Table of Contents
SECURITIES AND EXCHANGE COMMISSION
| England and Wales | N/A | 2911 | ||
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Primary Standard Industrial Classification Code Number) |
Carel van Bylandtlaan 30
CT Corporation System
Copies to:
William P. Rogers, Jr.
Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective and the consummation of the transactions described herein.
If this Form is filed to
register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering. o
If this Form is a
post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
| Proposed Maximum | Proposed Maximum | |||||||
| Title of Each Class of | Amount to be | Offering Price | Aggregate | Amount of | ||||
| Securities to be Registered(1) | Registered | Per Unit | Offering Price | Registration Fee | ||||
|
Class A Ordinary Shares, nominal value
€0.07 per
share(2)
|
1,107,326,950(2) | $28.32(3) | $31,359,499,224 | $3,691,013.06 | ||||
|
Class A Ordinary Shares, nominal value
€0.07 per
share(4)
|
471,740,236(4) | $28.41(5) | $13,402,140,105 | $1,577,431.89 | ||||
| (1) | American Depositary Shares issuable upon deposit of the securities registered hereby will be registered under separate registration statements on Form F-6. |
| (2) | Represents Class A Ordinary Shares underlying American Depositary Shares, reduced by the number of such shares that are to be offered outside the United States and increased by the number of such shares that are initially to be offered outside the United States but that may be resold from time to time in the United States. |
| (3) | Solely for the purposes of calculating the registration fee pursuant to Rule 457(c) and Rule 457(f) under the Securities Act of 1933, based on $56.65, which represents the average of the high and low prices of Royal Dutch ordinary shares in New York registry form on the New York Stock Exchange on May 13, 2005 and subsequently dividing such amount by two as one Royal Dutch Shell Class A ADR, which will represent two Royal Dutch Shell Class A Ordinary Shares, is being offered in exchange for each Royal Dutch ordinary share in New York registry form. |
| (4) | Represents Class A Ordinary Shares not underlying American Depositary Shares that are to be offered in the United States or that may be resold from time to time in the United States. |
| (5) | Solely for purposes of calculating the registration fee pursuant to Rule 457(c) and Rule 457(f) under the Securities Act of 1933, based on $56.83, which represents the average of the high and low prices of Royal Dutch ordinary shares in Hague registry form on Euronext Amsterdam on May 13, 2005, converted to U.S. dollars using the noon buying rate in New York City for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank of New York, and subsequently dividing such amount by two as two Royal Dutch Shell Class A Ordinary Shares are being offered in exchange for each Royal Dutch ordinary share in Hague registry form. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
| The information in this prospectus may change. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. We may not complete the offer and issue these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. |
SUBJECT TO COMPLETION, DATED MAY 18, 2005
U.S. Prospectus
EXCHANGE OFFER BY ROYAL DUTCH SHELL PLC FOR THE OUTSTANDING ORDINARY
The boards of directors of Royal Dutch Petroleum Company (N.V. Koninklijke Nederlandsche Petroleum Maatschappij) (“Royal Dutch”) and The “Shell” Transport and Trading Company, p.l.c. (“Shell Transport”) have agreed to propose to their shareholders that Royal Dutch and Shell Transport will become subsidiaries of a new parent company, Royal Dutch Shell plc (“Royal Dutch Shell”). To implement the proposal, (i) Royal Dutch Shell is making an offer to acquire all of the issued and outstanding ordinary shares of Royal Dutch in exchange for Royal Dutch Shell Class A ordinary shares or American depositary receipts (“ADRs”) representing Royal Dutch Shell Class A ordinary shares and (ii) Royal Dutch Shell proposes to become the parent company of Shell Transport pursuant to a United Kingdom reorganizational procedure referred to as a “scheme of arrangement” under section 425 of the UK Companies Act 1985, as amended. As a result of the Scheme of Arrangement, holders of Shell Transport ordinary shares will receive Royal Dutch Shell Class B ordinary shares and holders of Shell Transport ADRs will receive ADRs representing Royal Dutch Shell Class B ordinary shares.
The Royal Dutch supervisory board and the Royal Dutch board of management have unanimously reached the conclusion, on the basis of the considerations stated in this prospectus, that the transaction described above is in the best interest of Royal Dutch, holders of Royal Dutch’s ordinary shares and Royal Dutch’s other stakeholders. The Royal Dutch supervisory board and the Royal Dutch board of management are furthermore of the opinion that the offer is fair and reasonable and accordingly unanimously recommend its acceptance.
Under the terms of the offer:
| • | for every Royal Dutch ordinary share held in New York registry form you tender in the offer, you will receive one Royal Dutch Shell Class A ADR; and |
| • | for every Royal Dutch ordinary share held in bearer or Hague registry form you tender in the offer, you will receive two Royal Dutch Shell Class A ordinary shares. |
Each Royal Dutch Shell Class A ADR will represent two Royal Dutch Shell Class A ordinary shares.
The offer will expire at 5.00 p.m. New York City time (11:00 p.m. Amsterdam time) on July 18, 2005, unless the offer is extended.
The offer is subject to the conditions listed in this prospectus under “The Offer — Conditions to the Offer” on page 53, including, but not limited to, (i) the condition that, prior to the expiration of the offer, the number of Royal Dutch ordinary shares that have been validly tendered and not withdrawn shall represent at least 95% of the issued share capital of Royal Dutch that is then outstanding and (ii) the condition that the “scheme of arrangement” shall become effective. As of the date of this prospectus, we do not own any Royal Dutch ordinary shares.
Applications have been made for our Class A ordinary shares and Class B ordinary shares to be admitted to the official list of the UK Listing Authority and to trading on the market for listed securities of the London Stock Exchange under the symbols “RDSA” and “RDSB”, respectively. We have applied, subject to the offer being declared unconditional (gestanddoening), to list our Class A ordinary shares and Class B ordinary shares on Eurolist by Euronext Amsterdam (“Euronext Amsterdam”) under the symbols RDSA and RDSB, respectively. We have been approved, subject to official notice of issuance, to list our Class A ADRs and Class B ADRs on the New York Stock Exchange under the symbols “RDS.A” and “RDS.B”, respectively.
We urge you to read this prospectus carefully, including the section “RISK FACTORS” beginning on page 25, before deciding to accept the offer.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
| Citigroup Global Markets Inc. | Rothschild Inc. |
Dealer Managers for the offer in the United States
Date of this prospectus is May , 2005
Table of Contents
CERTAIN DEFINED TERMS
Unless otherwise specified or if the context otherwise requires:
“Royal Dutch Shell”, “the company”, “we”, “us” or “our” refer to Royal Dutch Shell plc, a company incorporated in England and Wales.
“Royal Dutch” refers to N.V. Koninklijke Nederlandsche Petroleum Maatschappij (also known as Royal Dutch Petroleum Company), a company organized under the laws of The Netherlands.
“Shell Transport” refers to The “Shell” Transport and Trading Company, p.l.c., a company incorporated in England and Wales.
“Royal Dutch/ Shell Group” or “Group” refers to the companies (other than Royal Dutch Shell) in which Royal Dutch and Shell Transport together or separately, either directly or indirectly, have control either through a majority of the voting rights or the right to exercise a controlling influence or to obtain the majority of the benefits and be exposed to the majority of the risks. The companies in which Royal Dutch and Shell Transport directly or indirectly own investments are separate and distinct entities. However, in this prospectus “Royal Dutch/ Shell Group” and “Group” are sometimes used for convenience in contexts where reference is made to companies in the Royal Dutch/ Shell Group in general. These expressions are also used where no specific purpose is served by identifying a particular company or companies.
“Parent Companies” refer to Royal Dutch and Shell Transport.
“Transaction” refers to the proposed transaction pursuant to which we will, through the offer and the Scheme, become the parent company of Royal Dutch and Shell Transport and the Royal Dutch/ Shell Group.
“Admitted Institution” means the institutions which hold Royal Dutch ordinary shares in bearer form and/ or, after the consummation of the Transaction, Royal Dutch Shell ordinary shares on behalf of their clients through Euroclear Nederland as an admitted institution of Euroclear Nederland or, as the context so permits, which hold Royal Dutch ordinary shares in bearer form and/ or, after the consummation of the Transaction, Royal Dutch Shell ordinary shares on behalf of their clients through an institution which is an admitted institution of Euroclear Nederland.
“AFM” refers to The Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten).
“Business day” means a day (other than a Saturday or Sunday) on which banks are open in London, New York and Amsterdam.
“Clear days” means calendar days and excludes the date of mailing, the date of receipt of the notice and the date of the meeting itself.
“Companies Act” refers to the Companies Act of England and Wales 1985, as amended.
“Euronext Amsterdam trading day” refers to a day on which Euronext Amsterdam is open for trading.
“Exchange Act” refers to the U.S. Securities Exchange Act of 1934.
“Expiration date of the offer” means 5.00 p.m., New York City time (11.00 p.m. Amsterdam time) on July 18, 2005, unless we extend the period of time for which the offer is open in compliance with Dutch tender offer regulations and U.S. federal securities laws, in which case the term “expiration date of the offer” means the latest time and date on which the offer, as so extended, expires.
“Form 20-F” refers to Royal Dutch’s and Shell Transport’s Annual Report on Form 20-F for the year ended December 31, 2004, as amended on May 4, 2005.
“HMRC” refers to Her Majesty’s Revenue and Customs.
“Q1 Form 6-K” refers to Royal Dutch’s and Shell Transport’s Report on Form 6-K furnished to the SEC on May 9, 2005.
