RBS 2008 Annual Report Download - page 247

28 Owners’ equity (continued)
Group Company
2008 2007 2006 2008 2007 2006
£m £m £m £m £m £m
Retained earnings
At 1 January 21,072 15,487 11,346 3,787 4,737 4,794
(Loss)/profit attributable to ordinary and equity preference shareholders (23,541) 7,549 6,393 (9,602) 2,499 3,499
Ordinary dividends paid (2,312) (3,044) (2,470) (2,312) (3,044) (2,470)
Equity preference dividends paid (536) (246) (191) (536) (246) (191)
Paid-in equity dividends paid, net of tax (60) ——(60) ——
Shares repurchased during the year — — (624) —— (624)
Redemption of preference shares classified as debt — (159) (271) —(159) (271)
Transfer from merger reserve 14,273 ——14,273 ——
Actuarial (losses)/gains recognised in retirement benefit
schemes, net of tax (1,335) 1,517 1,262 ———
Net cost of shares bought and used to satisfy share-based payments (19) (40) (38) ——
Share-based payments, net of tax — 8 80 ———
At 31 December 7,542 21,072 15,487 5,550 3,787 4,737
Own shares held
At 1 January (61) (115) (7) —— (7)
Shares purchased during the year (64) (65) (254) ———
Shares issued under employee share schemes 21 119 146 ——7
At 31 December (104) (61) (115) ———
Owners’ equity at 31 December 58,879 53,038 40,227 44,158 24,877 18,197
RBS Group Annual Report and Accounts 2008246
Notes on the accounts continued
The merger reserve comprises the premium on shares issued to acquire
NatWest less goodwill amortisation charged under previous GAAP. No
share premium was recorded in the company financial statements
through the operation of the merger relief provisions of the Companies
Act 1985.
UK law prescribes that only the reserves of the company are taken into
account for the purpose of making distributions and in determining the
permissible applications of the share premium account.
The Group optimises capital efficiency by maintaining reserves in
subsidiaries, including regulated entities. Certain preference shares and
subordinated debt are also included within regulatory capital. The
remittance of reserves to the company or the redemption of shares or
subordinated capital by regulated entities may be subject to maintaining
the capital resources required by the relevant regulator.
At 31 December 2008, 61,165,254 (2007 – 10,474,782) ordinary shares
of 25p each of the company were held by Employee Share Trusts in
respect of share awards and options granted to employees.
Paid-in equity represents notes issued under the company’s euro
medium term note programme with par value of US$1,600 million and
CAD600 million that are classified as equity under IFRS. The notes
attract coupons of 6.99% and 6.666% respectively until October 2017
when they change to 2.67% above the London interbank offered rate for
3-month US dollar deposits and 2.76% above the Canadian dollar
offered rate respectively.
Under the arrangements for the placing and open offer in December
2008, the company issued shares in exchange for shares in Encuentro
Limited. No share premium was recorded in the company financial
statements through the operation of the merger relief provisions of the
Companies Act 1985. The subsequent redemption of these shares gave
rise to distributable profits of £14,273 million which have been
transferred from merger reserve to retained earnings.