RBS 2008 Annual Report Download - page 151

RBS Group Annual Report and Accounts 2008150
Report of the directors continued
Corporate responsibility
The Group believes that meeting high standards of environmental,
social and ethical responsibility is key to the way it does business.
The Group’s business is managed in a way that takes account of the
social and environmental impact of its activities. In order to identify the
issues that matter most to its stakeholders, an annual research project is
conducted. This work provides the foundation of the corporate
responsibility strategy. It enables all parts of the Group to focus their
efforts and resources on the most important issues. Having the right
management structures in place and clear leadership helps set the
framework against which this happens. There are issue-specific steering
groups that feed into the Corporate Responsibility Forum, which
considers the Group’s current performance and proposes new
initiatives. The Group’s governance structure for corporate responsibility
extends throughout the organisation.
Further details of the Group’s corporate responsibility policies will be
contained in the 2008 Corporate Responsibility Report.
Going concern
The Group’s business activities and financial position; the factors likely
to affect its future development and performance; and its objectives and
policies in managing the financial risks to which it is exposed and its
capital are discussed in the Business review.
As set out in the Business review, recent economic conditions have
seen severe dislocation in many financial markets and an
unprecedented reduction in liquidity globally. ‘Liquidity risk’ describes
the measures governments and central banks in the UK and around the
world have taken to provide capital and liquidity to banks. The Group
used a number of these funding facilities during 2008 and its funding
and capital plans for the next twelve months from the date of approval
of these accounts assume continuing reliance on and the continuation
of these measures. These plans have been shared with the Tripartite
Authorities in the UK.
Following the rights issue in June 2008 and the open offer in December
2008, the Group’s capital ratios are at historically high levels and will be
further strengthened by the restructuring of the UK Government’s
preference shares. The UK Government owns 57.9% of the ordinary
share capital of the Group. This could increase to 70.4% following the
fully underwritten open offer announced in January 2009 and provides
tangible evidence of the UK Government’s support for the Group
reflecting its importance to the UK economy and financial system.
The directors have reviewed the Group’s forecasts, projections and
other relevant evidence including the ongoing measures from
governments and central banks in the UK and around the world to
sustain the banking sector. Whilst the Group has received no
guarantees, the directors have a reasonable expectation, based on
experience to date, of continued and sufficient access to the funding
facilities referred to above and, accordingly, that the Group and the
company will continue in operational existence for the foreseeable
future. The financial statements of the Group and of the company have,
therefore, been prepared on a going concern basis.
Corporate governance
The company is committed to high standards of corporate governance.
Details are given on pages 153 to 158.
Ordinary share capital
In June 2008, the company issued 6,123 million ordinary shares of 25p
each through a rights issue on the basis of 11 new ordinary shares for
every 18 existing shares held, at an issue price of £2 per share, raising
£12 billion.
In September 2008, the company issued 403 million ordinary shares of
25p to existing shareholders by way of a capitalisation issue on the
basis of one new ordinary share for every 40 shares held.
In December 2008, the company issued 22,910 million ordinary shares
of 25p each by way of a Placing and Open Offer on the basis of 18
new ordinary shares for every 13 existing shares held, at an issue price
of 65.5 pence per share, raising £14.7 billion. HM Treasury acquired
22,854 million of these shares and now holds 57.9% of the enlarged
ordinary share capital of the company.
During the year, the ordinary share capital was also increased by 13.5
million ordinary shares allotted as a result of awards and the exercise of
options under the company’s share schemes.
Details of the authorised and issued ordinary share capital at 31
December 2008 are shown in Note 27 on the accounts.
Preference share capital
In December 2008, the company issued 5 million non-cumulative
sterling preference shares to HM Treasury at £1,000 per preference
share, raising £5 billion.
As discussed on page 148, the company, subject to shareholder
approval, intends to issue new ordinary shares by way of an open offer,
the proceeds from which will be used to redeem the preference shares
issued to HM Treasury, together with the accrued dividend.
Details of the authorised and issued preference share capital at
31 December 2008 are shown in Note 27 on the accounts.
Authority to repurchase shares
At the Annual General Meeting in 2008, shareholders renewed the
authority for the company to make market purchases of up to
1,000,710,085 ordinary shares. The directors have not used this
authority to date and there is no current intention that the authority will
be exercised. This authority will lapse at the conclusion of the AGM of
the company in 2009 and no renewal will be sought.
Additional information
Where not provided previously in the Report of the directors, the
following provides the additional information required to be disclosed by
Part 7 of the Companies Act 1985 as amended.
The rights and obligations attaching to the company’s ordinary shares
and preference shares are set out in the company’s Articles of
Association, copies of which can be obtained from Companies House
in the UK or at www.rbs.com.
On a show of hands at a general meeting of the company every holder
of ordinary shares and cumulative preference shares present in person
or by proxy and entitled to vote shall have one vote. On a poll, every
holder of ordinary shares present in person or by proxy and entitled to
vote shall have one vote for every share held. On a poll, holders of