“RDS Group” means Royal Dutch Shell and its subsidiaries, after the consummation of the Transaction.
“Royal Dutch ordinary shares” refers to Royal Dutch ordinary shares in bearer form, Royal Dutch ordinary shares in Hague registry form and Royal Dutch ordinary shares in New York registry form, collectively.
ii
Table of Contents
“Scheme” or “Scheme of Arrangement” refers to the proposed scheme of arrangement under section 425 of the Companies Act, between Shell Transport and the holders of Shell Transport ordinary shares and Shell Transport bearer warrants.
“SEC” refers to the U.S. Securities and Exchange Commission.
“Securities Act” refers to the U.S. Securities Act of 1933.
“UK High Court” refers to the High Court of Justice in England and Wales.
“UKLA” or “UK Listing Authority” refers to the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the UK Financial Services and Markets Act 2000.
“United States” or “U.S.” refers to the United States of America, its territories and possessions, any state of the United States, and the District of Columbia.
“U.S. business day” means any day, other than a Saturday, Sunday or federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time.
References in this prospectus to Royal Dutch ordinary shares in bearer form or to Royal Dutch Shell shares shall, where the relevant shares are held by Euroclear Nederland in its capacity as central institute (centraal instituut) under the Dutch Securities Giro Act (Wet giraal effectenverkeer) and the context so permits, include references to interests held in such shares by other persons in accordance with the Dutch Securities Giro Act.
Certain other terms are defined in other sections of this prospectus.
iii
Table of Contents
REFERENCE TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information about Royal Dutch, Shell Transport and the Royal Dutch/Shell Group from other documents that are not included in or delivered with this prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this prospectus by requesting them in writing or by telephone or from the information agent at the following address:
Georgeson Shareholder Communications Inc.
If you would like to request documents, please do so by July 11, 2005, in order to receive them in a timely manner. If you request any incorporated document from the information agent, the information agent will mail the requested document to you by first class mail, or send it by other equally prompt means, within 1 business day after it receives your request. You can also obtain the documents incorporated by reference in this prospectus from the SEC’s website at http://www.sec.gov. For a list of the documents that are incorporated by reference into this prospectus, see “Where You Can Find More Information” on page 132.
In deciding whether to tender your Royal Dutch ordinary shares in the offer, you should rely only on the information contained or incorporated by reference into this prospectus or in the related U.S. offer documents. We have not authorized any person to provide you with any information that is different from, or in addition to, the information that is contained in this prospectus or in the related offer documents.
The information contained in this prospectus speaks only as of the date indicated on the cover of this prospectus unless the information specifically indicates that another date applies.
REGULATORY STATEMENT
Citigroup Global Markets Inc., which is acting as one of the dealer managers and is a registered broker dealer in the U.S., is an affiliate of Citigroup Global Markets Limited (“Citigroup”). Citigroup, which is regulated in the United Kingdom by the Financial Services Authority, is acting as sponsor of Royal Dutch Shell in connection with the listing of Royal Dutch Shell ordinary shares on the London Stock Exchange. In this capacity, Citigroup provides listing related services to Royal Dutch Shell and makes certain representations on behalf of Royal Dutch Shell in accordance with the regulations of the Financial Services Authority. Citigroup is also acting as co-listing agent in connection with the listing of Royal Dutch Shell ordinary shares on Euronext Amsterdam. Citigroup is also acting as a financial adviser to Royal Dutch Shell and as a financial adviser to Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group and no one else in connection with the Transaction and the listing of Royal Dutch Shell ordinary shares on the London Stock Exchange and Euronext Amsterdam. Citigroup will not be responsible under the provisions of the Financial Services and Markets Act 2000 or any regulations made thereunder to anyone (including shareholders of Royal Dutch or Shell Transport) other than Royal Dutch Shell, Royal Dutch and Shell Transport for providing the protections afforded to clients of Citigroup, or for providing advice in relation to the Transaction and the listing of Royal Dutch Shell ordinary shares on the London Stock Exchange and Euronext Amsterdam.
Rothschild Inc., which is acting as one of the dealer managers and is a registered broker dealer in the U.S., is an affiliate of NM Rothschild & Sons Limited (“Rothschild”). Rothschild, which is regulated in the United Kingdom by the Financial Services Authority, is acting as sponsor of Royal Dutch Shell in connection with the listing of Royal Dutch Shell ordinary shares on the London Stock Exchange. In this capacity, Rothschild provides listing related services to Royal Dutch Shell and makes certain representations on behalf of Royal Dutch Shell in accordance with the regulations of the Financial Services Authority. Rothschild is also acting as co-listing agent in connection with the listing of Royal Dutch Shell ordinary shares on Euronext Amsterdam. Rothschild is also acting as a financial adviser to Royal Dutch Shell and as a financial adviser to Royal Dutch, Shell Transport and
iv
Table of Contents
ABN AMRO Bank N.V. (“ABN AMRO”) is acting for Royal Dutch (and has provided certain financial services, and may continue to provide certain financial or investment banking services to Royal Dutch Shell, Shell Transport, Royal Dutch and the Royal Dutch/Shell Group, including acting as Dutch exchange agent in the offer and co-listing agent in connection with the listing of the Class A Shares and the Class B Shares on Euronext Amsterdam) and no-one else in connection with the Transaction and will not be responsible under the provisions of the Financial Services and Markets Act 2000 or any regulations made thereunder to anyone other than Royal Dutch for providing the protections afforded to clients of ABN AMRO or for providing advice in relation to the Transaction and the listing of Royal Dutch Shell ordinary shares on Euronext Amsterdam.
This prospectus must not be distributed in whole or in part into Japan. This prospectus and other documents related to the Transaction may not be electronically provided to, nor accessed by, residents of Japan or persons who are in Japan. Copies of this prospectus and any other documents related to the Transaction are not being, and must not be, mailed or otherwise distributed or sent to any person or company in or from Japan. Persons receiving this prospectus (including custodians, nominees and trustees) or other documents related to the Transaction must not distribute or send them to any person or company in or from Japan.
The offer is not being made, directly or indirectly, in or into or by the use of the mails or any other means or instrumentality (including, without limitation, facsimile transmission, telex, telephone or internet) of interstate or foreign commerce of, or any such facilities of a national securities exchange of, Japan, and is not capable of acceptance by any such use, means, instrumentality or facilities from or within Japan. The offer is not being made to residents of Japan or in Japan.
The offer has not been notified to the Commissione Nazionale per le Societa’ e la Borsa pursuant to applicable Italian securities laws and implementing regulations. Absent such notification, no public offer can be carried out in the Republic of Italy. This prospectus, and its accompanying documents, have not been, and cannot be, disclosed to any Italian residents or person or entity in the Republic of Italy and no other form of solicitation has been, and can be, carried out in the Republic of Italy. This prospectus and any accompanying or related document, may not be mailed, distributed, disseminated or otherwise disclosed to any Italian residents or person or entity in the Republic of Italy. Royal Dutch ordinary shares may not be tendered by Italian residents or persons or entities in the Republic of Italy and Royal Dutch Shell may not accept shares thus tendered.
This prospectus does not constitute an offer to sell securities and it is not soliciting an offer to buy securities, nor shall there be any sale or purchase of securities pursuant hereto, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the laws of any such jurisdiction.
In accordance with, and subject to the restrictions under, Dutch law and pursuant to exemptive relief granted by the SEC from Rule 14e-5 under the U.S. Securities Exchange Act of 1934, as amended, Royal Dutch and its affiliates may make certain purchases of, or arrangements to purchase, Royal Dutch ordinary shares outside the United States during the period in which the offer remains open for acceptance. In accordance with the requirements of Rule 14e-5 under the Exchange Act and with the exemptive relief granted by the SEC, such purchases, or arrangements to purchase, must comply with applicable Dutch rules, including the provisions of the 1995 Act on the supervision of the securities trade (Wet toezicht effectenverkeer 1995 / Wte 1995) (Netherlands) and the 1995 Decree on the supervision of the securities trade (Besluit toezicht effectenverkeer 1995 / Bte 1995) (Netherlands) and the rules of Euronext Amsterdam. Royal Dutch will disclose promptly in the U.S. and The Netherlands by means of a press release, information regarding such purchases of Royal Dutch ordinary shares outside the offer in reliance on the exemptive relief granted by the SEC, shall provide such information to holders
v
Table of Contents
This prospectus is only addressed to holders of Royal Dutch ordinary shares in New York registry form wherever located and holders of Royal Dutch ordinary shares in bearer or Hague registry form located in the U.S. Holders of Royal Dutch ordinary shares in bearer or Hague registry form located outside the U.S. should refer to the separate offer document (which may incorporate by reference all or a portion of this prospectus and documents incorporated by reference herein) which can be obtained from ABN AMRO, which is acting as the Dutch exchange agent.
