• General
• Share Buyback
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What is a share buy back?

The Company instructs their stockbrokers to purchase the Company’s own shares in the Market which are then cancelled. By reducing the number of shares in issue existing shareholders will own a larger percentage of the Company than they did before. The objective is to create shareholder value by improving the balance sheet efficiency (debt/equity ratio) and reducing the overall weighted average cost of capital.

What has the Company announced?

Following a review of the Company’s Capital Structure, the Board has decided that the Company will spend around £1bn buying back up to 10% of its shares during the next year, initially using shareholder authority given in July 2007 at the AGM.

Why is the Company doing this now?

This will result in a more efficient balance sheet whilst retaining the flexibility to continue to invest in the business.

How does it work?

The objective is to create shareholder value by improving the balance sheet efficiency (debt/equity ratio) and reducing the overall weighted average cost of capital. It also increases the earnings per share and indirectly creates value for existing shareholders by increasing the percentage of the Company that they own, through there being fewer shares in issue.

I’ve heard you’re returning £1bn to shareholders?

We intend to buy back up to 10% of our shares in the market and cancel them. At the current share price this could cost around £1bn but this will depend on the number of shares finally bought back and the price at which this happens. Shareholders who do not sell their holding will not receive money directly. However, they will own a larger percentage of the Company than they did before.

When do I get my money?

The buy back is an operation that the Company undertakes through its brokers in the open market. As such, there is no offer made or cash returned directly by the Company to specific shareholders. Shareholders will not be receiving money directly unless they choose to sell some or all of their shares. The Company buys its own shares in the market and cancels them, reducing the number in issue therefore increasing the percentage held by the remaining shareholders.

Why didn’t you issue a special dividend?

The interim dividend of 8.3p per share is a 31.7% increase on last year.

We consider that the combination of a significant increase in the dividend and share buy back achieves the restructuring of the balance sheet and capital efficiency that is optimum for the Group and balances the interests of our various stakeholders.

What effect will the buy back have on the share price?

We are not able to comment on how the share price will be affected by the share buy back as there are many other influencing factors which make the share price go up and down each day. However, we would not be undertaking the buy back if we did not feel that it would create value for shareholders.

How is the buy back being financed/where is the £1billion coming from?

The buy back programme is being financed initially out of cash and existing resources. In due course the company will look to borrow more money through access to the debt markets, subject to market conditions.

Will M&S be taking on more debt to pay for the buy back?

Yes, in due course – see above.

Doesn’t the Company have anything better to use this money for?

We will continue to invest in the business alongside the buy back as a key part of our three year plan. We are stepping up our investment in the business and expect to spend more than £1billionn in 2007/08 and in 2008/09. Our key priorities are the further development of our core business, property expansion, online development, growth of international and delivery of our plan A objectives. These decisions reflect our confidence in the strength and future prospects of the business.
The ability to return this capital to shareholders is driven in part by the strong cash generation of the business that has resulted from the significant investment undertaken in recent years. The buy back will enhance the balance sheet efficiency of the Company while not placing a constraint on the Company’s future investment plans.

Is there a meeting of shareholders that I need to attend?

No. A buy back of up to 10% of our shares in one year is within the routine authority sought from our shareholders annually. In July 2007 at the AGM shareholders approved a buy back of up to 170m shares.

Don’t shareholders have to approve this?

Shareholders passed a resolution at the AGM in July 2007 approving a share buy back of up to 170m shares (10% of issued share capital).

How many shares will be bought back/are being purchased by the Company?

This will largely depend on the price paid for each share. However shareholders gave authority for the Company to buy back up to 10% of its issued capital (the industry norm) at the AGM in July 2007. This is 170m shares.

How much will be paid for these shares?

The company will pay the market price for the shares. However, regulations state that the Company is not permitted to pay more than 105% of the average price calculated over the last five days preceding each purchase.

How long will this be going on for/when will the buy back be completed?

Up to one year.

Will the EPS targets for the executive long-term share incentives be adjusted to take these events into consideration?

The Remuneration Committee will consider at each potential vesting of shares under the Performance Share Plan (PSP) whether there have been any events that give rise to a need to adjust performance conditions. These would include events that had a negative or positive impact on EPS. If alterations are fairly and reasonably required, the Committee can amend the performance conditions upwards or downwards. It is not possible to say in advance that a share buy back programme will have a material impact on achievement of PSP performance conditions as it would need to be considered:
(i) in the context of other events; and
(ii) against the extent of buy back achieved in any period.

How will the buy back be conducted?

Our brokers (Morgan Stanley and Citigroup) have been authorised to buy back shares in the market on the Company’s behalf. These will then be cancelled.

