For a breakdown of Equity attributable to equity holders, reference is made to the Consolidated Statement of Changes in Group Equity.
Total distributable reserves at December 31, 2009, amount to EUR 3,063 million (2008: EUR 2,872 million). For a detail of the non-distributable reserves, reference is made to the Corporate Financial Statements.
Share capital
KPN’s authorized capital stock totals EUR 1,440,000,000, divided into 3 billion ordinary shares of EUR 0.24 each and 3 billion Class B preferred shares of EUR 0.24 each. As of December 31, 2009, a total of 1,628,855,322 ordinary shares were outstanding and fully paid-in. Dutch laws prohibit KPN to cast a vote on shares KPN holds. The ordinary shares and Class B preferred shares carry the right to cast one vote each. For a description of the preferred shares, please see ‘The Foundation Preference Shares B KPN’ hereafter. The ordinary shares are registered or payable to bearer. Shareholders may request the Company to convert their registered shares to bearer shares but not vice versa.
Share premium
KPNAnnual Report 2009 www.kpn.com 5
Other reserves
Below is a detailed overview of the movements in the number of treasury shares and other reserves:
Amounts in millions of EUR,
unless indicated otherwise treasury sharesNumber of
Treasury shares
reserve reserveHedge
Tax effect hedge reserve Fair value reserve available for sale financial assets Currency translation reserve Total other reserves Balance as of January , 28 53,293,37 -59 -7 - - -68
Sold (exercise options) [3] -3,777,988 24 - - - - 24
Purchased 104,241,810 -1,170 - - - - -1,170
Cancelled -129,119,421 1,502 - - - - 1,502
Release - - -12 3 1 - -8
Amortization [6] - - 15 -4 - - 11
Exchange rate differences - - - 21 21
Balance as of December 3, 28 2,637,838 -238 - 3 2 -228
Sold (exercise options) [3] -3,349,988 22 - - - - 22
Share based compensation -1,226,829 16 - - - - 16
Purchased 92,453,954 -960 - - - - -960 Cancelled -85,507,470 871 - - - - 871 Release - - -137 34 -1 - -104 Amortization [6] - - 17 -4 - - 13 Other - - - - Balance as of December 3, 29 27,7,55 -289 -3 33 - 2 -37 – of which: to be cancelled 10,711,653
Total treasury shares 6,295,852
[..] Bracketed numbers refer to the related notes. Hedge reserve
Amounts in millions of EUR Dec. 3, 29 Dec. 31, 2008
Effective portion cash flow hedges -69 64
Amortizable part -65 -78
Balance of -3 -
For details of cash flow hedges reference is made to Note 29 ‘Capital and Financial Risk Management’. Treasury shares and treasury shares reserve
KPN purchases shares in its own capital under a share repurchase program and also for delivery upon exercise of share options by management and personnel under the share option and performance share plans (see Note 3). Votes on purchased shares may not be cast and they do not count towards determining the number of votes required at a General Meeting of Shareholders.
In 2009, 86,553,954 shares were purchased under the share repurchase program of which 85,507,470 were cancelled, including 9,665,169 that were purchased in 2008 for the EUR 1 billion share repurchase program. The remaining 10,711,653 shares that were repurchased under the 2009 EUR 1 billion share repurchase program will be cancelled in the first quarter of 2010.
In 2009, 5,900,000 ordinary shares were repurchased to cover KPN’s cash-settled performance share plans. Treasury shares are accounted for at cost, representing the market price on the acquisition date. The average share price of the shares purchased in 2009 to cover share and stock compensation plans was EUR 10.49. The proceeds at delivery of the treasury shares are recognized directly in the other reserves. In the event that more options are exercised than available as treasury shares for option plans, KPN anticipates providing shares through the issuance of new shares or the purchase of shares in the market. All rights with respect to repurchased treasury shares are suspended until those shares are delivered. Foundation Preference Shares B KPN
As of December 31, 2009, KPN has option arrangements regarding the issue of preference shares B in place with the Foundation Preference Shares B KPN (‘the Foundation’). Please see the description regarding the Foundation in the Annual Report, section ‘Corporate Governance’.
Consolidated Financial Statements
6 KPNAnnual Report 2009
Consolidated Financial Statements
KPN has a put option to place with the Foundation a number of its Class B preference shares, which have the same voting rights as ordinary shares, not exceeding the total issued share capital before such issue, or, subject to prior approval by the General Meeting of Shareholders, such larger number as the parties may agree. In addition, the Foundation has a call option, which is not limited in time, to acquire a number of Class B preference shares from KPN not exceeding the total issued amount of ordinary shares, minus one share and minus any shares already issued to the Foundation. Since October 12, 2006, the authority of the Board of Management to issue Class B preference shares under the put option expired. This expiration does not affect the obligation to issue Class B preference shares upon exercise of the call option by the Foundation. Upon exercise of the call option, 25% of the nominal value of EUR 0.24 per Class B preference share needs to be paid by the Foundation. KPN’s Board of Management can decide to request the Foundation to pay the remainder. Such decision is subject to the approval of the Supervisory Board.