vi
Table of Contents
TABLE OF CONTENTS
| Page | |||||
| 1 | |||||
| 5 | |||||
| 13 | |||||
| 20 | |||||
| 22 | |||||
| 24 | |||||
| 25 | |||||
| 29 | |||||
| 30 | |||||
| 31 | |||||
| 31 | |||||
| 32 | |||||
| 41 | |||||
| 43 | |||||
| 43 | |||||
| 50 | |||||
| 50 | |||||
| 50 | |||||
| 51 | |||||
| 51 | |||||
| 52 | |||||
| 52 | |||||
| 52 | |||||
| 53 | |||||
| 53 | |||||
| 53 | |||||
| 54 | |||||
| 55 | |||||
| 56 | |||||
| 57 | |||||
| 57 | |||||
| 58 | |||||
| 58 | |||||
| 59 | |||||
| 59 | |||||
| 60 | |||||
| 61 | |||||
| 62 | |||||
| 62 | |||||
| 63 | |||||
| 63 | |||||
| 64 | |||||
vii
Table of Contents
viii
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
The following are some questions that you, as a holder of Royal Dutch ordinary shares, may have about the Transaction and the offer and answers to those questions. These questions and answers may not address all questions that may be important to you. We urge you to carefully read the remainder of this prospectus, and the accompanying letter of transmittal, because the information in these questions and answers is not complete and additional important information is contained in the remainder of this prospectus, the documents referred to or incorporated by reference in this prospectus and the accompanying letter of transmittal.
| Q: | What are we proposing to do? |
| A: | We have entered into an implementation agreement with Royal Dutch and Shell Transport pursuant to which (i) our Class A ordinary shares (“Class A Shares”) and ADRs representing Class A Shares (“Class A ADRs”) are being offered in exchange for all of the issued and outstanding Royal Dutch ordinary shares, and (ii) we plan to issue our Class B ordinary shares (“Class B Shares”) and the applicable depositary will issue ADRs representing Class B Shares (“Class B ADRs”) in exchange for the cancelation of Shell Transport’s ordinary shares (including Shell Transport ordinary shares to which holders of Shell Transport bearer warrants are entitled) and Shell Transport’s ordinary shares underlying the Shell Transport ADRs as a result of the Scheme of Arrangement. After the offer and the Scheme of Arrangement are completed, we would become the single parent company of Royal Dutch and Shell Transport and, through the Parent Companies, the Royal Dutch/ Shell Group. |
| Q: | What is the Scheme of Arrangement? |
| A: | Concurrent with the offer, we intend to acquire Shell Transport pursuant to an English law procedure known as a “scheme of arrangement”. A scheme of arrangement is an arrangement between a company and its members (or any class of them) pursuant to section 425 of the Companies Act. A company can effect almost any kind of reorganization, merger or demerger restructuring by way of a scheme of arrangement. |
| The Scheme of Arrangement requires approval by a majority in number representing three-quarters in value of the Shell Transport ordinary shareholders who are present and vote either in person or by proxy at the meeting convened by the UK High Court for the purpose of considering the Scheme (including those holders of Shell Transport bearer warrants present and voting, either in person or by proxy at the meeting). It also requires UK High Court approval. As the proposed Scheme of Arrangement includes a reduction of capital, a separate special resolution of the Shell Transport shareholders (requiring a 75% majority of those voting) is also necessary. The Shell Transport ordinary shares will be canceled and holders thereof whose names appear in the register of members of Shell Transport at the Scheme record time (6:00 p.m. London time on the business day before the Scheme becomes effective) will receive Class B Shares. | |
| Once approved by the Shell Transport ordinary shareholders and sanctioned by the UK High Court, the arrangements are binding on all holders of Shell Transport ordinary shares (including holders of Shell Transport bearer warrants) and on Shell Transport. |
| Q: | After the expiration of the offer period, when will the offer be declared unconditional? |
| A: | Our obligation to accept Royal Dutch ordinary shares for exchange is subject to the satisfaction or, if permitted and consented to by Royal Dutch and Shell Transport, waiver of the conditions to the offer. All conditions to the offer other than the sanctioning of the Scheme by the UK High Court and the subsequent registration of the order sanctioning the Scheme by the Registrar of Companies of England and Wales (the “scheme condition”) must be satisfied or waived on or prior to the expiration of the offer period. In order to facilitate the concurrent completion of the offer and the Scheme, the scheme condition will survive the expiration of the offer period for up to 5 Euronext Amsterdam trading days. We expect to make a public announcement on or immediately prior to the date of the hearing by the UK High Court of the petition to sanction the Scheme, stating that all conditions except for the scheme condition have been satisfied or waived, and subject to and immediately upon the satisfaction of the scheme condition, the offer |
1
Table of Contents
| will thereafter automatically be declared to be unconditional (gestand gedaan) upon the registration of the order sanctioning the Scheme by the Registrar of Companies of England and Wales. We expect the order sanctioning the Scheme to be registered by the Registrar of Companies in England and Wales on July 20, 2005. See “Important Dates” on page 12 for information on important dates relating to the offer. |
| Once the offer has expired, you will not be able to withdraw any Royal Dutch ordinary shares that you have tendered. For a discussion of the timing of delivery of Class A Shares or Class A ADRs in exchange for Royal Dutch ordinary shares previously tendered and accepted for exchange in the offer, see the discussion below under the heading “The Offer — Acceptance and Delivery of Securities”. |
| Q: | What will I receive if the offer is completed? |
| A: | If you tender Royal Dutch ordinary shares in New York registry form in the offer and the offer is completed, you will receive one Class A ADR for every Royal Dutch ordinary share in New York registry form you validly tender and do not properly withdraw. Each Class A ADR will represent two Class A Shares. |
| If you tender Royal Dutch ordinary shares in bearer or Hague registry form in the offer and the offer is completed, you will receive two Class A Shares for every Royal Dutch bearer or Hague registry share you validly tender and do not properly withdraw. |
| Q: | What is our tax residency? |
| A: | Although we are incorporated in England and Wales, we are resident in The Netherlands for Dutch and UK tax purposes. For a discussion of the material tax consequences to holders of our tax residency being in The Netherlands, see “Material Tax Consequences — Dutch Tax Considerations” on page 78. |
| Q: | Does Royal Dutch support the offer? |
| A: | Yes. The Royal Dutch supervisory board and the Royal Dutch board of management have unanimously reached the conclusion, on the basis of the considerations described in this prospectus, that the Transaction between Royal Dutch and Shell Transport is in the best interest of Royal Dutch, holders of Royal Dutch ordinary shares and Royal Dutch’s other stakeholders. They are furthermore of the opinion that the offer is fair and reasonable and accordingly unanimously recommend its acceptance. The Royal Dutch supervisory board and the Royal Dutch board of management have received a written opinion from ABN AMRO that, as at October 27, 2004, based upon and subject to matters considered, assumptions used and qualifications set forth therein, the exchange ratio to be used in the offer was fair, from a financial point of view, to the holders of Royal Dutch ordinary shares. ABN AMRO confirmed its opinion by delivering a written opinion dated 13 May, 2005 to the Royal Dutch supervisory board and the Royal Dutch board of management. |
| Information about the recommendation of the Royal Dutch board of management and the Royal Dutch supervisory board is set forth under “The Transaction — Recommendation of Royal Dutch’s Management and Supervisory Board” on page 43. The Royal Dutch supervisory board and the Royal Dutch board of management received certain corporate finance advice from Citigroup and Rothschild. Information about the corporate finance advice received from Citigroup and Rothschild and the fairness opinions delivered by ABN AMRO is set forth herein, under “The Transaction — Background to the Transaction” on page 32 and “The Transaction — Opinion of Royal Dutch’s Financial Advisor” on page 43 respectively. |
| Q: | If I decide not to tender, how will the offer affect my Royal Dutch ordinary shares? |
| A: | You will continue to own your Royal Dutch ordinary shares in their current form. However, if the offer is completed, the number of Royal Dutch ordinary shares remaining in public circulation may be so small that there would no longer be an active trading market for Royal Dutch ordinary shares. The absence of an active trading market could reduce the liquidity and market value of the Royal Dutch ordinary shares that you do not tender. In addition, Royal Dutch ordinary shares in New York registry form may no longer be eligible for trading on the New York Stock Exchange. |
| Following completion of the offer and depending on the level of acceptance, we intend to request that Royal Dutch seeks to delist the |
2
Table of Contents
| Royal Dutch ordinary shares from the London Stock Exchange and Euronext Amsterdam and the Royal Dutch ordinary shares in New York registry form from the New York Stock Exchange. If Royal Dutch’s ordinary shares in New York registry form are delisted from the New York Stock Exchange and Royal Dutch has fewer than 300 holders of record of Royal Dutch ordinary shares in the United States, Royal Dutch may seek to deregister its New York registry shares under the Exchange Act. | |
| In addition, we reserve the right to use any legally permitted method to obtain 100% of the Royal Dutch ordinary shares, including engaging in a squeeze-out, one or more corporate restructuring transactions, changes to the Royal Dutch articles or in one or more transactions with holders of minority shares, including public or private exchanges or tender offers or purchases. |
| Q: | Will there be a “squeeze-out” following the offer? |
