Notes to the consolidated financial statements
19 Equity attributable to common shareholders continued
Cumulative preferred shares
Legal reserves
31 www.ahold.com/reports2008
Financial statements
AHOLD ANNUAL REPORT 2008 74
The Company's Articles of Association provide for the possible issuance of cumulative preferred shares. The Company believes
that its ability to issue this class of shares could prevent, or at least delay, an attempt by a potential bidder from making a hostile
takeover bid. In this respect, but also in other circumstances, this ability may safeguard the interests of the Company and all
stakeholders in the Company and resist influences that might conflict with those interests by affecting the Company's continuity,
independence or identity. No cumulative preferred shares were outstanding as of December 28, 2008 or during 2008 and 2007.
In March 1989, the Company entered into an agreement with Stichting Ahold Continuïteit ("SAC") as amended and restated in April
1994, March 1997, December 2001 and December 2003 (the "Option Agreement"). Pursuant to the Option Agreement, SAC was
granted an option, without payment, to acquire from the Company, from time to time until December 2016, cumulative preferred
shares up to a total par value that is equal to the total par value of all issued and outstanding shares of Ahold's share capital,
excluding cumulative preferred shares, at the time of exercising the option. The Option Agreement provides for an increase of the
total par value of cumulative preferred shares under option, taking into account the new, increased authorized share capital. The
holders of the cumulative preferred shares are entitled to 1,666.67 votes per share and a cumulative dividend expressed as a
percentage of the amount called-up and paid-in to purchase the cumulative preferred shares. The percentage to be applied is the
sum of (1) the average basic refinancing transaction interest rate as set by the European Central Bank - measured by the number
of days during which that rate was in force in the fiscal year over which the dividend is paid - plus 2.1 percent, and (2) the average
interest surcharge rate - measured by the number of days during which that rate was in force in the fiscal year over which the
dividend is paid - that would be charged by the largest credit institution in the Netherlands (based on balance sheet total as at the
close of the fiscal year immediately preceding the fiscal year over which the dividend is paid). The minimum percentage to be
applied is 5.75 percent. Subject to limited exceptions, any potential transfer of cumulative preferred shares requires the approval of
the Corporate Executive Board. Cumulative preferred shares can only be issued in a registered form. The Company may stipulate that
only 25 percent of the par value will be paid upon subscription for cumulative preferred shares until payment in full is later required
by the Company. SAC would then only be entitled to a market-based interest return on its investment.
SAC is a foundation organized under the laws of the Netherlands. Its statutory purpose is to safeguard the interests of the Company
and all stakeholders in the Company and to resist to the best of its ability influences that might conflict with those interests by
affecting the Company's continuity, independence or identity. In the case of liquidation, the SAC board of directors will decide
on the use of any remaining residual assets. The SAC board of directors has four members. The members are appointed by the
board of SAC itself.
In accordance with the Netherlands Civil Code, legal reserves have to be established in certain circumstances. The currency
translation reserve and cash flow hedging reserve are both legal reserves. The other legal reserves primarily consist of the cumulative
share in income of joint ventures and associates less dividends received and adjusted for any direct equity movements of joint
ventures and associates. Legal reserves are not available for distribution to the Company's shareholders. If the currency translation
reserve or the cash flow hedging reserve has a negative balance, distributions to the Company's shareholders are restricted to the
extent of the negative balance.
