RBS 2003 Annual Report Download - page 195

193
Annual Report and Accounts 2003
Notes on the accounts
Summary consolidated statements of cash flows presented on a US GAAP basis for each of the three years ended
31 December 2003 are set out below:
2003 2002 2001
£m £m £m
Cash flows from operating activities 8,534 11,008 1,413
Cash flows from investing activities (31,879) (44,892) (34,813)
Cash flows from financing activities 34,872 37,245 29,761
Effect of exchange rate changes on cash and cash equivalents (863) (115) 39
Change in cash and cash equivalents 10,664 3,246 (3,600)
Cash and cash equivalents at beginning of the year 10,273 7,027 10,627
Cash and cash equivalents at end of the year 20,937 10,273 7,027
The composition of cash at 31 December 2003, 2002 and 2001 and the movement in cash for the years then ended are shown
in Note 47 and Note 48 on the accounts respectively.
Stock-based compensation costs
The Group grants share options to executive officers under an
executive share option scheme (the “executive scheme”) and
to employees under a savings-related sharesave scheme (the
“savings scheme”) and the option 2000 scheme.
Executive scheme
Under the terms of the executive scheme, senior management
employees and executive directors of Group companies may
participate in the executive scheme at the discretion of the
Board of directors of the company. The executive scheme
involves a participant being granted an option to subscribe for
ordinary shares of the company at the higher of nominal value
and market value of ordinary shares on the date of grant.
Normally, options may be granted only within six weeks after
the announcement of final or interim results of the Group for
any particular year. Options may not be transferred or
assigned. A participant may not be granted options over new
shares to the extent that the aggregate subscription price
would exceed four times his compensation. Options granted
under the executive scheme are issued on a UK Inland Revenue
approved or unapproved basis. Options are exercisable
between the third and tenth anniversaries of the grant date,
only if performance criteria are met. For options granted from
1996 to 1998, the criterion is the average growth in adjusted
earnings per ordinary share to exceed the average increase in
the UK Retail Prices Index by 2% per annum over a three year
period. For options granted since 1999, the relevant
percentage has been increased to 3% per annum.
Savings scheme
Under the Inland Revenue rules, a participant in a savings
scheme is permitted to make a maximum monthly saving of
£250 under approved savings schemes. Employees of Group
companies in the UK and Ireland and certain offshore
jurisdictions are offered participation in the savings scheme.
Participants can make monthly savings for a period of three,
five or seven years. Options may be granted at not less than
80% of the average market value of ordinary shares of the
company by reference to dealings in the ordinary shares over
the last three trading days of the week immediately preceding
the date of an invitation to participate, or, if higher, at par.
Options comprise, as nearly as possible, such number of
ordinary shares as may be purchased at the option price with
the proceeds on maturity after either three, five or seven years
of the savings contract, and options may normally be
exercised only within six months after the third, fifth or seventh
anniversary of the savings contract. Options may not be
transferred or assigned.
Option 2000 scheme
On 9 August 2000 and again on 4 April 2001, every qualifying
permanent member of staff in the Group received an option
over 150 shares in the company. The executive directors of the
company waived their entitlement to the option granted on 4
April 2001. On 21 March 2002, options over 150 shares were
granted to all employees of Mellon who transferred to Citizens
Financial Group, and 1 September 2003 further options over
150 shares were granted to all employees of Churchill
Insurance Group, as a result of the acquisition by the Group.
Under the scheme, options are granted at the market value of
ordinary shares at the date of grant and may normally be
exercised only between the third and sixth anniversary of the
date of grant.
Limitations of the option schemes:
(i) During a ten year period, no more than 10% in aggregate
of the issued ordinary share capital of the company from
time to time may be issued pursuant to all of the employee
share schemes operated by the company.
(ii) During a five year period, no more than 5% in aggregate of
the issued ordinary share capital of the company from time
to time may be issued pursuant to all of the employee
share schemes operated by the company.
(iii) During a ten year period, no more than 5% in aggregate of
the issued ordinary share capital of the company from time
to time may be issued pursuant to the executive scheme.
(iv) During a four year period, no more than 21⁄2% in aggregate
of the issued ordinary share capital of the company from
time to time may be issued pursuant to the executive scheme.
(v) During a three year period, no more than 3% in aggregate
of the issued ordinary share capital of the company from
time to time may be issued pursuant to the executive scheme.