| A: | If the number of Royal Dutch ordinary shares that have been validly tendered and not withdrawn represent at least 95% of the issued share capital of Royal Dutch that is then outstanding, we expect, but are not obligated, to initiate squeeze-out proceedings with a view to acquiring 100% of the outstanding share capital of Royal Dutch, in accordance with Article 2:92a of the Dutch Civil Code. To initiate squeeze-out proceedings, we would have to issue a notice of summons in accordance with Dutch law. If we are able to effectuate a squeeze-out, the Royal Dutch ordinary shares held by minority Royal Dutch shareholders will be acquired for cash and a Dutch court will determine the price to be paid for the shares. Upon payment of such amount into a specified bank account (in accordance with the procedures prescribed by Dutch law), the Royal Dutch ordinary shares of the minority will transfer to us by operation of law. The price determined by the Dutch court in squeeze-out proceedings may be higher or lower than the cash equivalent of the Royal Dutch Shell securities offered in exchange for the Royal Dutch ordinary shares. |
| Q: | Will I have to pay any fees or commissions? |
| A: | No, if: |
| • | you hold Royal Dutch ordinary shares in New York registry form that are registered in your name and you tender them to the U.S. exchange agent, | |
| • | you hold Royal Dutch ordinary shares in bearer form with a bank or broker that is an Admitted Institution of Euroclear Netherlands or an institution which holds Royal Dutch ordinary shares in bearer form through such Admitted Institutions, which directly tenders, and delivers your shares to the Dutch exchange agent, or | |
| • | you hold Royal Dutch ordinary shares in Hague registry form (aandelen op naam). |
| If you hold your Royal Dutch ordinary shares with a bank, broker or other nominee which does not directly tender and deliver your shares to the Dutch exchange agent, you are advised to consult with them to determine whether any charges will apply to you. |
| Q: | Will I be taxed on the Royal Dutch Shell securities I receive? |
| A: | If you are a U.S. taxpayer, as a general matter, you will not recognize gain or loss on the exchange. |
| For more information on the UK, Dutch and U.S. tax consequences of the offer, see “Material Tax Consequences” beginning on page 74. You are advised to consult your own tax advisor on the tax consequences to you of participating in the offer. |
| Q: | What percentage of our shares will current Royal Dutch ordinary shareholders own after the offer? |
| A: | Assuming all Royal Dutch shareholders validly tender, and none properly withdraw, their Royal Dutch ordinary shares in the offer, after completion of the Transaction (i) the former holders of Royal Dutch ordinary shares would own Class A Shares (including Class A Shares represented by Class A ADRs), representing 60% of our outstanding issued ordinary share capital and voting rights and (ii) the former holders of Shell Transport ordinary shares would own Class B Shares (including Class B Shares represented by Class B ADRs), representing 40% of our out- |
3
Table of Contents
| standing issued ordinary share capital and voting rights. |
| To the extent that the Transaction is consummated but not all the former holders of Royal Dutch ordinary shares tender their shares, the percentage of our share capital and voting rights held by former holders of Royal Dutch ordinary shares will be less than 60%. Accordingly, in such a situation, the amount of our issued ordinary share capital and voting rights held by former Shell Transport shareholders would be greater than 40%. |
| Q: | What is the difference between Class A Shares and Class B Shares? |
| A: | Class A Shares and Class B Shares will have identical voting rights and will vote together as a single class on all matters, including the election of directors, unless a matter affects the rights of one class as a separate class. Class A Shares and Class B Shares will have identical rights upon our liquidation, and dividends declared on each will be equivalent in amount. However, in seeking to preserve the current tax treatment of dividends, holders of Class A Shares will receive Dutch source dividends, while holders of Class B Shares will receive dividends that are UK sourced to the extent that these dividends are paid through the dividend access mechanism (as described on page 69 under “The Scheme of Arrangement — Dividend Access Mechanism”). |
| Q: | Do I need to do anything if I want to retain my Royal Dutch ordinary shares? |
| A: | No. If you want to retain your Royal Dutch ordinary shares, you do not need to take any action. |
| Please see “Risk Factors — Risks to Royal Dutch shareholders who do not tender their Royal Dutch ordinary shares in the Offer” on page 26 for a discussion of potential consequences to you if you do not tender your Royal Dutch ordinary shares and the Transaction is consummated. |
| Q: | What happens if the offer is not completed? |
| A: | If the offer is not completed: |
| • | your tendered Royal Dutch ordinary shares in New York registry form will be returned to you without interest or any other payment being due. This should occur several business days following the announcement that the offer has terminated; | |
| • | if you hold Royal Dutch ordinary shares in bearer form, your shares delivered to ABN AMRO will be re-delivered to the relevant Admitted Institution(s) of Euroclear Nederland upon public announcement thereof; and | |
| • |
if you hold Royal Dutch ordinary shares in Hague
registry form (aandelen op naam), your acceptance
communicated to N.V. Algemeen Nederlands Trustkantoor ANT (“ANT”) will be considered withdrawn. |
| Q: | Who can answer my questions? |
| A: | If you hold Royal Dutch ordinary shares in New York registry form and have questions about the offer, you may contact Georgeson Shareholder Communications Inc., which is acting as information agent for the offer. |
| If you hold Royal Dutch ordinary shares in bearer form and have questions about the offer, you should contact your bank or broker or ABN AMRO, which is acting as Dutch exchange agent. | |
| If you hold Royal Dutch ordinary shares in Hague registry form and have questions about the offer, you should contact ANT at (011) 31-20-522-2510 and email: registers@ant-trust.nl. |
4
Table of Contents
SUMMARY
This summary highlights selected information from this prospectus and may not contain all of the information that is important to you. To understand the offer fully and for a more complete description of the legal terms of the offer, you should read carefully this entire prospectus and the other documents to which we have referred you. See “Where You Can Find More Information” on page 132.
The Companies
Royal Dutch Shell
We were incorporated in England and Wales on February 5, 2002, as a private company limited by shares under the name Forthdeal Limited. On October 27, 2004, we re-registered as a public company limited by shares and changed our name to Royal Dutch Shell plc.
We are registered at Companies House, Cardiff with company number 04366849, and the Chamber of Commerce, The Hague under number 34179503. Our registered office is at Shell Centre, London, SE1 7NA, UK and our headquarters are at Carel van Bylandtlaan 30, 2596 HR The Hague, The Netherlands. Tel.: +31 (0) 70 377 9111. We are considered a resident of The Netherlands for Dutch and UK tax purposes. Our authorised agent in the United States is Puglisi & Associates, 850 Library Avenue, Suite 204, Newark Delaware 19711. Our agent for service of process in the United States is CT Corporation Systems, 111 Eighth Avenue, 13th floor, New York NY 10019 Tel (212) 894-8400.
The Transaction will result in our becoming the parent company of Royal Dutch, Shell Transport and, through Royal Dutch and Shell Transport, of the Royal Dutch/ Shell Group. Our primary object is to carry on the business of a holding company.
Royal Dutch/ Shell Group
Currently, Royal Dutch and Shell Transport are the Parent Companies of the Royal Dutch/ Shell Group but are not themselves part of it. The Royal Dutch/ Shell Group has grown out of a scheme of amalgamation between Royal Dutch and Shell Transport dated 12 September 1906 and agreements from 1907 by which the scheme of amalgamation was implemented and pursuant to which they combined their interests in the oil industry through the transfer of all the significant operating assets of each Parent Company to companies owned 60% by Royal Dutch and 40% by Shell Transport. Throughout the twentieth century, the Royal Dutch/ Shell Group expanded with acquisitions in Europe, Africa and the Americas and continued to develop its business interests around the world, now operating in over 140 countries and territories and employing more than 114,000 people. Whilst best known to the public for its service stations and for exploring and producing oil and gas on land and at sea, the Royal Dutch/ Shell Group’s activities include transporting and trading oil and gas, marketing natural gas, producing and selling fuel for ships and planes, generating electricity and providing energy efficiency advice. The Royal Dutch/ Shell Group also produces and sells petrochemical building blocks to industrial consumers globally and is investing in making renewable and lower-carbon energy sources competitive for large-scale use.
Royal Dutch
Royal Dutch Petroleum Company (N.V. Koninklijke Nederlandsche Petroleum Maatschappij), was incorporated on June 16, 1890, under the laws of The Netherlands.
Royal Dutch does not engage in operational activities. It derives the whole of its income — except for interest income on cash balances or short-term investments — from its interests in the Royal Dutch/ Shell Group.
The principal trading markets for Royal Dutch ordinary shares are Euronext Amsterdam and the New York Stock Exchange.
The address of Royal Dutch’s registered office, head office and principal place of business is at Carel van Bylandtlaan 30, 2596 HR The Hague, The Netherlands. Tel.: (011 31 70) 377 9111.
5
Table of Contents
Shell Transport
The “Shell” Transport and Trading Company, p.l.c. was incorporated on October 18, 1897, under the laws of England and Wales.
Shell Transport does not engage in operational activities. It derives the whole of its income — except for interest income on cash balances or short-term investments — from its interests in the Royal Dutch/ Shell Group.
The principal trading market for the Shell Transport ordinary shares is the London Stock Exchange. American Depositary Receipts evidencing Shell Transport ordinary shares are listed on the New York Stock Exchange. Each Shell Transport ADS represents six Shell Transport ordinary shares.
