back to Marks and Spencer plc at market rates. The
Group retains control over these properties, including the fl exibility 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 profi ts
of the Partnership earned from rental income.
The Partnership liability to the Marks & Spencer UK pension scheme of £512.9m (last year £568.7m) is valued at the net present value
of the future expected distributions from the Partnership.
During the year to 28 March 2015 an interest charge of £16.1m (last year £17.8m) 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 Partnership is included within the UK pension scheme assets, valued
at £531.3m (last year £574.7m), refer to note 11E.
13 SHARE-BASED PAYMENTS
This year a net credit of £1.1m was recognised for share-based payments (last year charge of £21.3m). The total balance comprises a credit
of £15.0m (l ast year charge of £4.1m) rel ating to Performance Share Plans o set by a charge of £9.0m (last year charge of £9.6m) relating to
the Save As You Earn Share Scheme. The remaining £4.9m 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 76.
A . Save As You E a rn scheme
Sharesave, the Company’s Save As You Earn scheme, was approved by shareholders at the 2007 AGM. Under the terms of the scheme,
the Board may o er options to purchase ordinary shares in the Company once in each fi nancial year to those employees who enter into
Her Majesty’s Revenue & Customs (HMRC) approved Save As You Earn (SAYE) savings contract. The price at which options may be o ered is
80% of the average mid-market price for three consecutive dealing days preceding the o er date. The options may normally be exercised
during the six-month period after the completion of the SAYE contract.
2015 2014
Number of options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
Outstanding at beginning of the year 34,423,922 311.6p 45,273,287 265.2p
Granted 14,389,736 369.0p 9,992,932 405.0p
Exercised (14,602,805) 256.8p (16,921,571) 237.7p
Forfeited (4,485,417) 371.5p (3,058,210) 300.6p
Expired (194,913) 302.8p (862,516) 450.2p
Outstanding at end of year 29,530,523 357.6p 34,423,922 311.6p
Exercisable at end of year 1,352,847 268.7p 1,879,073 253.3p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 471.8p (last year 448.1p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2015
3-year plan
2014
3-year plan
Grant date Nov 14 Nov 13
Share price at grant date 460p 506p
Exercise price 369p 405p
Option life in years 3 years 3 years
Risk-free rate 0.9% 0.8%
Expected volatility 23.6% 24.2%
Expected dividend yield 3.9% 3.4%
Fair value of option 91p 105p
Volatility has been estimated by taking the historical 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 10%) of options will lapse
over the service period as employees leave the Group.