13 Preference shares
ING Group preference shares
Preference shares are divided into 2 categories: ‘A’ preference shares and ‘B’ preference shares. The authorised preference share capital of ING Groep N.V. consists of 100 million ‘A’ preference shares with a par value of EUR 1.20, of which as at 31 December 2007 16,012,839 have been issued and 1,000 million ‘B’ preference shares with a par value of EUR 0.24, of which none have been issued. The only movement in preference shares outstanding is explained under Buy-back of preference shares.
Preference shares may only be issued if at least the nominal value is paid up.
Preference shares rank before ordinary shares in entitlement to dividends and distributions upon liquidation of ING Groep N.V., but are subordinated to cumulative preference shares. Holders of ‘A’ and ‘B’ preference shares rank pari passu among themselves. If the profit or amount available for distribution to the holders of preference shares is not sufficient to make such distribution in full, the holders will receive a distribution in proportion to the amount they would have received if the distribution could have been made in full. The ‘A’ preference shares and ‘B’ preference shares are not cumulative and their holders will not be compensated in subsequent years for a shortfall in a prior year.
The ING Groep N.V.’s Articles of Association make provision for cancellation of preference shares.
‘A’ preference shares
The dividend on the ‘A’ preference shares is equal to a percentage of the amount (including share premium) for which the ‘A’ preference shares were originally issued.
This percentage is calculated by taking the arithmetic mean of the average effective yield on the 5 longest-dated Dutch government loans, as determined by a Calculating Agent to be designated by the Executive Board for the last 20 stock exchange days preceding the day on which the first ‘A’ preference shares are issued, or, as the case may be, preceding the day on which the dividend percentage is adjusted. The percentage thus established may be increased or decreased by not more than 0.5 percentage points, depending on the market conditions then prevailing, as the Executive Board may decide with the approval of the Supervisory Board.
The dividend on the ‘A’ preference shares is set at EUR 0.1582 per year until 1 January 2014 at which stage the dividend percentage will be readjusted (and thereafter every 10 years) to the average effective yield at that time on the 5 longest-dated Dutch government loans.
‘A’ preference shares may only be cancelled if a distribution of the amount (including share premium) for which the ‘A’ preference shares were originally issued reduced by the par value of the shares can be made on each ‘A’ preference share. Upon liquidation of ING Groep N.V., a distribution of the amount (including share premium) for which the ‘A’ preference shares were originally issued will, insofar as possible, be made on each ‘A’ preference share.
Buy-back of preference shares
During 2007, ING Group bought back 57,016,572 (depository receipts for) ‘A’ preference shares (2006: 24,051,039) at an average price of EUR 3.64 per share or EUR 207.5 million in total (2006: EUR 3.72 per share or EUR 89.5 million). The ‘A’ preference shares were bought back from ABN AMRO Holding and Fortis as described below.
In July 2007, ING announced that agreement had been reached with Fortis Insurance Netherlands to buy-back 28,172,583 ‘A’ preference shares of ING at a price of EUR 3.618175 per share or EUR 101,933,336 in total. Following the repurchase the preference shares were cancelled.
In October 2007, ING announced that agreement had been reached with ABN AMRO Holding to buy-back 28,843,989 ‘A’ preference shares of ING Group. The transaction was completed in two tranches. On 15 October 2007, 18,843,989 ‘A’ preference shares, were repurchased at a price of EUR 3.65 per share, or EUR 68,780,560 in total. Following the repurchase these preference share were cancelled. On 24 December, an additional 10,000,000 ‘A’ preference shares were repurchased at a price of EUR 3.68 per share, or EUR 36,800,000. None of the 10 million preference shares had been cancelled at 31 December 2007, and are therefore included in the number of ‘A’ preference share in issue at 31 December 2007. However, all of these shares were cancelled in February 2008.
Cumulative preference shares
The par value of the cumulative preference shares is EUR 1.20. The authorised cumulative preference share capital consists of 900 million cumulative preference shares, of which none have been issued.
The cumulative preference shares rank before the preference shares and the ordinary shares in entitlement to dividend and to distributions upon liquidation of ING Groep N.V.
The dividend on the cumulative preference shares will be equal to a percentage, calculated on the amount compulsorily paid up or yet to be paid up. This percentage shall be equal to the average of the Euro OverNight Index Average (EONIA) as calculated by the European Central Bank. During the financial year for which the distribution is made, this percentage is weighted on the basis of the number of days for which it applies, increased by 2.5 percentage points.
If and to the extent that the profit available for distribution is not sufficient to pay the dividend referred to above in full, the shortfall will be made up from the reserves insofar as possible. If, and to the extent that, the dividend distribution cannot be made from the reserves, the profits earned in subsequent years shall first be used to make up the shortfall before any distribution may be made on shares of any other category.
ING Groep N.V.’s Articles of Association make provision for the cancellation of cumulative preference shares. Upon cancellation of cumulative preference shares and upon liquidation of ING Groep N.V., the amount paid up on the cumulative preference shares will be repaid together with the dividend shortfall in preceding years, insofar as this shortfall has not yet been made up.