The Transaction
Reasons for the Transaction (page 41)
In making their decision that Royal Dutch should propose the Transaction and in making their recommendation that holders of Royal Dutch ordinary shares accept the offer and tender their Royal Dutch ordinary shares, the Royal Dutch board of management and Royal Dutch supervisory board considered, among other things, the following:
| • | Terms of the Transaction: the fact that the exchange ratio to be proposed reflects the ownership of the Royal Dutch/ Shell Group by Royal Dutch and Shell Transport and the other terms of the unification protocol and implementation agreement. | |
| • | Advice and opinion of financial advisors: the written opinion of ABN AMRO addressed to the Royal Dutch board of management and the Royal Dutch supervisory board that, as at October 27, 2004, the exchange ratio to be used in the offer was fair, from a financial point of view, to holders of Royal Dutch shares; and the corporate finance advice provided by Citigroup and Rothschild. ABN AMRO confirmed its opinion by delivering a written opinion dated May 13, 2005 to the Royal Dutch board of management and the Royal Dutch supervisory board. The full text of the written opinions of ABN AMRO dated October 27, 2005 and May 13, 2005 are attached hereto as Annex B and Annex C, respectively, and set forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by ABN AMRO in rendering its opinions. Additional detail concerning the written opinion of ABN AMRO and the corporate finance advice provided by Citigroup and Rothschild is contained under “The Transaction — Opinion of Royal Dutch’s Financial Advisor” on page 43 and “The Transaction — Background to the Transaction” on page 32, respectively. | |
| • | Increased clarity and simplicity of governance: the belief that the Transaction will result in a clearer and simpler governance structure, including: |
| — | a single, smaller board initially comprised of 10 non-executive members and 5 executive directors and | |
| — | a simplified senior management structure with a single non-executive Chairman of the board, a single Chief Executive and clear lines of authority. This is expected to result from the fact that following completion of the Transaction the executive committee of Royal Dutch Shell will report through the Chief Executive Officer to a single board of directors with a single non-executive Chairman. |
| • | Increased accountability: the expectation that the Transaction will lead to increased accountability and clarify lines of authority. | |
| • | Increased management efficiency: the belief that the Transaction will increase the efficiency of decision making and management processes generally, including through the elimination of dual corporate headquarters in favor of a single corporate headquarters, the elimination of duplication and the centralization of functions. | |
| • | Tax treatment: the fact that (a) the exchange of Royal Dutch ordinary shares in the Transaction would not be subject to tax for Dutch and U.S. federal income tax purposes and (b) the Transaction would be |
6
Table of Contents
| broadly tax neutral for the Royal Dutch/ Shell Group. See “Material Tax Consequences” for a description of the material tax consequences to U.S. holders of the offer. | ||
| • | Expected accounting treatment: the fact that it was expected that the Transaction would be accounted for on an historical cost (or carry-over) basis under International Financial Reporting Standards and U.S. GAAP rather than as a business combination (see Unaudited Condensed Pro Forma Combined Financial Information on page 134 for a more detailed explanation of the accounting treatment for the Transaction). | |
| • | Index inclusion: the fact that our shares would be expected to be included in the FTSE All-Share and FTSE 100 indices with a weighting reflecting our full market capitalization (i.e., both Class A Shares and Class B Shares). Because these indices are widely tracked by investors, we expect this inclusion to have a positive impact on overall demand for our shares. | |
| • | Flexibility in issuing equity and debt: the fact that the Transaction would result in a single publicly traded entity that would facilitate equity and debt issuances, including on an SEC-registered basis. |
The Offer (page 53)
If the offer is completed:
| • | for every Royal Dutch ordinary share in New York registry form you tender, you will receive one Class A ADR. Each Class A ADR will represent two Class A Shares; and | |
| • | for every Royal Dutch ordinary share in bearer or Hague registry form you tender, you will receive two Class A Shares. |
Assuming that all outstanding Royal Dutch ordinary shares are tendered, a total of 4,139,040,000 Class A Shares, including Class A Shares represented by Class A ADRs, will be in issue.
Conditions to the Offer (page 53)
Our obligation to accept Royal Dutch ordinary shares for exchange is subject to the satisfaction or, if permitted and consented to by Royal Dutch and Shell Transport, waiver of the conditions to the offer. These conditions are set forth more fully under the heading “The Offer — Conditions to the Offer” on page 53 and include, but are not limited to, the following:
| • | the number of Royal Dutch ordinary shares that have been validly tendered for exchange before the expiration of the offer and that have not been withdrawn representing at least 95% of the issued share capital of Royal Dutch that is then outstanding (the “minimum acceptance condition”); | |
| • | prior to the expiration date of the offer, the Royal Dutch Annual General Meeting having been held in accordance with Dutch law to inform Royal Dutch shareholders about the offer and the Royal Dutch Annual General Meeting having resolved to approve the entering into by Royal Dutch of the implementation agreement; | |
| • | the sanctioning of the Scheme of Arrangement by the UK High Court and the subsequent registration of the order sanctioning the Scheme of Arrangement by the Registrar of Companies of England and Wales (the “scheme condition”); and | |
| • | approval of applications to list and trade our ordinary shares on Euronext Amsterdam and the London Stock Exchange and our ADRs on the New York Stock Exchange, subject only to the limited conditions described under the applicable clause under the heading “The Offer — Conditions to the Offer” on page 53. |
We may, with Royal Dutch’s and Shell Transport’s prior written consent, waive the minimum acceptance condition and certain other conditions to the offer.
7
Table of Contents
Conditions to the Scheme of Arrangement (page 67)
The Scheme of Arrangement is subject to the satisfaction or, if consented to by Royal Dutch, waiver of certain conditions. These conditions are set forth more fully under the heading “The Scheme of Arrangement — Conditions to the Scheme of Arrangement” on page 67 and include, but are not limited to, the following
| • | the conditions to the offer (other than the scheme condition) having been satisfied or waived on or before the date on which the order sanctioning the Scheme of Arrangement is made or expressed to take effect; | |
| • | receipt of specified approvals by the Shell Transport shareholders, the sanctioning of the Scheme of Arrangement by the UK High Court and the subsequent registration of the order sanctioning the Scheme of Arrangement by the Registrar of Companies of England and Wales; and | |
| • | approval of applications to list and trade our ordinary shares on Euronext Amsterdam and the London Stock Exchange and to list our ADRs on the New York Stock Exchange, subject only to the limited conditions described under the applicable clause under the heading “The Scheme of Arrangement — Condition to the Scheme of Arrangement”. |
Shell Transport may, with Royal Dutch’s prior written consent, waive certain conditions to the Scheme of Arrangement.
The Offer
Procedures for Tendering (page 56)
If you hold your Royal Dutch ordinary shares in New York registry form in a brokerage or custody account, you should instruct your broker, dealer, commercial bank, trust company or other entity through which you hold your Royal Dutch ordinary shares in New York registry form to arrange to tender your Royal Dutch ordinary shares in the offer to the U.S. exchange agent in book-entry form through The Depository Trust Company’s (“DTC”) automated tender offer system (ATOPs).
If you hold one or more share certificates for Royal Dutch ordinary shares in New York registry form, to accept the offer, complete and sign the enclosed letter of transmittal and deliver it, before the expiration date of the offer, together with share certificate(s) representing your Royal Dutch ordinary shares in New York registry form and any other required documents, to JPMorgan Chase Bank, N.A., the U.S. exchange agent for the offer, at one of the addresses set forth on the letter of transmittal.
Holders of Royal Dutch ordinary shares in bearer form who hold their Royal Dutch ordinary shares with a bank or stockbroker should make their acceptance of the offer known to the Dutch exchange agent, ABN AMRO, via their respective bank or stockbroker during the period beginning on May 20, 2005 and ending on the expiration date of the offer.
The bank or stockbroker may set an earlier deadline for communication by holders of such Royal Dutch ordinary shares in bearer form in order to permit the bank or stockbroker to communicate their acceptances to ABN AMRO in a timely manner.
Holders of Royal Dutch ordinary shares in Hague registry form registered in the name of the relevant holders (aandelen op naam) will receive an application form to make their acceptance of the offer known. The application form should be completed, signed and returned so as to reach ANT at PO Box 11063, 1001 GB Amsterdam, The Netherlands, by no later than the expiration date of the offer.
Holders of Royal Dutch ordinary shares in bearer form represented by already issued share certificates to bearer provided with separate dividend coupons (K-stukken) should note that, in accordance with Royal Dutch’s articles of association, such certificates have been abolished. If such holders wish to tender these Royal Dutch ordinary shares, they should make their acceptance known by transferring their certificates via their bank or stockbroker to the Dutch exchange agent, ABN AMRO, during the period beginning on May 20, 2005 and ending on the expiration date of the offer. The bank or stockbroker may set an earlier deadline for communication by holders of such Royal Dutch ordinary shares in bearer form in order to permit the bank or stockbroker to communicate their acceptances to ABN AMRO in a timely manner.
8
Table of Contents
Offer Period and Extension (page 54)
The offer is currently scheduled to expire at 5:00 p.m. New York City time (11:00 p.m. Amsterdam time) on July 18, 2005; however, we may, from time to time, extend the offer until all the conditions listed in this prospectus under the heading “The Offer — Conditions to the Offer” beginning on page 53 have been satisfied or waived.
If we extend the offer, we will make an announcement to that effect no later than 3:00 a.m. New York City time (9:00 a.m. Amsterdam time) on the next Euronext Amsterdam trading day after the previously scheduled expiration date.
We reserve the right to provide a subsequent offer period (also known as a “grace period”) of up to 15 Euronext Amsterdam trading days, but in no event more than 20 U.S. business days, following the expiration date of the offer. If we decide to provide a subsequent offer period, it will not commence until we have determined that all conditions to the offer (including the scheme condition) have been satisfied or, to the extent permitted, waived.
During a subsequent offer period, if provided, you would be permitted to tender Royal Dutch ordinary shares that you did not tender in the offer. A subsequent offer period, if provided, is not an extension of the offer. If you tender Royal Dutch ordinary shares during a subsequent offer period, you will not be able to withdraw your tendered shares. We would promptly accept for exchange any Royal Dutch ordinary shares tendered during a subsequent offer period at the same exchange ratio as in the offer. Any subsequent offer period will be announced simultaneously with an announcement that the offer has become unconditional (gestanddoening), and we have accepted shares for exchange in the offer.
