Marks and Spencer 2016 Annual Report Download - page 108

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106
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. The Group retains
control over these properties, including the fl exibility to substitute alternative properties into the partnership. 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 Par tnership earned from rental income.
The Partnership liability to the Marks & Spencer UK Pension Scheme of £455.7m (last year £512.9m) is valued at the net present value of the
future expected distributions from the Partnership to the Marks & Spencer UK Pension Scheme as limited partner.
During the year to 2 April 2016 an interest charge of £14.7m (last year £16.1m) was recognised in the income statement representing the
unwind of the discount included in this obl igation.
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 £469.5m (last year £531.3m), refer to note 11E.
13 SHARE-BASED PAYMENTS
This year a charge of £16.0m was recognised for share-based payments (last year credit of £1.1m). Of the total share-based payments charge
£9.5m (last year £9.0m) relates to the Save As You Earn Share Option scheme and a charge of £1.1m (last year credit of £15.0m) relates to
Performance Share Plans. The remaining charge of £5.4m (last year £4.9m) 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 50 to 71.
A . Save As You E arn Sc heme
Sharesave, the Company’s Save As You Earn (SAYE) 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 SAYE savings contract. The Company has chosen to cap the maximum monthly
saving amount at £250 which is below the £500 per month allowed under HMRC Approved Schemes. 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.
2016 2015
Number of
options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
Outstanding at beginning of the year 29,530,523 357.6p 34,423,922 311.6p
Granted 10,437,215 432.0p 14,389,736 369.0p
Exercised (6,645,922) 302.6p (14,602,805) 256.8p
Forfeited (2,967,697) 382.5p (4,485,417) 371.5p
Expired (199,572) 317.2p (194,913) 302.8p
Outstanding at end of year 30,154,547 393.3p 29,530,523 357.6p
Exercisable at end of year 1,936,860 315.3p 1,352,847 268.7p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 443.9p (last year 471.8p).
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
2016
3-year plan
2015
3-year plan
Grant date Nov 15 Nov 14
Share price at grant date 520p 460p
Exercise price 432p 369p
Option life in years 3 years 3 years
Risk-free rate 0.9% 0.9%
Expected volatility 23.4% 23.6%
Expected dividend yield 3.7% 3.9%
Fair value of option 96p 91p
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 10%) of options will lapse
over the service period as employees leave the Group.