Annual Report and Accounts 2010

8Reserves

Option
reserve
£000

Profit and
loss reserve
£000

At 1 January 2010

61,474

542,016

Proceeds on issue of treasury shares on exercise of share options

24,015

Credit in respect of capital contributions arising from share-based compensation charges

27,129

(Loss)/profit attributable to shareholders

(888)

Equity dividends payable

(34,323)

At 31 December 2010

61,474

557,949

The Company has taken advantage of merger relief and not recorded the premium on the issue of shares for the acquisition of Artisan Components Inc. (now ARM Inc.). The option reserve represents the fair value of options granted on the acquisition of Artisan Components Inc. in 2004.

The Company considers the option reserve as non-distributable. Within the profit and loss account is £128,354,000 of credits in respect of FRS 20 employee share scheme charges in respect of services performed by employees of subsidiary undertakings and recorded as a capital contribution. The Company also considers these credits as non-distributable. As such, £429,595,000 of the profit and loss account is deemed distributable.

The Company did not undertake any share buy-backs during 2010. The quantum and frequency of share re-purchases is not predetermined and will take into account prevailing market conditions, the short- to medium-term cash needs of the business and the level of employee share-based remuneration going forward. At 31 December 2010, there were 21,624,158 (2009: 60,321,361) shares in the Company still held from these purchases with a market value of £91,535,000 (2009: £107,070,000).

Offset within retained earnings is an amount of £22,059,000 (2009: £65,102,000) representing the cost of own shares held, being 21,624,158 (2009: 60,321,361) shares in the Company. These shares are expected to be used for the benefit of the Group’s employees and directors to satisfy share options, restricted stock units (RSUs) and conditional share awards in future periods.