As it is expected that we will not be able to determine that the scheme condition has been satisfied until after the expiration date of the offer (which determination is expected to occur on July 20, 2005), the subsequent offer period, if any, would commence after such determination. Subject to the satisfaction or, to the extent permitted, waiver of all conditions to the offer other than the scheme condition, we expect to make a public announcement on or immediately prior to the date of the hearing by the UK High Court of the petition to sanction the Scheme (the “hearing date”), stating that all conditions except for the scheme condition have been satisfied or waived, and subject to and immediately upon the satisfaction of the scheme condition, the offer will thereafter automatically be declared to be unconditional (gestand gedaan) upon the registration of the order sanctioning the Scheme by the Registrar of Companies of England and Wales.
Withdrawal Rights (page 59)
You will have the right to withdraw tendered Royal Dutch ordinary shares prior to the expiration date of the offer. Once the offer has expired, you will not be able to withdraw any Royal Dutch ordinary shares that you have tendered. You should be aware that we will not be able to determine if the scheme condition has been satisfied until the order sanctioning the Scheme of Arrangement has been registered by the Registrar of Companies of England and Wales. Consequently, you will not be able to withdraw your tendered Royal Dutch ordinary shares during the period between the expiration date of the offer and the determination of whether or not the scheme condition has been satisfied, which is expected to occur on July 20, 2005. Further, we will not be obligated to accept tendered Royal Dutch ordinary shares unless the scheme condition has been satisfied.
Risk Factors (page 25)
In deciding whether to tender your Royal Dutch ordinary shares, you should carefully consider the risks described under “Risk Factors”.
Delisting of Royal Dutch Ordinary Shares (page 64)
Following completion of the offer and depending on the level of acceptance, we intend to request that Royal Dutch seeks to delist the Royal Dutch ordinary shares from the London Stock Exchange and Euronext Amsterdam and the Royal Dutch ordinary shares in New York registry form from the New York Stock Exchange. In addition, depending on the number of Royal Dutch ordinary shares in New York registry form acquired
9
Table of Contents
Regulatory Matters (page 52)
It is a condition to completion of the offer that all necessary filings or applications have been made in connection with the Transaction and all statutory or regulatory obligations in any jurisdiction have been complied with in connection with the Transaction except as noted in clause (vii) under the heading “The Offer — Conditions to the Offer” on page 53.
Appraisal Rights (page 52)
There are no appraisal rights with respect to the offer or the Transaction.
Material Tax Consequences (page 74)
The exchange of Royal Dutch ordinary shares pursuant to the offer will not be a taxable transaction for U.S. federal income tax purposes for U.S. holders. U.S. holders of Royal Dutch ordinary shares who are neither resident nor ordinarily resident in the UK for UK tax purposes will not generally be subject to UK taxation of chargeable gains in respect of the exchange of Royal Dutch ordinary shares pursuant to the offer unless they carry on a trade, profession or vocation in the UK through a branch or agency or a permanent establishment and their Royal Dutch ordinary shares are or have been used, held or acquired for the purposes of such trade, branch, agency or permanent establishment. U.S. holders of Royal Dutch ordinary shares who are not resident in The Netherlands will generally not be subject to Dutch taxes in respect of the exchange of Royal Dutch ordinary shares in the offer.
You are advised to consult your own tax advisor concerning the particular tax consequences to you of tendering your Royal Dutch ordinary shares in the offer.
See “Material Tax Consequences” on page 74.
Shareholders’ Meetings
Royal Dutch Annual General Meeting to Approve the Implementation Agreement and Consider the Offer
The Royal Dutch annual general meeting will be held at 10:30 a.m. Amsterdam time on June 28, 2005 at the Circus Theater in The Hague.
The agenda for the Royal Dutch annual general meeting will include the following matters specifically related to the Transaction:
| (1) | explanation and discussion of the offer in accordance with section 9q of the Dutch 1995 Decree on the Supervision of the Securities Trade; and | |
| (2) | approval of the implementation agreement. |
In addition, the agenda will also include the proposal, which will not be subject to the Offer being declared unconditional (gestanddoening), that the Royal Dutch Annual General Meeting resolves to amend the Royal Dutch articles of association and to grant the Royal Dutch Board of Management authorisation to buy back all the outstanding Royal Dutch priority shares and subsequently cancel all the Royal Dutch priority shares thus obtained.
10
Table of Contents
The Royal Dutch Annual General Meeting will be called on or about May 27, 2005 in accordance with past practice and in accordance with the Royal Dutch articles of association and Dutch law.
A majority vote of Royal Dutch Shareholders is required to approve the implementation agreement
As of May 13, 2005, the directors of Royal Dutch and managing directors of the companies of the Royal Dutch/ Shell Group and Royal Dutch’s affiliates beneficially owned and were entitled to vote approximately 102,547 Royal Dutch ordinary shares representing less than 1% of the shares outstanding on that date.
Shell Transport Meetings to Approve Scheme of Arrangement
The Scheme of Arrangement is subject to approval at the court meeting by a majority in number representing three-fourths in value of those Shell Transport ordinary shareholders present and voting, either in person or by proxy (including those holders of Shell Transport bearer warrants present and voting, either in person or by proxy at the meeting) and its implementation will also require the approval of Shell Transport shareholders at the separate Shell Transport Extraordinary General Meeting to be held on June 28, 2005 by not less than 75 per cent of the Shell Transport shareholders as (being entitled to do so) vote in person or by proxy.
11
Table of Contents
Important Dates
| Event | Date | |
|
Commencement of the offer
|
May 19, 2005 | |
| Latest time for lodging forms of proxy for the Royal Dutch Annual General Meeting | June 21, 2005 | |
| Royal Dutch Annual General Meeting | June 28, 2005, 10:30 a.m. Amsterdam time | |
| Shell Transport Annual General Meeting | June 28, 2005, 11:00 a.m. London time | |
| Shell Transport Court Meeting | June 28, 2005, 12:00 noon London time(a) | |
| Shell Transport Extraordinary General Meeting | June 28, 2005, 12:10 p.m. London time(b) | |
| Expiration date of the offer | July 18, 2005, 5:00 p.m. New York City time, (11:00 p.m. Amsterdam time) unless the offer is extended in accordance with Dutch and U.S. federal securities laws (in which case an announcement to that effect will be made no later than the next Euronext Amsterdam trading day) | |
| Expected announcement that the offer is unconditional (gestand wordt gedaan), except for the Scheme Condition | July 19, 2005, 2:00 a.m. New York City time (8:00 a.m. Amsterdam time)(d) | |
| Hearing of petition to sanction the Scheme of Arrangement | July 19, 2005, 10:30 a.m. London time(a) | |
| Expected date of registration of the order sanctioning the Scheme by the Registrar of Companies in England and Wales | July 20, 2005 by 9:00 a.m. Amsterdam time (8:00 a.m. London time)(c) | |
| Expected date that the offer will be declared unconditional (gestanddoening) and the Royal Dutch ordinary shares will be accepted for exchange | July 20, 2005, before opening Euronext Amsterdam, unforeseen circumstances excepted (c) | |
| Expected commencement of subsequent offer period assuming July 20, 2005 as the date of acceptance of shares for exchange | July 20, 2005 | |
| Effective date of the Transaction, expected date and time of commencement of dealings of our ordinary shares on Euronext Amsterdam and the London Stock Exchange | July 20, 2005, 9:00 a.m. Amsterdam time, (8:00 a.m. London time)(c)(d)(e) | |
| Expected date of listing and time of start of trading of our ADRs on the New York Stock Exchange | July 20, 2005, 9:30 a.m. (New York City time)(c)(d) | |
| Expected settlement date | No later than July 25, 2005(c) | |
| End of subsequent offer period, if any, assuming July 20, 2005 as the date of acceptance of shares for exchange | August 9, 2005, 9:00 a.m. New York City time, (3:00 p.m. Amsterdam time)(c)(d) | |
| (a) | Or as soon thereafter as the Shell Transport Annual General Meeting is concluded or adjourned. |
| (b) | Or as soon thereafter as the Court Meeting is concluded or adjourned. |
| (c) | These dates are indicative only and will depend, inter alia, on the date upon which the High Court sanctions the Scheme. |
| (d) | Unless the offer is extended in accordance with Dutch and U.S. federal securities laws. |
| (e) | Or as soon thereafter as the order sanctioning the Scheme has been registered by the Registrar of Companies in England & Wales. |
12
Table of Contents
SUMMARY HISTORICAL FINANCIAL DATA
Presented below is summary historical financial data for Royal Dutch Shell as at and for the period ended December 31, 2004 and as at and for the quarter ended March 31, 2005 and for the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport as at and for each of the years in the five-year period ended December 31, 2004 and as at and for the quarters ended March 31, 2004 and 2005. The summary historical financial data of Royal Dutch Shell has been derived from Royal Dutch Shell’s audited financial statements and unaudited financial information included elsewhere in this prospectus, which have been prepared in accordance with UK GAAP or, in the case of condensed interim financial information as at and for the periods ended March 31, 2004 and 2005, International Financial Reporting Standards. The summary historical financial data for each of the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport has been derived from the “Selected Financial Data” and their respective audited financial statements included in the Form 20-F, which is incorporated by reference in this prospectus, and unaudited financial information included in the Q1 Form 6-K, which is incorporated by reference in this prospectus. The historical financial information of the Royal Dutch/ Shell Group has been prepared in accordance with U.S. GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in U.S. dollars. The historical financial information of Royal Dutch has been prepared in accordance with Netherlands GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in euros. The historical financial information of Shell Transport has been prepared in accordance with UK GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in pounds sterling.
