25 Share capital and reserves
| 2007 | 2006 | |||||||
| Number of shares millions |
£m | Number of shares millions |
£m | |||||
| Authorised: | ||||||||
| Ordinary shares of 5p each | 210.0 | 10.5 | 210.0 | 10.5 | ||||
| Issued and fully paid: | ||||||||
| At 1 January | 125.0 | 6.2 | 124.6 | 6.2 | ||||
| Issued for cash on exercise of share options | – | – | 0.4 | – | ||||
| At 31 December | 125.0 | 6.2 | 125.0 | 6.2 | ||||
The group has one class of ordinary voting shares which carry no right to fixed income.
During the year 38,500 (2006: 0.4 million) ordinary shares were issued upon exercise under share option schemes, giving rise to net proceeds of £0.2m (2006: £1.5m). See Note 27 for a summary of potential issues of ordinary shares under existing share option schemes.
Other reserves
Movements in reserves are set out in the Reconciliation of movement in capital and reserves in Note 26. The retained earnings reserve includes own shares held by the Employee Benefit Trust (see Note 29). The retained earnings reserve also includes own shares purchased by the company and treated as treasury shares (see Note 30). The nature and purpose of other reserves forming part of equity are as follows:
Translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries, including gains or losses arising on net investment hedges.
Hedging reserveThis reserve records the cumulative net change in the fair value of forward exchange contracts where they are designated as effective cash flow hedge relationships.
Merger reserveThis reserve arose on the acquisition of Servomex Limited in 1999, a purchase satisfied substantially by the issue of share capital and therefore eligible for merger relief under the provisions of section 131 of the Companies Act 1985.
Capital redemption reserveThis reserve records the historical repurchase of the group’s own shares.