Unilever 2000 Annual Report Download - page 114

Unilever Annual Report & Accounts and Form 20-F 2000 Shareholder Information
112
Control of Unilever
NV’s issued share capital on 31 December 2000 w as made
up of:
• Fl. 640 165 008 split into 571 575 900 ordinary shares
of Fl. 1.12 each
• Fl. 2 400 000 split into 2 400 ordinary shares numbered
1 to 2 400, know n as special shares
• Fl. 286 207 379 split into several classes of cumulative
preference shares
PLC’s issued share capital on 31 December 2000 w as made
up of:
• £40 760 420 split into 2 911 458 580 ordinary shares
of 1.4p each
• £100 000 of deferred stock
Unity of management
In order to ensure unity of management, NV and PLC have
the same directors. We achieve this through our nomination
procedure. Only the holders of NV’s special shares can
nominate candidates for election to the NV board, and only
the holders of PLC’s deferred stock can nominate candidates
for election to the PLC board. The current directors can
ensure that both NV and PLC shareholders are presented
with the same candidates for election as directors, because
the joint holders of both the special shares and the deferred
stock are NV Elma and United Holdings Limited, which are
subsidiaries of NV and PLC.
NV and PLC both act as directors of NV Elma and of
United Holdings Limited. The Chairmen of NV and PLC
are additional directors of United Holdings Limited.
Equalisation Agreement
To ensure that NV and PLC operate for all practical purposes
as a single company, we have an Equalisation Agreement.
Under the Equalisation Agreement NV and PLC adopt the same
financial periods and accounting policies. Neither company
can issue or reduce capital w ithout the consent of the other.
If one company had losses, or was unable to pay its
preference dividends, w e would make up the loss or
shortfall out of:
• the current profits of the other company (after it has
paid its ow n preference shareholders)
• then its ow n free reserves
• then the free reserves of the other company
If either company could not pay its ordinary dividends, we
would follow the same procedure, except that the current
profits of the other company would only be used after it
had paid its ow n ordinary shareholders and if the directors
thought it appropriate.
So far NV and PLC have always been able to pay their own
dividends, so w e have never had to follow this procedure.
If we did, the payment from one company to the other
would be subject to any United Kingdom and Dutch
tax and exchange control laws applicable at that time.
The Equalisation Agreement also makes the position of the
shareholders of both companies, as far as possible, the same
as if they held shares in a single company. To make this
possible we compare the ordinary share capital of the two
companies in units: a unit made up of Fl. 12 nominal of
NV’s ordinary capital carries the same weight as a unit made
up of £1 nominal of PLC’s ordinary capital. For every unit
(Fl. 12) you have of NV you have the same rights and
benefits as the ow ner of a unit (£1) of PLC. NV’s ordinary
shares currently each have a nominal value of Fl. 1.12,
and PLC’s share capital is divided into ordinary shares of
1.4p each. This means that a Fl. 12 unit of NV is made
up of 10.71 NV ordinary shares of Fl. 1.12 each and
a £1 unit of PLC is made up of 71.43 PLC ordinary shares
of 1.4p each. Consequently, one NV ordinary share equates
to 6.67 ordinary shares of PLC.
When we pay ordinary dividends we use this formula.
On the same day NV and PLC allocate funds for the dividend
from their parts of our current profits and free reserves.
We pay the same amount on each NV share as on 6.67 PLC
shares calculated at the relevant exchange rate. For interim
dividends this exchange rate is the average rate for the
quarter before w e declare the dividend. For final dividends
it is the average rate for the year. In arriving at the equalised
amount we include any tax payable by the company in
respect of the dividend, but calculate it before any tax
deductible by the company from the dividend.
In principle, issues of bonus shares and rights offerings
can only be made in ordinary shares. Again we would
ensure that shareholders of NV and PLC received shares
in equal proportions, using the ratio of Fl. 12 NV nominal
share capital to £1 PLC nominal share capital. The subscription
price for one new NV share would have to be the same,
at the prevailing exchange rate, as the price for 6.67 new
PLC shares.
Under the Equalisation Agreement (as amended in 1981)
the two companies are permitted to pay different dividends
in the following exceptional circumstances:
• if the average annual sterling/euro exchange rate
changed so substantially from one year to the next that
to pay equal dividends at the current exchange rates,
either NV or PLC w ould have to pay a dividend that was
unreasonable (i.e. substantially larger or smaller in its
own currency than the dividend it paid in the previous
year)
• the government of the United Kingdom or the
Netherlands could in some circumstances place
restrictions on the proportion of a company’s profits
which can be paid out as dividends; this could mean
that in order to pay equal dividends one company would
have to pay out an amount which w ould breach the
limitations in place at the time, or that the other company
would have to pay a smaller dividend