You should read the following summary historical financial data together with the financial information of Royal Dutch Shell included elsewhere in this prospectus, the financial information of the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport and the section entitled “Discussion and Analysis of Financial Condition and Results of Operations” included in the Form 20-F, which is incorporated by reference into this prospectus, and the condensed interim financial reports of the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport and the section entitled “Discussion and Analysis of Financial Condition and Results of Operations” included in the Q1 Form 6-K, which is incorporated by reference in this prospectus.
Royal Dutch Shell
Royal Dutch Shell has not engaged in any operational activities since its incorporation. Apart from the contemplated Transaction, Royal Dutch Shell has only borne the costs of administration expenses, acquired investments and issued share capital. At December 31, 2004, the end of its most recent fiscal year, under UK GAAP, Royal Dutch Shell had accumulated net profits of $1 million, total assets of $404 million and shareholders’ funds of $397 million. Under U.S. GAAP, at December 31, 2004 Royal Dutch Shell’s accumulated losses were $2 million, its total assets were $404 million and its shareholders’ funds were $397 million. At March 31, 2005, the end of its most recent fiscal period, under International Financial Reporting Standards, Royal Dutch Shell had accumulated net profits of $2 million, total assets of $386 million and total equity of $379 million. Under U.S. GAAP, at March 31, 2005, Royal Dutch Shell’s accumulated losses were $1 million, its total assets were $386 million and its shareholders’ funds were $379 million.
13
Table of Contents
Royal Dutch/ Shell Group
| 2004 | 2003(a) | 2002(a) | 2001(a) | 2000(a) | ||||||||||||||||
| $ million | ||||||||||||||||||||
|
Income statement data
(year ended December 31)
|
||||||||||||||||||||
|
Sales proceeds
|
||||||||||||||||||||
|
Oil and gas(b)
|
308,660 | 243,566 | 202,861 | 149,005 | 161,219 | |||||||||||||||
|
Chemicals
|
27,780 | 19,459 | 14,659 | 13,767 | 15,658 | |||||||||||||||
|
Other
|
1,082 | 864 | 767 | 589 | 481 | |||||||||||||||
|
Gross proceeds
|
337,522 | 263,889 | 218,287 | 163,361 | 177,358 | |||||||||||||||
|
Sales taxes, excise duties and similar levies
|
72,332 | 65,527 | 54,834 | 40,908 | 41,122 | |||||||||||||||
|
Net
proceeds(c)
|
265,190 | 198,362 | 163,453 | 122,453 | 136,236 | |||||||||||||||
|
Earnings by industry segment
|
||||||||||||||||||||
|
Exploration & Production
|
8,957 | 8,590 | 6,641 | 7,882 | 9,902 | |||||||||||||||
|
Gas & Power
|
2,069 | 2,271 | 747 | 1,199 | 92 | |||||||||||||||
|
Oil Products
|
6,281 | 2,821 | 2,485 | 1,919 | 3,371 | |||||||||||||||
|
Chemicals
|
930 | (209 | ) | 565 | 127 | 1,031 | ||||||||||||||
|
Other industry segments
|
(141 | ) | (267 | ) | (110 | ) | (287 | ) | (12 | ) | ||||||||||
|
Total operating segments
|
18,096 | 13,206 | 10,328 | 10,840 | 14,384 | |||||||||||||||
|
Corporate
|
(847 | ) | (820 | ) | (684 | ) | (216 | ) | (706 | ) | ||||||||||
|
Minority interests
|
(626 | ) | (353 | ) | (175 | ) | (360 | ) | (357 | ) | ||||||||||
|
Income from continuing operations
|
16,623 | 12,033 | 9,469 | 10,264 | 13,321 | |||||||||||||||
|
Income from discontinued operations, net of tax
|
1,560 | 25 | 187 | 37 | (508 | ) | ||||||||||||||
|
Cumulative effect of a change in accounting
principle, net of tax
|
— | 255 | — | — | — | |||||||||||||||
|
Net income
|
18,183 | 12,313 | 9,656 | 10,301 | 12,813 | |||||||||||||||
|
Assets and liabilities data
(at December 31)
|
||||||||||||||||||||
|
Total fixed and other long-term assets
|
130,963 | 125,946 | 111,476 | 80,729 | 76,836 | |||||||||||||||
|
Net current assets/(liabilities)
|
1,184 | (10,813 | ) | (13,546 | ) | (2,750 | ) | 3,778 | ||||||||||||
|
Total debt
|
14,422 | 20,127 | 19,691 | 5,820 | 7,427 | |||||||||||||||
|
Parent Companies’ interest in Royal
Dutch/ Shell Group net assets
|
84,576 | 72,497 | 60,276 | 56,142 | 57,616 | |||||||||||||||
|
Minority interests
|
5,309 | 3,415 | 3,568 | 3,466 | 2,897 | |||||||||||||||
|
Capital employed
|
104,307 | 96,039 | 83,535 | 65,428 | 67,940 | |||||||||||||||
|
Cash flow data (year
ended December 31)
|
||||||||||||||||||||
|
Cash flow provided by operating
activities
|
25,587 | 21,719 | 16,283 | 16,905 | 18,278 | |||||||||||||||
|
Capital expenditure (including acquisitions)
|
12,734 | 12,252 | 21,027 | 9,598 | 6,128 | |||||||||||||||
|
Cash flow used in investing
activities
|
5,643 | 8,252 | 20,633 | 9,080 | 1,490 | |||||||||||||||
|
Dividends paid
|
8,754 | 6,548 | 7,189 | 9,627 | 5,501 | |||||||||||||||
|
Cash flow used in financing
activities
|
12,792 | 12,586 | 53 | 11,562 | 9,125 | |||||||||||||||
|
Increase/(decrease) in cash and cash
equivalents
|
6,507 | 396 | (5,114 | ) | (4,761 | ) | 7,388 | |||||||||||||
|
Other statistics
|
||||||||||||||||||||
|
Total debt ratio(d)
|
13.8 | % | 21.0 | % | 23.6 | % | 8.9 | % | 10.9 | % | ||||||||||
| (a) | As set out in the Form 20-F, the financial statements for these periods have been restated. |
| (b) | Certain prior period amounts have been reclassified, resulting in a reduction in sales proceeds and a corresponding reduction in cost of sales following the implementation of US accounting guidance EITF Issue No. 02-03. |
| (c) | Includes net proceeds related to buy/ sell contracts of $24,744, $19,795 and $14,267 in 2004, 2003 and 2002, respectively. Costs related to these buy/ sell contracts were $24,719, $19,713, and $14,419 in 2004, 2003 and 2002, respectively. |
| (d) | The total debt ratio is defined as short-term plus long-term debt as a percentage of capital employed. Capital employed is Royal Dutch/ Shell Group net assets before deduction of minority interests plus short-term and long-term debt. Management of the Royal Dutch/ Shell Group believes that the debt ratio calculated on this basis (rather than the ratio of total debt to shareholders’ equity) is useful to investors because it takes account of all amounts of capital employed in the business. Management uses this measure to assess the level of debt relative to the capital invested in the business. The derivation of capital employed from Royal Dutch/ Shell Group net assets is shown in the table above. |
14
Table of Contents
Royal Dutch/Shell Group
| First Quarter 2005 | First Quarter 2004 | |||||||
| $ million | ||||||||
|
Income statement data
|
||||||||
|
Sales proceeds
|
||||||||
|
Oil and gas
|
81,499 | 68,610 | ||||||
|
Chemicals
|
8,277 | 5,768 | ||||||
|
Other
|
292 | 370 | ||||||
|
Gross proceeds
|
90,068 | 74,748 | ||||||
|
Sales taxes, excise duties and similar levies
|
17,912 | 17,480 | ||||||
|
Revenue(a)
|
72,156 | 57,268 | ||||||
|
Earnings by industry
segment(b)
|
||||||||
|
Exploration & Production
|
2,955 | 2,707 | ||||||
|
Gas & Power
|
476 | 522 | ||||||
|
Oil Products
|
3,051 | 1,573 | ||||||
|
Chemicals
|
663 | 201 | ||||||
|
Other industry segments
|
(8 | ) | (16 | ) | ||||
|
Total operating segments
|
7,137 | 4,987 | ||||||
|
Corporate
|
(119 | ) | (160 | ) | ||||
|
Income from continuing operations
|
7,018 | 4,827 | ||||||
|
Income from discontinued operations
|
(214 | ) | 20 | |||||
|
Income for the period
|
6,804 | 4,847 | ||||||
|
Attributable to minority interests
|
131 | 145 | ||||||
|
Income attributable to Parent
Companies
|
6,673 | 4,702 | ||||||
| As at | As at | |||||||
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
|
Balance sheet data
|
||||||||
|
Total assets
|
195,499 | 186,664 | ||||||
|
Total liabilities
|
106,160 | 101,252 | ||||||
|
Total debt
|
13,732 | 14,653 | ||||||
|
Equity attributable to Parent
Companies
|
83,662 | 80,099 | ||||||
|
Minority interests
|
5,677 | 5,313 | ||||||
|
Total equity
|
89,339 | 85,412 | ||||||
|
Total liabilities and equity
|
195,499 | 186,664 | ||||||
|
Cash flow data
|
||||||||
|
Cash flow from operating activities
|
8,093 | 8,118 | ||||||
|
Capital expenditure
|
2,934 | 2,636 | ||||||
|
Cash flow from investing activities
|
1,898 | 1,289 | ||||||
|
Dividends paid
|
5,184 | 46 | ||||||
|
Cash flow from financing activities
|
5,667 | 3,033 | ||||||
|
Increase/(decrease) in cash and cash
equivalents
|
435 | 3,781 | ||||||
|
Other statistics
|
||||||||
|
Total debt ratio(c)
|
13.3 | % | 14.6 | % | ||||
| (a) Includes net proceeds related to buy/sell contracts: | 7,155 5,625 |
| Includes costs related to buy/sell contracts: | 7,114 5,619 |
