RBS 2012 Annual Report Download - page 444

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Notes on the consolidated accounts continued
26 Share capital continued
Ordinary shares
Following approval at the Group’s Annual General Meeting on 30 May
2012, the sub-division and consolidation of the Group’s ordinary shares
on a one-for-ten basis took effect on 6 June 2012. The nominal value of
the ordinary shares was amended to £1. The sub-division and
consolidation of the Group’s ordinary shares resulted in the creation of
59,554,319,127 deferred shares of 15p each, which were cancelled on 6
June 2012.
In 2012, the company issued 326 million ordinary shares of 25p each
prior to the sub-division and consolidation and 62 million ordinary shares
of £1 each following the sub-division and consolidation, in connection
with employee share schemes.
In September 2012, 52.7 million ordinary shares of £1 each were issued
at 227.87 pence each to yield gross proceeds of £120 million for the
purpose of neutralising the Core Tier 1 effects of paying coupons on
discretionary hybrid capital securities. The shares were listed on
allotment to UBS AG. The subscription price was determined by
reference to the average market price between 3 August and 10
September 2012 when the share price closed at 253 pence per share.
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.
The B shares do not generally carry voting rights at general meetings of
ordinary shareholders. Following the subdivision and consolidation of
ordinary shares in 2012 and subject to anti-dilution adjustments, each B
share is entitled to one tenth of the cash dividend of an ordinary share
and may be converted at any time at the option of the holder into ordinary
shares at the rate of ten B shares for each ordinary share.
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.
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.
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
below plus dividends otherwise payable for the then current dividend
period accrued to the date of redemption.