Can I sell you my shares?

As we have a special relationship with our private investors, many of whom are also valued customers, we have put in place a Special Share Dealing Service, to run for a period of six weeks from the start of the buy back programme. Details of this were/are being mailed to shareholders on 9 November 2007 with a deadline of 21 December 2007. Forms need to be received by Equiniti, our registrar, by Thursday 20 December 2007.

Shareholders are/were able to sell, buy more, retain or donate the proceeds from the sale of their shares. Due to regulatory constraints, shares sold through the Special Share Dealing Service are/were not purchased by the Company.

What happens to the shares that are bought back?

Shares that are bought in the market by our brokers will be cancelled.

Will shares be held in Treasury?

No. Shares are not going to be held in treasury. Companies often hold shares in treasury to use for future obligations for company share schemes. M&S has sufficient arrangements in place to meet these obligations. Therefore, all shares being bought back will be cancelled.

Will you be buying back shares in the close period?

If it is decided that the buy back will continue during a close period we will make the necessary announcement via the London Stock Exchange (as required by Listing Rule 12.2.1R).

What is a close period?

This is a period when certain people (e.g. Directors and the company itself) are not permitted to trade in the Company’s shares.

When are your close periods?

Q1 (AGM) Monday, at least two weeks before AGM, the day of the Q1 announcement
Q2 + Half year: Monday following relevant half year end to announcement date.
Q3 (Christmas) Monday, at least two weeks before Christmas, some four weeks before Q3 announcement
Full year: Monday following relevant year end to announcement date.
Actual Dates (inclusive)
Monday 10 December 2007 to mid-Jan 2008
Monday 31 March to Monday 19 May2008
Monday 23 June to Tuesday 8 July 2008
Monday 29 September to 3 November2008

How will shareholders be affected?

By reducing the number of shares in issue, shareholders who retain their shares will own a larger percentage of the company than they did before.

Why isn’t the money being returned straight to shareholders?

We consider that the combination of a significant increase in the dividend and share buy back achieves the restructuring of the balance sheet and capital efficiency that is optimum for the Group and balances the interests of our various stakeholders.

Who are the brokers responsible for undertaking the buy back?

M&S has two brokers, Morgan Stanley and Citigroup. Both brokers will be buying shares in the market for us, with only one active on any given day.

Were any alternatives to the buy back discussed?

We consider an on-market share buy back of up to 10% of our share capital is an efficient method of restructuring the balance sheet whilst retaining the greatest flexibility to continue to invest in the business. It is very common for companies to obtain from their shareholders the authority to buy back shares in this way annually and to make use of such authority.

I am an M&S employee. Will I be affected by the buy back?

Share Schemes are not affected by the buy back. However, employees who hold shares will receive details of the Share Dealing Service being offered to shareholders.
If you are an existing shareholder in the Company you will be treated in the exactly the same manner as all other shareholders and can utilise the Special Share Dealing Service if you wish.

How does this compare with previous corporate actions?

The Company regularly reviews its capital structure to ensure efficient use of the balance sheet. Recent corporate actions were
2004 – £2.3bn returned through a Tender offer. Some 28% of shares were bought and cancelled – the majority of participants would have been institutional investors.
2002 – £2bn returned by issuing B shares to all shareholders valued at 70p each and consolidating the ordinary shares on a 17 for 21 basis. This reduced the share capital by 19%. The remaining B shares were redeemed in May 2006.

When did M&S last buy back shares?

Buy back history

Tender Offer
Under authority granted by shareholders at the EGM held on 22 October 2004, the Company purchased, and subsequently cancelled, by way of Tender Offer, 635,359,116 ordinary shares at a cost of £2.3bn at a price of 362p, representing 27.9% of the issued share capital.

On-market buy backs
2003/04 18,490,000 – cost of £52.9m – 0.8% issued share capital 2002/03 44,894,601 – cost of £141.7m – 2.0% issued share capital.

B Shares
In March 2002 the new company was formed, Marks and Spencer Group plc, and we reduced the share capital through a Court-approved Scheme of Arrangement (Return of £2bn – 17 new ordinary shares and 21 B shares issued for every existing ordinary share).

On-market buy backs
2001/02 21,446,162 – cost of £52.0m – 0.8% issued share capital 2000/01 10,619,272 – cost of £20.3m – 0.4% issued share capital.

Will there be further buy backs after this?

The Company will continue to keep its balance sheet efficiency under review.

I am unhappy about the buy back, who do I complain to?

Please write to Marks and Spencer Group plc, Waterside House, 35 North Wharf Road, London, W2 1NW
Please mark your letter for the attention of the Group Secretary.

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