RBS 2009 Annual Report Download - page 328

RBS Group Annual Report and Accounts 2009326
Notes on the accounts continued
27 Share capital continued
Ordinary shares
At the Annual General meeting in April 2009, the authorised ordinary
share capital of the company was increased by £7.5 billion through the
creation of 30 billion new ordinary shares of 25p each.
At a General meeting in April 2009, the authorised ordinary share
capital of the company was increased by a further £4.2 billion through
the creation of 16.9 billion new ordinary shares of 25p each.
In April 2009, the company issued 16.9 billion ordinary shares at 31.75p
each through a placing and open offer. The placing and open offer was
fully underwritten by HM Treasury. The net proceeds were £5.4 billion.
Following redemption of the non-cumulative sterling preference shares
of £1 each, the authorised ordinary share capital of the company was
increased by £5 million through the creation of 20 million new ordinary
shares of 25p each (see below).
During the year ended 31 December 2009, options were granted over
1.5 billion ordinary shares under the company’s executive and
sharesave schemes. At 31 December 2009, options granted under the
company’s various schemes, exercisable up to 2019 at prices ranging
from 28.2p to 586p per share, were outstanding in respect of 1.4 billion
ordinary shares.
No ordinary shares were issued during the year ended 31 December
2009 following the exercise of options under the company’s share
schemes. Any options exercised were satisfied using market purchase
shares held in the Trust.
No options granted under the NatWest executive scheme were
outstanding as at 31 December 2009.
Employee share trusts purchased 86.2 million ordinary shares at a cost
of £33 million and awarded 8.7 million ordinary shares on receipt of
£0.06 million on the exercise of awards under employee share schemes.
The employee share trusts incurred costs of £0.2 million in purchasing
the company’s ordinary shares.
B shares and dividend access share
In December 2009, the company entered into an acquisition and
contingent capital agreement with HM Treasury. HM Treasury agreed to
acquire at 50p per share 51 billion B shares with a nominal value of 1p
each and a Dividend Access Share with a nominal value of 1p; these
shares were issued to HM Treasury on 22 December 2009. Net proceeds
were £25.1 billion. HM Treasury also agreed to subscribe for up to 16
billion further B shares with a nominal value of 1p each at 50p per share
subject to certain conditions including the Group's core tier 1 capital
ratio falling below 5%. The fair value of the consideration payable by the
company on entering into this agreement amounted to £1,458 million; of
this £1,208 million has been debited to the contingent capital reserve.
The B shares do not generally carry voting rights at general meetings of
ordinary shareholders. Each B share is entitled to the same cash
dividend as an ordinary share (subject to anti–dilution adjustments). The
B shares may be converted into ordinary shares at a fixed ratio of issue
price (50p) divided by the conversion price (50p subject to anti-dilution
adjustments) at the option of the holder at any time after issue.
Following the issue of B shares, HM Treasury's holding of ordinary
shares of the company remained at 70.3% although its economic
interest rose to 84.4%. HM Treasury has agreed not to convert its B
shares into ordinary shares to the extent that its holding of ordinary
shares following the conversion would represent more than 75% of the
company's issued ordinary share capital.
The Dividend Access Share entitles the holder to dividends equal to the
greater of 7% of the aggregate issue price of B shares issued to HM
Treasury and 250% times the ordinary dividend rate multiplied by the
number of B shares issued, less any dividends paid on the B shares
and on ordinary shares issued on conversion. Dividends on the
dividend access share are discretionary unless a dividend has been
paid on the ordinary shares, in which case dividends became
mandatory. The Dividend Access Share does not generally carry voting
rights at general meetings of ordinary shareholders and is not
convertible into ordinary shares.
The contingent capital commitment agreement can be terminated in
whole or in part by the company, with the FSA’s consent, at any time. It
expires at the end of five years or, if earlier, on its termination in full.
Preference shares
Under IFRS certain of the Group’s preference shares are classified as
debt and are included in subordinated liabilities on the balance sheet.
Following the Placing and Open Offer in April 2009, the company
redeemed the five million non-cumulative sterling preference shares of
£1 issued at £1,000 each (£5 billion in total) held by HM Treasury at 101
per cent of their issue price plus the dividend accrued on the
preference shares from 1 December 2008 to the date of redemption
and the commissions payable to HM Treasury under the Second Placing
and Open Offer Agreement. In accordance with the Articles of
Association of the company, the nominal amount of these shares was,
upon redemption of the shares, divided into and reclassified as 20
million new ordinary shares of 25p each.
Other securities
Certain of the Group’s subordinated securities in the legal form of debt
are classified as equity under IFRS.
These securities entitle the holders to interest which may be deferred at
the sole discretion of the company. Repayment of the securities is at the
sole discretion of the company on giving between 30 and 60 days
notice.
Non-cumulative preference shares
Non-cumulative preference shares entitle the holders thereof (subject to
the terms of issue) to receive periodic non-cumulative cash dividends at
specified fixed rates for each Series payable out of distributable profits
of the company.
The non-cumulative preference shares are redeemable at the option of
the company, in whole or in part from time to time at the rates detailed
on the next page plus dividends otherwise payable for the then current
dividend period accrued to the date of redemption.