ING Direct 2011 Annual Report Download - page 177

Notes to the consolidated annual accounts of ING Group continued
These non-voting equity securities are deeply subordinated and rank pari-passu with ordinary shares in a winding up of ING Group.
On these non-voting equity securities a coupon is payable of the higher of:
• EUR 0.85 per security, payable annually in arrears, with a first coupon of EUR 0.425 per security paid on 12 May 2009;
• 110% of the dividend paid on each ordinary share over 2009 (payable in 2010);
• 120% of the dividend paid on each ordinary share over 2010 (payable in 2011); and
• 125% of the dividend paid on each ordinary share over 2011 onwards (payable in 2012 onwards).
Since ING Groep N.V. had already paid an interim dividend of EUR 0.74 in August 2008, ING recognised a coupon payable of
EUR425million to the Dutch State as of 31 December 2008. This coupon was paid on 12 May 2009.
Further coupons are to be paid on 12 May of each year (the coupon date) in cash if dividend on ordinary shares is paid in cash or to be
paid in scrip securities in the event of a scrip dividend on ordinary shares. Coupons are only due and payable, on a non-cumulative basis
and if a dividend is paid on ordinary shares over the financial year preceding the coupon date, either on an interim or a final dividend basis,
provided that ING Groep N.V.’s capital adequacy position is and remains satisfactory both before and immediately after payment in the
opinion of the Dutch Central Bank.
ING Groep N.V. has, as of 12 November 2011, the right to repay all or some of the non-voting equity securities at EUR 15 per security at
any time, together with the pro-rata coupon accrued to such date. ING Groep N.V. and the Dutch State have agreed in October 2009 that
up to EUR 5 billion of the EUR 10 billion core Tier 1 securities could be repaid at any time until 31 January 2010 at the original issue price of
EUR 10 per non-voting equity security, plus a repurchase premium and accrued interest.
ING Groep N.V. also has the right to convert all or some of the non-voting equity securities into ordinary shares on the basis of one
non-voting equity security for 1.335 ordinary shares or bearer depositary receipts from three years after the issue date onwards, subject
tocertain conditions. This equates to an exchange price of EUR 7.49. The Dutch State in that case has the right to demand a redemption
payment of EUR 10 per non-voting equity security, together with the pro-rata coupon, if due, accrued to such date.
Both repayment and conversion of the securities must be approved by the Dutch Central Bank.
Repayment non-voting equity shares
In December 2009, ING repaid the first half of the non-voting equity securities (core Tier 1 securities) of EUR 5 billion plus a total premium
of EUR 605 million. On 13 May 2011 ING exercised its option for early repayment of EUR 2 billion of the remaining non-voting equity
securities (core Tier 1 securities). The total payment in May 2011 amounted to EUR 3 billion and included a 50% repurchase premium. ING
funded this repayment from retained earnings. ING has indicated that it is one of its priorities to repay the remaining EUR 3 billion
non-voting equity securities (core Tier 1 securities) as soon as possible, but this needs to be done very prudently in light of the current
challenging and changing financial and regulatory environment.
In order to finance the repayment, in December 2009, of the non-voting equity securities and the associated expenses as well as to
mitigate the capital impact of the additional Illiquid Assets Back-up Facility payments as part of the overall agreement with the European
Commission, ING launched a capital increase with preferential subscription rights for holders of (depositary receipts for) ordinary shares
ofup to EUR 7.5 billion. The rights issue, as disclosed in Note 13 ‘Shareholders’ equity (parent)/non-voting equity securities’ was authorised
by the Extraordinary General Meeting of Shareholders on 25 November 2009. Proceeds of the issue in excess of the above amounts were
used to strengthen ING’s capital position.
European Commission Restructuring Plan
In 2009, ING Groep N.V. submitted a Restructuring Plan to the European Commission as part of the process to receive approval for
thegovernment support measures. The European Commission has, by decision of 18 November 2009, formally approved the
Restructuring Plan. The main elements of the Restructuring Plan as announced on 26 October 2009 are as follows:
• elimination of double leverage and significant reduction of ING’s balance sheet;
• divestment of all Insurance and Investment Management activities;
• divestment of ING Direct USA;
• creation of a new company in the Dutch retail market composed of Interadvies (including Westland Utrecht and the mortgage activities
of Nationale-Nederlanden) and the existing consumer lending portfolio of ING Retail in the Netherlands. This business, once separated,
needs to be divested;
• restriction to be a price leader in any EU country for certain retail and SME banking products and restriction to acquire financial
institutions or other businesses that would delay the repayment of the non-voting equity securities. These restrictions will apply
fortheshorter period of three years or until the non-voting equity securities have been repaid in full to the Dutch State;
• an agreement with the Dutch State to alter the repayment terms of 50% of the non-voting equity securities;
• repayment of EUR 5 billion of the non-voting equity securities issued in November 2008 to the Dutch State;
• additional Illiquid Assets Back-up Facility payments as part of the overall agreement with the European Commission will have to be
made to the Dutch State in the form of fee adjustments relating to the Illiquid Assets Back-Up Facility which resulted in a one-off
pre-tax charge to ING of EUR 1.3 billion in the fourth quarter of 2009;
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
175ING Group Annual Report 2011