RBS 2013 Annual Report Download - page 466
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Notes on the consolidated accounts
464
26 Share capital continued
The Group has now resumed payments on all discretionary non-equity
capital instruments following the end of the European Commission ban in
2012 for RBSG and 2013 for RBS N.V. Future coupons and dividends on
hybrid capital instruments will be paid subject to, and in accordance with,
the terms of the relevant instruments.
27 Other equity
Paid-in equity - comprises equity instruments issued by the company
other than those legally constituted as shares.
£m
EMTN notes
US$564 million 6.99% capital securities
(callable October 2017) 275
CAD321 million 6.666% notes (callable October 2017) 156
Trust preferred issues: subordinated notes (1)
US$357 million 5.512% 2044
(callable September 2014) (2) 195
US$276 million 3 month US$ LIBOR plus 0.80% 2044
(callable September 2014) (3) 150
€166 million 4.243% 2046 (callable January 2016) (4) 110
£93 million 5.6457% 2047 (callable June 2017) (5) 93
979
Notes:
(1) Subordinated notes issued to limited partnerships that have in turn issued partnership
preferred securities to trusts that have issued trust preferred securities to investors. The trust
preferred securities are redeemable only at the issuer’s option and dividends are payable at
the Group’s discretion. On maturity of the subordinated notes, the partnerships are required
to reinvest in eligible capital instruments issued by the Group. Prior to the implementation of
IFRS 10, the limited partnerships and the trusts were consolidated and the trust preferred
securities recorded as non-controlling interests.
(2) Preferred securities in issue - US$357 million RBS Capital Trust III, fixed/floating non-
cumulative trust preferred securities.
(3) Preferred securities in issue - US$276 million RBS Capital Trust IV, floating rate non-
cumulative trust preferred securities.
(4) Preferred securities in issue - €166 million RBS Capital Trust C, fixed/floating rate non-
cumulative trust preferred securities.
(5) Preferred securities in issue - £93 million RBS Capital Trust D, fixed/floating rate non-
cumulative trust preferred securities.
Merger reserve - the merger reserve comprises the premium on shares
issued to acquire NatWest, less goodwill amortisation charged under
previous GAAP, and the premium arising on shares issued to acquire
Aonach Mor Limited, less amounts realised through subsequent share
redemptions by Aonach Mor Limited. No share premium was recorded in
the company financial statements through the operation of the merger
relief provisions of the Companies Act.
Capital redemption reserve - under UK companies legislation, when
shares are redeemed or purchased wholly or partly out of the company's
profits, the amount by which the company's issued share capital is
diminished must be transferred to the capital redemption reserve. The
capital maintenance provisions of UK companies legislation apply to the
capital redemption reserve as if it were part of the company’s paid up
share capital.
Contingent capital reserve - in December 2009, HM Treasury agreed to
subscribe for up to 16 billion B shares of £0.01 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 to
be settled in instalments; of this £1,208 million was debited to the
contingent capital reserve. The reserve and £320 million in respect of the
final instalment were transferred to Retained earnings on cancellation of
the above contingent capital arrangements on 16 December 2013.
Own shares held - at 31 December 2013, 34 million ordinary shares of £1
each of the company (2012 - 51 million; 2011 - 164 million) were held by
Employee Share Trusts in respect of share awards and options granted
to employees. The 17 million reduction during the year relates to the sale
of surplus shares to help neutralise any impact on Core Tier 1 capital as
a result of the recommencement of capital and dividend payments on the
Group’s hybrid capital instruments, together with ordinary shares
delivered in satisfaction of the exercise of options, the vesting of share
awards and for equity funding of employee incentive awards under the
employee share plans.
The Group optimises capital efficiency by maintaining reserves in
subsidiaries, including regulated entities. Certain preference shares and
subordinated debt are also included within regulatory capital. The
remittance of reserves to the company or the redemption of shares or
subordinated capital by regulated entities may be subject to maintaining
the capital resources required by the relevant regulator.
UK law prescribes that only the reserves of the company are taken into
account for the purpose of making distributions and in determining the
permissible applications of the share premium account.