KPN is of the opinion that neither the put option nor the call option represent a significant value as meant in IAS 1, paragraph 31 due to the fact that the put option can no longer be exercised by KPN and the fact that the likelihood that the call option will be exercised is very remote. In the remote event that the call option will be exercised, the preference shares B will be cancelled relatively shortly after issuance. The options are therefore not accounted for in the annual accounts nor is any additional information as meant in IAS 32 and 39 added.
[20] Minority interests
On December 21, 2009, KPN successfully completed its tender offer for the outstanding shares (44%) it did not already own in iBasis. The final offer amounted to USD 3.00 per share in cash, or approximately USD 93 million in total. Upon this acquisition KPN recorded EUR 65 million goodwill, refer to Note 10. In 2008, minority interests mainly related to iBasis (44%).
[21] Borrowings
The carrying amounts and fair value of the borrowings at December 31 are as follows:
December 3, 29 December 31, 2008
Amounts in millions of EUR Carrying amount Fair value Carrying amount Fair value
Eurobonds EUR 10,080 10,898 8,577 8,297
Eurobonds GBP 1,525 1,562 541 458
Global Bonds USD 1,555 1,709 2,322 2,202
Financial lease obligations 159 159 141 121
Bank overdraft 38 38 428 428 Credit facility - - - - Other loans 14 14 32 28 Total borrowings 3,37 ,38 2, ,53 – of which: current 869 909 1,165 1,181 – of which: non-current 12,502 13,471 10,876 10,353
The fair value is based on the listed price of the bonds.
KPN’s weighted average interest yield on the borrowings outstanding before swap at December 31, 2009, was approximately 5.7% (2008 5.5%) and the weighted average effective interest yield of these borrowings before swap was approximately 5.9% (2008 5.7%). The weighted average interest yield on borrowings outstanding after swap was approximately 5.4% (2008: 5.4%).
For further details on borrowings, including a redemption schedule, reference is made to Note 29 ‘Financing Risk Management – Liquidity Risk’.
Bonds
On February 4, 2009, KPN issued a dual tranche Eurobond consisting of two bonds for respectively an amount of EUR 750 million, with a five-year maturity and a coupon of 6.25% and for an amount of EUR 750 million, with a ten-year maturity and a coupon of 7.50%.
On September 17, 2009, KPN issued a GBP 850 million Sterling bond with a twenty-year maturity and a Sterling coupon of 5.75%. The Sterling bond has been swapped into EUR 971 million with a Euro-equivalent coupon of 5.98%.
On September 30, 2009, KPN issued an EUR 700 million Eurobond with a fifteen-year maturity and a coupon of 5.625%. All new bonds in 2009 have been issued under KPN’s Global Medium Term Note program and have been listed on Euronext Amsterdam.
KPNAnnual Report 2009 www.kpn.com 7
On June 29, 2009, KPN repurchased USD 588 million, with settlement date July 2, 2009, of the USD 1,750 million 8% Notes due 2010. In accordance with the regular redemption schedule, KPN redeemed in 2009 EUR 700 million of the Eurobond 2004 – 2009 (matured on July 21, 2009).
On April 2, 2008, KPN issued an EUR 850 million Eurobond with a long seven-year maturity and a coupon of 6.50% and in June 2008 a tap of EUR 75 million was issued.
On September 16, 2008, KPN issued an EUR 850 million Eurobond with a five-year maturity and a coupon of 6.25%. All new bonds in 2008 have been issued under KPN’s Global Medium Term Note program and have been listed on Euronext Amsterdam.
In accordance with the regular redemption schedule, KPN redeemed in 2008 GBP 175 million of the Eurobond 2001 – 2008 (matured on April 11, 2008) and EUR 768 million of the Eurobond 1998 – 2008 (matured on November 5, 2008).
Financial lease obligations and other loans
As of December 31, 2009, the financial lease obligations amounted to EUR 159 million, refer to Note 29 for more
information. iBasis has a revolving credit facility amounting to USD 35 million of which USD 19 million (EUR 13 million) was drawn as per December 31, 2009. This credit facility will mature on October 1, 2011. The revolving credit facility is secured by a first priority lien and security interest on the assets of iBasis and its wholly owned subsidiaries in the United States who act as guarantors. In addition, iBasis has pledged two-thirds of all its shares of iBasis Netherlands, which is a wholly- owned subsidiary of iBasis, as collateral for the revolving credit facility.
Credit rating
KPN’s credit ratings on December 31, 2009, were BBB+ with stable outlook from Standard & Poor’s and Baa2 with stable outlook from Moody’s.