Shareholders’ equity

Common shares

As of December 31, 2013, the issued and fully paid share capital consists of 937,845,789 common shares, each share having a par value of EUR 0.20.

In June 2013, Philips settled a dividend of EUR 0.75 per common share, representing a total value of EUR 678 million. Shareholders could elect for a cash dividend or a share dividend. Approximately 59.8% of the shareholders elected for a share dividend, resulting in the issuance of 18,491,337 new common shares. The settlement of the cash dividend resulted in a payment of EUR 272 million.

The following table shows the movements in the outstanding number of shares;

Share movement schedule
 
2012
2013
 
 
 
Balance as of January 1
926,094,902
914,591,275
 
 
 
Dividend distributed
30,522,107
18,491,337
Purchase of treasury shares
(46,870,632)
(27,811,356)
Re-issuance of treasury shares
4,844,898
8,066,511
 
 
 
Balance as of December 31
914,591,275
913,337,767

Preference shares

The ‘Stichting Preferente Aandelen Philips’ has been granted the right to acquire preference shares in the Company. Such right has not been exercised. As a means to protect the Company and its stakeholders against an unsolicited attempt to (de facto) take over control of the Company, the General Meeting of Shareholders in 1989 adopted amendments to the Company’s articles of association that allow the Board of Management and the Supervisory Board to issue (rights to acquire) preference shares to a third party. As of December 31, 2013, no preference shares have been issued.

Option rights/restricted shares

The Company has granted stock options on its common shares and rights to receive common shares in the future. Please refer to note (31) Share-based compensation, which is deemed incorporated and repeated herein by reference.

Treasury shares

In connection with the Company’s share repurchase programs, shares which have been repurchased and are held in treasury for (i) delivery upon exercise of options, performance and restricted share programs and employee share purchase programs, and (ii) capital reduction purposes, are accounted for as a reduction of shareholders’ equity. Treasury shares are recorded at cost, representing the market price on the acquisition date. When issued, shares are removed from treasury shares on a FIFO basis.

Any difference between the cost and the cash received at the time treasury shares are issued, is recorded in retained earnings.

Dividend withholding tax in connection with the Company’s purchase of treasury shares is recorded in retained earnings.

The following transactions took place resulting from employee option and share plans:

 
 
2012
2013
 
 
 
Shares acquired
5,147
3,984
Average market price
EUR 17.86
EUR 22.51
Amount paid
EUR 0 million
EUR 0 million
Shares delivered
4,844,898
8,066,511
Average market price
EUR 24.39
EUR 28.35
Amount received
EUR 118 million
EUR 229 million
Total shares in treasury at year-end
28,712,954
20,650,427
Total cost
EUR 847 million
EUR 618 million

In order to reduce share capital, the following transactions took place:

 
 
2012
2013
 
 
 
Shares acquired
46,865,485
27,807,372
Average market price
EUR 16.41
EUR 22.69
Amount paid
EUR 769 million
EUR 631 million
Reduction of capital stock
82,364,590
37,778,510
Total shares in treasury at year-end
13,828,733
3,857,595
Total cost
EUR 256 million
EUR 100 million

Dividend distribution

A proposal will be submitted to the 2014 General Meeting of Shareholders to pay a dividend of EUR 0.80 per common share, in cash or shares at the option of the shareholder, from the 2013 net income.

Legal reserves

As of December 31, 2013, legal reserves relate to the revaluation of assets and liabilities of acquired companies in the context of multi-stage acquisitions of EUR 23 million (2012: EUR 54 million), unrealized gains on available-for-sale financial assets of EUR 55 million (2012: EUR 54 million), unrealized gains on cash flow hedges of EUR 24 million (2012: EUR 20 million), ‘affiliated companies’ of EUR 1,319 million (2012: EUR 1,161 million) and unrealized currency translation losses of EUR 569 million (2012: EUR 93 million).

The item ‘affiliated companies’ relates to the ‘wettelijke reserve deelnemingen’, which is required by Dutch law. This reserve relates to any legal or economic restrictions on the ability of affiliated companies to transfer funds to the parent company in the form of dividends.

Limitations in the distribution of shareholders’ equity

Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity of EUR 1,609 million (2012: EUR 1,480 million). As at December 31, 2013, such limitations relate to common shares of EUR 188 million (2012: EUR 191 million) as well as to legal reserves included under ‘revaluation’ of EUR 23 million (2012: EUR 54 million), available-for-sale financial assets of EUR 55 million (2012: EUR 54 million), unrealized gains on cash flow hedges of EUR 24 million (2012: EUR 20 million) and ‘affiliated companies’ of EUR 1,319 million (2012: EUR 1,161 million).

The unrealized losses related to currency translation differences of EUR 569 million (2012: EUR 93 million), although qualifying as a legal reserve, reduce the distributable amount by their nature.

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This is an interactive electronic version of the Philips Annual Report 2013 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the full Philips Annual Report 2013. This printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, IFRS basis of presentation, use of non-GAAP information, statutory financial statements and management report, reclassifications and analysis of 2013 compared to 2012.