Aviva 2006 Annual Report Download - page 164

Aviva plc
Annual Report and Accounts 2006 160
Notes to the consolidated financial statements continued
30 – Preference share capital continued
At the Annual General Meeting on 10 May 2006, the Company’s authorised preference share capital was increased to £1,200 million
and b700 million by the creation of 500 million sterling new preference shares of £1 each.
The new preference shares, if issued and allotted, would rank, as to payment of a dividend and capital, ahead of the Company’s ordinary
share capital but behind the cumulative irredeemable preference shares currently in issue. The issued preference shares are non-voting
except where their dividends are in arrears, on a winding up or where their rights are altered. On a winding up, they carry a preferential
right of return of capital ahead of the ordinary shares.
31 – Direct capital instrument
2006 2005
Notional amount £m £m
5.9021% £500 million direct capital instrument 500 500
4.7291% a700 million direct capital instrument 490 490
990 990
The euro and sterling direct capital instruments (the DCIs) were issued on 25 November 2004. They have no fixed redemption date but
the Company may, at its sole option, redeem all (but not part) of the DCIs at their principal amount on 28 November 2014 and 27 July
2020 for the euro and sterling DCIs respectively, at which dates the interest rates change to variable rates, or on any respective coupon
payment date thereafter. In addition, under certain circumstances defined in the terms and conditions of the issue, the Company may at
its sole option:
(i) redeem all (but not part) of the DCIs at their principal amount at any time prior to 28 November 2014 and 27 July 2020 for the euro
and sterling DCIs respectively;
(ii) substitute at any time all (but not some only) of the DCIs for,or vary the terms of the DCIs so that they become, Qualifying Tier 1
Securities or Qualifying Upper Tier 2 Securities;
(iii) substitute all (but not some only) of the DCIs for fully paid non-cumulative preference shares in the Company.These preference shares
could only be redeemed on 28 November 2014 in the case of the euro DCIs and on 27 July 2020 in the case of the sterling DCIs, or in
each case on any dividend payment date thereafter. The Company has the right to choose whether or not to pay any dividend on the
new shares, and any such dividend payment will be non-cumulative.
The Company has the option to defer coupon payments on the DCIs on any relevant payment date. Deferred coupons shall be satisfied
only in the following circumstances, all of which occur at the sole option of the Company:
(i) Redemption; or
(ii) Substitution by,or variation so they become, alternative Qualifying Tier 1 Securities or Qualifying Upper Tier 2 Securities; or
(iii) Substitution by preference shares.
No interest will accrue on any deferred coupon. Deferred coupons will be satisfied by the issue and sale of ordinary shares in the
Company at their prevailing market value, to a sum as near as practicable to (and at least equal to) the relevant deferred coupons.
In the event of any coupon deferral, the Company will not declare or pay any dividend on its ordinary or preference share capital.
Financial statements continued