29 Share-Based Payments

The total charge to operating profit relates to the following equity settled schemes:

The following table reconciles the movement in share options and the weighted average exercise price, (“WAEP”) for the ESOP scheme. The PSP, SIP and DBMP share options all have a nil exercise price.

i) The Debenhams Performance Share Plan

The PSP is intended to facilitate the retention of senior executives of the Company by enabling executives to receive shares provided that they remain in the Group. An award under the PSP will normally vest on the third anniversary of date of grant and must be exercised within six months of vesting. No payment is required for the grant of an award. An award under the PSP will comprise an option to receive free shares or nil cost options with performance conditions attached.

Options Granted on 24 November 2009 and 23 May 2011

The vesting of the shares granted under this plan is dependent on Earnings Per Share (“EPS”) growth. Where growth is less than 6 per cent per annum over the three year period, no options will vest. Where growth is 6 per cent per annum 30 per cent will vest, where growth is 10 per cent per annum, 100 per cent of the options will vest. Between these two points the options will vest on a straight-line basis between 30 and 100 per cent. In accordance with IFRS 2 “Share-Based Payments”, this is classified as a non-market condition and therefore the shares have been fair valued at face value with a discount to take into account the non entitlement to dividends in the vesting period where relevant. The fair value of the PSP options granted for these awards is calculated based on a Black-Scholes model assuming the inputs shown in the table below.

Where volatility has been used in the calculation of fair value it has been estimated by taking the historic volatility in the Company’s share price.

In accordance with the plan rules, options issued in May 2008 have lapsed during the year as neither the EPS nor the TSR performance conditions were met.

ii) Executive Share Option Plan

The ESOP allows the Company to grant options to acquire shares to eligible employees. These options will normally become exercisable following a three-year performance period, only if and to the extent that the performance conditions to which they are subject have been satisfied. Once the options have vested, the employees have a seven year period in which to exercise. Options are granted with an exercise price equal to the middle market value of the shares on the day immediately preceding the date of grant.

Options Granted on 24 November 2009

The vesting of options granted under this plan is dependent on the Company’s Return on Capital Employed (“ROCE”) exceeding the Cost of Capital. Where the ROCE is less than or equal to the Cost of Capital over a three year period, no options will vest. Where the ROCE is greater than the Cost of Capital, 30 per cent will vest, where the ROCE is greater than the Cost of Capital plus 5 per cent, 100 per cent will vest. Between these two points the options will vest on a straight-line basis between 30 and 100 per cent. The fair value of the share options has been calculated using a Black-Scholes model. The key assumptions are set out in the table below.

Volatility has been estimated by taking the historic volatility in the Company’s share price.

In accordance with the plan rules, options issued in November 2007 have lapsed as the performance conditions associated with these options were not met.

The weighted average exercise price of the ESOP at 3 September 2011 was 85.5 pence (2010: 95.1 pence).

iii) Share Incentive Plan

The SIP allows the Company to grant options to a small number of key, senior employees below board level, whom the Company wishes to retain and incentivise in the short to medium term. Once the options have vested the employee has six months in which to exercise.

Options Granted on 16 November 2010 and 23 May 2011

The options granted on 16 November 2010 and on 23 May 2011 have a 24 month vesting period based on the employee’s continued employment and other performance targets and are granted with no exercise price.

The fair value of the SIP options granted is calculated based on a Black-Scholes model assuming the inputs shown below:

The 690,000 remaining options granted under the SIP on 24 November 2009 vested on 23 May 2011.

iv) Deferred Bonus Matching Plan

The DBMP was set up to allow executives and certain members of the management team below board level to invest up to 100 per cent of their net annual bonus earned in respect of 2010 into shares (“invested shares”). If the participant remains in service for three years and retains the beneficial ownership of all the invested shares s/he will be, subject to the satisfaction of certain performance conditions be entitled to a matching share award equal to the amount of the pre-tax bonus that has been invested. Once the options have vested they will be released to the employee within one month of the vesting date.

Options Granted on 26 November 2010

All bonus eligible employees were offered the opportunity to invest up to 50 per cent of their 2010 bonus into invested shares. The entitlement to the matching award is subject to the participant retaining beneficial ownership of their invested shares during the performance period and to the achievement of the following performance conditions. The Group’s ROCE must exceed the Cost of Capital by 2 per cent over this period otherwise the options will not vest. The Group’s EPS growth must then exceed 6 per cent per annum over the three year period or the options will not vest. If the Group’s EPS growth is 6 per cent or more per annum over the three year period 30 per cent of the options will vest; if the growth is 12 per cent or more per annum over the three year period, 100 per cent of the options will vest. Between these two points the options will vest on a straight-line basis between 30 and 100 per cent.

The fair value of the DBMP options granted is calculated based on a Black-Scholes model assuming the inputs shown below: