RBS 2010 Annual Report Download - page 361

Ordinary shares
During the year, the ordinary share capital was increased by 3.7 million
ordinary shares allotted as a result of the exercise of options under the
company's executive and sharesave plans.
Employee share trusts purchased 1.6 billion ordinary shares at a cost of
£672 million and awarded 17.9 million ordinary shares on receipt of £0.5
million on the exercise of awards under employee share plans.
The employee share trusts incurred costs of £3.7 million in purchasing
the company's ordinary shares.
In March 2010, the company converted 935,228 non-cumulative
convertible preference shares of US$0.01 into ordinary shares resulting
in approximately 1.6 billion ordinary shares being issued.
In December 2010, the company converted 185,134 non-cumulative
convertible preference shares of £0.01 into ordinary shares resulting in
approximately 487 million ordinary shares being issued.
Bshares 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 was 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.
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% of 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.
Non-voting deferred shares
In November 2010, the company cancelled all of its outstanding Non-
voting deferred shares of £0.01 each, all of which were held by a
nominee company wholly owned by the Group.
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.
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.
359RBS Group 2010
Financial statements