RBS 2011 Annual Report Download - page 300

298 RBS Group 2011
The directors present their report together with the audited accounts for
the year ended 31 December 2011.
Group structure
The company is a holding company owning the entire issued ordinary
share capital of The Royal Bank of Scotland plc, the principal direct
operating subsidiary undertaking of the company. The Group comprises
the company and all its subsidiary and associated undertakings, including
the Royal Bank and NatWest. Details of the principal subsidiary
undertakings of the company are shown in Note 8 on page 427.
Following placing and open offers in December 2008 and in April 2009,
HM Treasury (HMT) owned approximately 70.3% of the enlarged ordinary
share capital of the company. In December 2009, the company issued a
further £25.5 billion of new capital to HMT. This new capital took the form
of B shares, which do not generally carry voting rights at general
meetings of ordinary shareholders but are convertible into ordinary
shares and qualify as Core Tier 1 capital.
In 2011, the company issued 770.3 million ordinary shares in connection
with employee share schemes. At 31 December 2011, HMT’s holding in
the company’s ordinary shares had reduced to 66.9%.
Results and dividends
The loss attributable to the ordinary and B shareholders of the company
for the year ended 31 December 2011 amounted to £1,997 million
compared with a loss of £1,125 million for the year ended 31 December
2010, as set out in the consolidated income statement on page 307.
The company did not pay a dividend on ordinary shares in 2010 or 2011.
The Group has undertaken that, unless otherwise agreed with the
European Commission, neither the company nor any of its direct or
indirect subsidiaries (other than companies in the RBS Holdings N.V.
group, which are subject to different restrictions, see below) will pay
external investors any dividends or coupons on existing hybrid capital
instruments (including preference shares, B shares and upper and lower
tier 2 instruments) for a period of two years from 30 April 2010 (the
“Deferral Period”), or exercise any call rights in relation to these capital
instruments between 24 November 2009 and the end of the Deferral
Period, unless there is a legal obligation to do so. Hybrid capital
instruments issued after 24 November 2009 will generally not be subject
to the restriction on dividend or coupon payments or call options.
The Group has agreed that RBS Holdings N.V. will not pay investors any
coupons on, or exercise any call rights in relation to, specified hybrid
capital instruments for an effective period of two years from 1 April 2011,
unless in any such case there is a legal obligation to do so. RBS Holdings
N.V. and its group companies are also subject to restrictions on the
exercise of call rights in relation to their other hybrid capital instruments.
Business review
Activities
The Group is engaged principally in providing a wide range of banking,
insurance and other financial services. Further details of the
organisational structure and business overview of the Group, including
the products and services provided by each of its divisions and the
competitive markets in which they operate, are contained in the Business
review on pages 36 to 38. Details of the strategy for delivering the
company’s objectives can be found on pages 14 and 15.
Risk factors
The Group’s future performance and results could be materially different
from expected results depending on the outcome of certain potential risks
and uncertainties. Certain risk factors the Group faces are summarised
on page 39. Fuller details of these and other risk factors are set out on
pages 451 to 464.
The reported results of the Group are also sensitive to the accounting
policies, assumptions and estimates that underlie the preparation of its
financial statements. Details of the Group’s critical accounting policies
and key sources of accounting judgments are included in Accounting
policies on pages314 to 326.
The Group’s approach to risk management, including its financial risk
management objectives and policies and information on the Group’s
exposure to price, credit, liquidity and cash flow risk, is discussed in the
Risk and balance sheet management section of the Business review on
pages 100 to 249.
Financial performance
A review of the Group's performance during the year ended 31 December
2011, including details of each division, and the Group's financial position
as at that date is contained in the Business review on pages 40 to 95.
RBS Holdings N.V. (formerly ABN AMRO Holding N.V.)
In 2007, RFS Holdings B.V., which was jointly owned by the Group, the
Dutch State (successor to Fortis) and Santander (together, the
“Consortium Members”) completed the acquisition of ABN AMRO Holding
N.V.
On 6 February 2010, the businesses of ABN AMRO Holding N.V.
acquired by the Dutch State were legally demerged to a newly
established company, ABN AMRO Bank N.V., which on 1 April 2010 was
transferred to ABN AMRO Group N.V., itself owned by the Dutch State.
Following legal separation, RBS Holdings N.V. (formerly ABN AMRO
Holding N.V.) has one operating subsidiary, The Royal Bank of Scotland
N.V. (“RBS N.V.”), a fully operational bank within the Group. RBS N.V. is
independently rated and regulated by the Dutch Central Bank. Certain
assets within RBS N.V. continue to be shared by the Consortium
Members.
Report of the directors