RBS 2005 Annual Report Download - page 112

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Report of the directors
Report of the directors
The directors have pleasure in presenting their report together
with the audited accounts for the year ended 31 December 2005.
Profit and dividends
The profit attributable to the ordinary shareholders of the
company for the year ended 31 December 2005 amounted to
£5,392 million compared with £4,856 million for the year ended
31 December 2004, as set out in the consolidated income
statement on page 145.
An interim dividend of 19.4p per ordinary share was paid on
7 October 2005 totalling £619 million (2004 – £529 million).
The directors now recommend that a final dividend of 53.1p
per ordinary share totalling £1,700 million (2004 – £1,308
million) be paid on 9 June 2006 to members on the register
at the close of business on 10 March 2006. Subject to
approval of the dividend at the Annual General Meeting,
shareholders will be offered the opportunity to participate in
a dividend reinvestment plan, which will replace the current
scrip dividend scheme.
Activities and business review
The company is a holding company owning the entire issued
ordinary share capital of the Royal Bank, the principal direct
operating subsidiary undertaking of the company. The “Group”
comprises the company and all its subsidiary and associated
undertakings, including the Royal Bank and NatWest. The
Group is engaged principally in providing a wide range of
banking, insurance and other financial services. The financial
risk management objectives and policies of the Group and
information on the Group’s exposure to price, credit, liquidity
and cash flow risk are contained in Note 34 on the financial
statements. Details of the principal subsidiary undertakings of
the company are shown in Note 15. A review of the business
for the year to 31 December 2005, of recent events and of
likely future developments is contained in the Operating and
financial review.
Business developments
In August 2005, the Group announced a strategic partnership
with Bank of China (BoC). Subsequently, a Group-led
consortium acquired a 10% shareholding in BoC through a
majority-owned subsidiary for US$3.1 billion (£1.7 billion). The
Group’s share of the investment (US$1.6 billion) was financed
through the disposal of its 2.2% holding in the issued share
capital of Banco Santander Central Hispano, S.A. Following
receipt of all required regulatory approvals, the investment was
completed in December 2005. The two banks will co-operate
across a range of business activities in China including credit
cards, wealth management, corporate banking and personal
lines insurance. They will also closely co-operate in key
operational areas including financial controls, risk
management, human resources and corporate governance.
Going concern
The directors are satisfied that the Group has adequate
resources to continue in business for the foreseeable future.
For this reason, they continue to adopt the ‘going concern’
basis for preparing the accounts.
Ordinary share capital
During the year ended 31 December 2005, the ordinary share
capital was increased by the following issues:
(a) 13.5 million ordinary shares allotted as a result of the
exercise of options under the company’s executive,
sharesave and option 2000 schemes and a further 0.7
million ordinary shares allotted in respect of the exercise of
options under the NatWest executive and sharesave schemes
which had been exchanged for options over the company’s
shares following the acquisition of NatWest in 2000;
(b) 7.4 million ordinary shares allotted in lieu of cash
dividends; and
(c) 2.3 million ordinary shares allotted under the company’s
employee share ownership plan.
Details of the authorised and issued ordinary share capital at
31 December 2005 are shown in Note 30.
Preference share capital
Details of issues of preference shares during the year and the
authorised and issued share capital at 31 December 2005 are
shown in Note 30.
Authority to repurchase shares
At the Annual General Meeting in 2005, shareholders renewed
the authority for the company to make market purchases
of up to 317,495,924 ordinary shares. The directors have not
exercised this authority to date. The Group has however
announced its intention to repurchase up to £1 billion of
ordinary shares over the course of the next 12 months, and
shareholders will be asked to renew this authority at the Annual
General Meeting in April.