RBS 2008 Annual Report Download - page 284

283RBS Group Annual Report and Accounts 2008
The undertakings the company has given to HM Treasury included the
following:
•no bonus will be awarded to any director for 2008 and any bonuses
earned by directors in respect of 2009 will be paid in restricted
shares, remuneration will seek to reward long term value creation and
not encourage excessive risk taking (short term indicators will be
taken into account only where fully consistent with long term value
creation and not encouraging excessive risk taking) and Directors
who are dismissed will receive a severance package which is
reasonable and perceived as fair;
•to work with HM Treasury on the appointment of up to three new
independent non-executive directors;
•to maintain its SME and mortgage lending availability to at least 2007
levels until the end of 2011 with the active marketing of competitively
priced loan products;
•to increase its support to shared equity projects until the end of 2009
in order to assist those in difficulties with their mortgage payments to
stay in their homes, either through individual bank schemes or paid
into a central fund run by industry; and
•to publish an annual report, for each year until 2011, on its lending to
SMEs and establish transparent public reporting on both SME and
mortgage lending as agreed with HM Treasury.
In addition, the company agreed to limit its activities to the higher of:
(i) the annual rate of growth of UK nominal GDP in the preceding year;
and (ii) the average historical growth of the balance sheets in the UK
banking sector during the period 1987-2007, unless there is evidence
that the thresholds are exceeded for reasons unrelated to the provision
of the aid. HM Treasury agreed, in certain circumstances, to consult
with the company with a view to making submissions to the European
Commission to obtain clarity as to the duration of the conditions and/or
seek their disapplication.
Sale of Bank of China investment
On 14 January 2009, pursuant to (i) a placing agreement entered into
between the company, RBS China Investments Sarl (a Luxembourg
incorporated subsidiary of the company) and ABN AMRO Bank N.V.,
Hong Kong Branch, (ii) a placing agreement entered into between the
company, RBS China Investments Sarl, ABN AMRO Bank N.V., Hong
Kong Branch and Morgan Stanley & Co. International plc, and (iii) a
share purchase agreement entered into between RBS China
Investments Sarl., Primestar Resource Holdings Limited and Orientmax
Capital Limited, the company (through RBS China Investments Sarl.)
sold its entire 4.26 per cent. stake in Bank of China for HKD18.4 billion.
Second Placing and Open Offer Agreement
Pursuant to a placing and open offer agreement dated 19 January 2009
entered into between the company, UBS, Merrill Lynch International and
HM Treasury, (i) the company agreed to invite Qualifying Shareholders
to apply to subscribe for New Shares at the Issue Price by way of the
Open Offer, (ii) UBS and Merrill Lynch International were appointed as
joint sponsors, joint bookrunners and joint placing agents and agreed to
use reasonable endeavours to procure Placees to subscribe for the
New Shares on such terms as may be agreed by the Company and HM
Treasury at not less than the Issue Price on the basis that the New
Shares placed will be subject to clawback to the extent they are taken
up under the Open Offer and (iii) HM Treasury agreed that, to the extent
not placed or taken up under the Open Offer and subject to the terms
and conditions set out in the Placing and Open Offer Agreement, HM
Treasury will subscribe for such New Shares itself at the Issue Price.
Pursuant to the terms of the Second Placing and Open Offer
Agreement, the aggregate proceeds of the Placing and Open Offer will
be used in full to fund the redemption on Admission of the Preference
Shares held by HM Treasury at 101 per cent. of their issue price
(£5,050,000,000) together with the accrued dividend on the Preference
Shares (from and including 1 December 2008 to but excluding the date
of Admission) and the commissions payable to HM Treasury under the
Second Placing and Open Offer Agreement. Should the proceeds of
the Placing and Open Offer be insufficient to fund the redemption of the
Preference Shares, the company shall provide additional finance from
its own resources and make use of its own reserves to enable such
redemption to be effected in full.
In consideration of the provision of its services under the Second
Placing and Open Offer Agreement, the company shall pay to HM
Treasury (i) a commission of 0.5 per cent. of the aggregate value of the
New Shares at the Issue Price per New Share payable on the earlier of
Admission and the second Business Day after the day on which the
Second Placing and Open Offer Agreement is terminated and (ii) a
further commission of 1 per cent. of the aggregate value of the New
Shares subscribed for by Placees at the Issue Price per New Share
payable on the date of Admission.
The company shall pay to each of HM Treasury, UBS and Merrill Lynch
International all legal and other costs and expenses (properly incurred
in the case of UBS and Merrill Lynch International) and those of HM
Treasury’s financial advisers, incurred in connection with the Placing
and Open Offer, the redemption of the Preference Shares or any
arrangements referred to in the Second Placing and Open Offer
Agreement.
The company shall also bear all costs and expenses relating to
the Placing and Open Offer and the Preference Share Redemption,
including (but not limited to) the fees and expenses of its professional
advisers, the cost of preparation, advertising, printing and distribution
of all documents connected with the Placing and Open Offer and the
Preference Share Redemption, the listing fees of the FSA, any charges
by CREST and the fees of the London Stock Exchange and Euronext.
The obligations of HM Treasury, UBS and Merrill Lynch International
under the Second Placing and Open Offer Agreement are subject to
certain conditions including, amongst others:
•the passing of the Resolutions to be proposed at the General
Meeting;
•the obtaining of regulatory approvals; and
•Admission becoming effective by not later than 8.00 a.m. on 15 April
2009 (or such later time and date as HM Treasury may agree).