Notes 26-31

27. Equity share owners’ funds

The movements during 2008 and 2007 were as follows:

  Ordinary
share
capital
£m
Share
premium
account
£m
Shares to
be issued
£m
Merger
reserve
£m
Other
reserves
£m
Own
Shares1
£m
Retained
earnings
£m
Total
£m
Balance at 1 January 2007 124.1 74.9 7.5 (1,370.0) (170.1) (288.5) 5,449.0 3,826.9
Ordinary shares issued in respect of acquisitions 0.1 2.2 5.7 8.0
Other ordinary shares issued 0.7 29.5 (7.9) 4.2 1.72 28.2
Share issue/cancellation costs (2.7) (0.1) (2.8)
Share cancellations (5.7) 5.7 (402.7) (402.7)
Exchange adjustments on foreign currency net investments 71.7 71.7
Net profit for the year 465.9 465.9
Dividends paid (138.9) (138.9)
Non-cash share-based incentive plans
(including stock options)
62.4 62.4
Tax adjustment of share-based payments 0.9 0.9
Net movement in own shares held by ESOP Trusts 45.9 (45.9)
Shares purchased into treasury (12.7) (12.7)
Actuarial gain on defined benefit pension schemes 27.0 27.0
Deferred tax on defined benefit pension schemes (9.9) (9.9)
Revaluation of other investments 108.1 108.1
Share purchases – close period commitments3 (64.8) (64.8)
Recognition of financial instruments during the year 3.4 3.9 7.3
Reclassification of equity component of convertible
bond redeemed during the year
(68.7) 68.7
Other movements (0.2) (0.2)
Balance at 31 December 2007 119.2 103.9 5.3 (1,365.9) (114.9) (255.3) 5,482.1 3,974.4
Reclassification due to Group reconstruction 3,780.6 (3,769.2) (11.4)
Transfer of share premium to retained earnings as part of
the scheme of arrangement
(4,143.1) 4,143.1
Ordinary shares issued in respect of acquisitions 8.0 259.7 2.8 270.5
Other ordinary shares issued 0.2 8.3 (2.8) 1.1 1.12 7.9
Share issue/cancellation costs (0.8) (4.8) (5.6)
Share cancellations (1.9) 1.9 (112.2) (112.2)
Exchange adjustments on foreign currency net investments 1,379.2 1,379.2
Transfer to goodwill 3.4 3.4
Net profit for the year 439.1 439.1
Dividends paid (161.8) (161.8)
Non-cash share-based incentive plans
(including stock options)
62.3 62.3
Tax adjustment of share-based payments (9.0) (9.0)
Net movement in own shares held by ESOP Trusts 52.8 (56.4) (3.6)
Treasury shares disposals 12.7 (5.8) 6.9
Actuarial loss on defined benefit schemes (82.2) (82.2)
Deferred tax on defined benefit pension schemes 0.7 0.7
Revaluation of other investments (51.3) (51.3)
Share purchases – close period commitments3 64.8 (5.0) 59.8
Recognition of financial instruments during the year (17.8) 1.5 (16.3)
Balance at 31 December 2008 125.5 8.6 8.7 (5,138.8) 1,250.5 (189.8) 9,697.5 5,762.2

Notes

1
The Company’s holdings of own shares are stated at cost and represent shares held in treasury and purchases by the Employee Share Ownership Plan (‘ESOP’) trusts of shares in WPP plc for the purpose of funding certain of the Group’s share-based incentive plans, details of which are disclosed in the Compensation Committee report.
The trustees of the ESOP purchase the Company’s ordinary shares in the open market using funds provided by the Company. The Company also has an obligation to make regular contributions to the ESOP to enable it to meet its administrative costs. The number and market value of the ordinary shares of the Company held by the ESOP at 31 December 2008 was 33,167,446 (2007: 43,889,384), and £133.5 million (2007: £284.0 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2008 was nil (2007: 2,000,000) and £nil million (2007: £12.9 million) respectively.
2
Represents the difference between the legal share capital and premium, recorded on the issue of new shares to satisfy option exercises, and the cash proceeds received on exercise.
3
During 2007, the Company entered into an arrangement with its broker to conduct share buy-backs on the Company’s behalf in the close period commencing on 2 January 2008 and ending on 28 February 2008, in accordance with UK listing rules. Under IAS 39, the commitment resulting from this agreement constitutes a financial liability at 31 December 2007 which must be recognised at fair value at that date. This liability is included in Trade and other payables: amounts falling due within one year in 2007 and has been recognised as a movement in equity, along with the payments in relation to these buy-backs in 2008.
Other reserves comprise the following:

 
 
 

Equity
reserve
£m

Revaluation
reserve
£m
Capital
redemption
reserve
£m

Translation
reserve
£m
Total
other
reserves
£m
Balance at 1
January 2007
0.4 30.5 3.8 (204.8) (170.1)
Share cancellations 5.7 5.7
Exchange adjustments on foreign
currency net investments
71.7 71.7
Gain on revaluation of available
for sale investments
108.1 108.1
Recognition of financial
instruments during the year
3.4 3.4
Share purchases –
close period commitments
(64.8) (64.8)
Reclassification of equity
component of convertible bond
redeemed during the year

(68.7)




(68.7)
Other movements (0.2) (0.2)
Balance at 31
December 2007
(129.9) 138.6 9.5 (133.1) (114.9)
Reclassification due to
Group reconstruction
(11.4) (11.4)
Share cancellations 1.9 1.9
Exchange adjustments on foreign
currency net investments
1,379.2 1,379.2
Revaluation of other
investments
(51.3) (51.3)
Recognition of financial
instruments during the year
(17.8) (17.8)
Share purchases – close
period commitments
64.8 64.8
Balance at 31
December 2008
(82.9) 87.3 1,246.1 1,250.5

Reconciliation of movements in consolidated equity share owners’ funds for the year ended 31 December 2008:


2008
£m
2007
£m
2006
£m
Net profit for the year 439.1 465.9 435.8
Dividends paid (161.8) (138.9) (118.9)
  277.3 327.0 316.9
Non-cash share-based incentive plans
(including stock options)
62.3 62.4 70.9
Tax adjustment of share-based payments (9.0) 0.9 32.3
Exchange adjustments on foreign currency net investments 1,379.2 68.7 (352.3)
Ordinary shares issued in respect of acquisitions 270.5 8.0
Share issue/cancellation costs (5.6) (2.8) (1.7)
Other ordinary shares issued 7.9 28.2 73.0
Share cancellations (112.2) (402.7) (218.8)
Treasury shares disposals/(additions) 6.9 (12.7)
Actuarial (loss)/gain on defined benefit pension schemes (82.2) 30.0 11.3
Deferred tax on defined benefit pension schemes 0.7 (9.9) 5.3
Net movement in own shares held by ESOP Trusts (3.6) (38.9)
Transfer to goodwill 3.4
Revaluation of other investments (51.3) 108.1 9.5
Shares repurchases – close period commitments 59.8 (64.8)
Recognition of financial instruments during the year (16.3) 7.3 14.9
Other movements (0.2)
Net additions/(reductions) to equity
share owners’ funds
1,787.8 147.5 (77.6)
Opening equity share owners’ funds 3,974.4 3,826.9 3,904.5
Closing equity share owners’ funds 5,762.2 3,974.4 3,826.9

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