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Note 17 Equity


Subscribed share capital

The holders of common shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the Annual General Meeting of shareholders. The holders of the priority shares are entitled to 6 percent per share or the statutory interest in the Netherlands, whichever is lower, plus any accrued and unpaid dividends. They are entitled to 200 votes per share (in accordance with the 200 times higher nominal value per share) at the Annual General Meeting of shareholders. In addition, the holders of priority shares have the right to draw up binding lists of nominees for appointment to the Supervisory Board and the Board of Management; amendments to the Articles of Association are subject to the approval of the Meeting of Holders of Priority Shares.

Priority shares may only be transferred to a transferee designated by a Meeting of Holders of Priority Shares and against payment of the par value of the shares, plus interest at the rate of six percent per annum or the statutory interest in the Netherlands, whichever is lower. There are no restrictions on voting rights of holders of common or priority shares. The Articles of Association set out procedures for exercising voting rights. The General Meeting of Shareholders has in 2008 resolved to authorize the Board of Management for a period of 18 months (i) to issue shares (or grant rights to shares) in the capital of the company up to a maximum of 10 percent, which in case of mergers or acquisitions can be increased by up to a maximum of 10 percent, of the total number of shares outstanding (and to restrict or exclude the pre-emptive rights to those shares) and (ii) to acquire shares in the capital of the company, provided that the shares that will at any time be held will not exceed 10 percent of the issued share capital. The issue or repurchase of shares requires the approval of the Supervisory Board.

Composition of share capital

 

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In € 

Authorized share capital

Subscribed share capital

 

 

 

Priority shares (48 with nominal value of €400)

19,200

19,200

Cumulative preferred shares (200 million with nominal value of €2)

400,000,000

Common shares (600 million with nominal value of €2)

1,200,000,000

463,328,374

 

 

 

Total

1,600,019,200

463,347,574

Outstanding common shares

 

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Number of shares

 

 

 

2008

2007

 

 

 

Outstanding at January 1

262,322,775

287,268,350

Issued in connection to stock options exercised and performance shares granted

1,088,384

1,791,099

Share buyback program

(31,746,972)

(26,736,674)

 

 

 

Balance at year-end

231,664,187

262,322,775

In 2008, we completed a share repurchase program of €1.4 billion. Under the program, we repurchased and subsequently canceled 31.7 million shares (12 percent of the issued share capital). We held no common shares at year-end 2008 or 2007. During 2007, we repurchased and canceled 26.7 million common shares at an average price of €59.84 for a total amount of €1.6 billion.

Earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the year.

Weighted average number of shares

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Number of shares

 

 

 

2008

2007

 

 

 

Issued common shares at January 1

262,322,775

287,268,350

 

 

 

Effect of:

 

 

- Share buyback

(15,542,100)

(12,751,020)

- Issued common shares during the year

944,435

1,439,602

- Effect of own shares held

(45,635)

Shares for basic earnings
per share for the year

247,725,110

275,911,297

 

 

 

Effect of dilutive shares:

 

 

- For stock options

359,618

1,031,997

- For performance-related shares

1,168,391

1,127,034

 

 

 

Shares for diluted earnings per share

249,253,119

278,070,328

Of the shareholders’ equity of €7.5 billion, an amount of €6.8 billion (2007: €10.3 billion) was unrestricted and available for distribution – subject to the relevant provisions of our Articles of Association and Dutch law.

Unrestricted reserves at year-end

 

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In € millions

 

 

 

2008

2007

 

 

 

Shareholders’ equity at year-end

7,463

11,032

Subscribed share capital

(463)

(525)

Subsidiaries’ restrictions to transfer funds

(156)

(111)

Statutory reserve due to capital reduction

(77)

(77)

Reserve for development costs

(3)

(1)

 

 

 

Unrestricted reserves

6,764

10,318

At the General Meeting of Shareholders of April 26, 2001, an amendment to the Articles of Association was approved whereby the par value of the priority shares was decreased to €400 and of the common shares and the cumulative preferred shares to €2. As the revised nominal values are somewhat lower than the original par values, in accordance with section 67a of Book 2 of the Netherlands Civil Code, we recognized a statutory reserve of €77 million for this reduction in subscribed share capital. Statutory reserves also include €3 million for capitalized development costs, as well as the reserves relating to earnings retained by subsidiaries, associates, and joint ventures after 1983. Statutory reserves are non-distributable.

Other components of shareholders’ equity

Changes in fair value of derivatives comprise the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. In 2008, an amount of €551 million was transferred to goodwill, which related to hedging activities for the acquisition of ICI.

Cumulative translation reserves comprise all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well as from the translation of intercompany loans with a permanent nature and liabilities and derivates that hedge the net investments in a foreign subsidiary.

Equity-settled transactions include the stock option program and the performance-related share plan whereby options or shares are granted to the Board of Management and other executives. For details of the performance-related stock option plan and the performance-related share plan for the Board of Management and other executives, see note 8.

Dividend proposal

It is proposed that dividend on priority shares of €1,152 and on common shares of €417 million will be distributed. Following acceptance of this proposal, holders of common shares will receive a dividend of €1.80 per share of €2, of which €0.40 was paid earlier as an interim dividend. The final dividend of €1.40 will be made payable from May 7, 2009.

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