| (b) | Segment results include equity accounted investments and after tax, which is the basis upon which they are appraised by management. |
| (c) | The total debt ratio is defined as total debt as a percentage of total equity plus total debt. Management of the Royal Dutch/ Shell Group believes that the debt ratio calculated on this basis (rather than the ratio of total debt to shareholders’ equity) is useful to investors because it takes account of all amounts of capital employed in the business. Management uses this measure to assess the level of debt relative to the capital invested in the business. |
15
Table of Contents
Royal Dutch
| per €0.56 ordinary share(a) | |||||||||||||||||||||
| 2004 | 2003(b) | 2002(b) | 2001(b) | 2000(b) | |||||||||||||||||
|
Net
assets — €
|
19.63 | 18.29 | 18.49 | 20.35 | 19.63 | ||||||||||||||||
|
Total
assets — €
|
19.63 | 18.30 | 18.49 | 20.36 | 19.64 | ||||||||||||||||
|
Basic
earnings — €(c)
|
4.31 | 3.15 | 2.96 | 3.30 | 3.91 | ||||||||||||||||
|
from continuing operations
|
3.94 | 3.14 | 2.90 | 3.29 | 4.06 | ||||||||||||||||
|
from discontinued operations
|
0.37 | 0.01 | 0.06 | 0.01 | (0.15 | ) | |||||||||||||||
|
Diluted
earnings — €(c)
|
4.30 | 3.15 | 2.96 | 3.30 | 3.91 | ||||||||||||||||
|
from continuing operations
|
3.93 | 3.14 | 2.90 | 3.29 | 4.06 | ||||||||||||||||
|
from discontinued operations
|
0.37 | 0.01 | 0.06 | 0.01 | (0.15 | ) | |||||||||||||||
|
Dividends
declared — €
|
1.79 | (d) | 1.76 | 1.72 | 1.66 | 1.59 | |||||||||||||||
|
Dividends — equivalent payment in
US dollars
|
2.23 | (d) | 2.06 | 1.80 | 1.50 | 1.40 | |||||||||||||||
| (a) | Following the redenomination from guilders into euros in May 2002, the authorised share capital of Royal Dutch as set forth in its Articles of Association consists of 3,198,800,000 ordinary shares, par value €0.56 each, and 1,500 priority shares, par value €448 each. The number of ordinary shares and priority shares issued and paid up at the end of 2000 was 2,144,296,352 ordinary shares and 1,500 priority shares, at the end of 2001 was 2,126,647,800 ordinary shares and 1,500 priority shares, at the end of 2002 was 2,099,285,000 ordinary shares and 1,500 priority shares, and at the end of 2003 were 2,083,500,000 ordinary shares and 1,500 priority shares, and at the end of 2004 was 2,081,725,000 ordinary shares and 1,500 priority shares. The issued and paid-up share capital at the end of 2000 was €1,216,979,748, at the end of 2001 was €1,206,969,043, at the end of 2002 was €1,176,271,600, at the end of 2003 was €1,167,432,000 and at the end of 2004 was €1,166,438,000. |
| (b) | As set out in the Form 20-F, the financial statements for these periods have been restated. |
| (c) | The basic earnings per share amounts shown are related to profit after taxation and after deducting the 4% cumulative preference dividend on priority shares. The 2004 calculation uses a weighted-average number of 2,023,212,126 shares (2003: 2,036,687,755; 2002: 2,057,657,737; 2001: 2,095,731,261; 2000: 2,128,592,305). The basic earnings per share number has been restated to exclude shares held by Group companies for stock options and other incentive compensation plans. For the purpose of the calculation, shares repurchased under the buyback programme are deemed to have been cancelled on purchase date. |
| The diluted earnings per share are based on the same profit figures. For this calculation, weighted-average number of shares is increased by 2,283,163 for 2004 (2003: 674,120; 2002: 442,580; 2001: 1,124,897; 2000: 1,394,975). These numbers relate to stock options schemes as mentioned above. |
| (d) | Includes interim dividend of €0.75 ($0.90) made payable in September 2004 and a second interim dividend of €1.04 ($1.33) made payable in March 2005. This together will constitute the total dividend for 2004, subject to finalization by the General meeting of Shareholders to be held on June 28, 2005. |
Royal Dutch
| per €0.56 ordinary share(a) | ||||||||
| Quarter ended | Quarter ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
|
Net assets —
€
|
46.62 | 19.25 | ||||||
|
Total assets —
€
|
46.82 | 19.26 | ||||||
|
Basic earnings —
€(b)
|
0.59 | 1.08 | ||||||
|
Diluted earnings —
€(b)
|
0.59 | 1.08 | ||||||
|
Dividends declared —
€
|
0.46 | (c) | — | |||||
|
Dividends — equivalent payment in US
dollars
|
0.59 | (c) | — | |||||
(a) Following the redenomination from guilders into euros in May 2002, the authorised share capital of Royal Dutch as set forth in its Articles of Association consists of 3,198,800,000 ordinary shares, par value €0.56 each, and 1,500 priority shares, par value €448 each. The number of ordinary shares and priority shares issued and paid up at the end of March 31, 2004 was 2,083,500,000 ordinary shares and 1,500 priority shares and at the end of March 31, 2005 was 2,081,725,000 ordinary shares and 1,500 priority shares. The issued and paid-up share capital at the end of March 31, 2004 was €1,167,432,000 and at the end of March 31, 2005 was €1,166,438,000.
16
Table of Contents
(b) The basic earnings per share calculation uses a weighted-average number of shares at March 31, 2005 of 2,011,503,515 (March 31, 2004: 2,033,223,756). The basic earnings per share number has been restated to exclude shares held by Group companies for stock options and other incentive compensation plans. For the purpose of the calculation, shares repurchased under the buyback programme are deemed to have been cancelled on purchase date.
| The same earnings figure is used in the basic and diluted earnings per share calculation. For the diluted earnings per share calculation, the weighted-average number of shares has increased by 5,970,220 for March 31, 2005 (March 31, 2004: 15,033). These numbers relate to stock options schemes as mentioned above. |
(c) Includes an interim dividend of €0.46 ($0.59) to be paid on June 15, 2005.
Shell Transport
| per 25p ordinary share(a) | ||||||||||||||||||||
| 2004 | 2003(b) | 2002(b) | 2001(b) | 2000(b) | ||||||||||||||||
|
Net assets — pence
|
187.1 | 173.1 | 161.2 | 169.3 | 164.9 | |||||||||||||||
|
Total assets — pence
|
198.2 | 183.1 | 170.7 | 178.5 | 173.9 | |||||||||||||||
|
Adjusted basic earnings — continuing
operations (pro forma) — pence
|
37.9 | 30.7 | 26.0 | 29.2 | 36.8 | |||||||||||||||
|
Adjusted basic earnings — discontinued
operations (pro forma) — pence
|
3.6 | 0.1 | 0.5 | 0.1 | (1.4 | ) | ||||||||||||||
|
Adjusted basic earnings
(pro forma) — pence(c)
|
41.5 | 30.8 | 26.5 | 29.3 | 35.4 | |||||||||||||||
|
Adjusted diluted earnings — continuing
operations (pro forma) — pence
|
37.9 | 30.7 | 26.0 | 29.2 | 36.7 | |||||||||||||||
|
Adjusted diluted earnings —
discontinued operations (pro forma) — pence
|
3.6 | 0.1 | 0.5 | 0.1 | (1.4 | ) | ||||||||||||||
|
Adjusted diluted earnings
(pro forma) — pence(c)
|
41.5 | 30.8 | 26.5 | 29.3 | 35.3 | |||||||||||||||
|
Dividends declared — pence
|
16.95 | (d) | 15.75 | 15.25 | 14.80 | 14.60 | ||||||||||||||
| (a) | The authorised share capital of Shell Transport as set forth in its Memorandum of Association consists of £2,500,000,000 divided into 9,948,000,000 Ordinary shares of 25 pence each and 3,000,000 First Preference shares of £1 each and 10,000,000 Second Preference shares of £1 each. |
| (b) | As set out in the Form 20-F, the financial statements for these periods have been restated. |
| (c) | Adjusted earnings includes Shell Transport’s share of earnings retained by companies of the Royal Dutch/Shell Group. A reconciliation between this Adjusted earnings per share measure and Shell Transport’s earnings per share is provided on page S2 of the Form 20-F. The basic earnings per share amounts shown are calculated after deducting 5.5% and 7% cumulative dividend on First and Second Preference shares respectively. The calculation uses a weighted-average number of shares of 9,480,407,909 (2003: 9,528,797,724; 2002: 9,608,614,760; 2001: 9,758,574,437; 2000: 9,882,388,055). The basic earnings per share calculation has been restated to exclude shares held by Group companies for share options and other incentive compensation plans. The same earnings figure is used in the basic and diluted earnings per share calculation. For the diluted earnings per share calculation the weighted-average number of shares is increased by 4,772,177 for 2004 (2003: 2,722,083; 2002: 4,661,292; 2001: 12,602,362; 2000: 17,170,048). These numbers relate to share option schemes as mentioned above. |
| (d) | Includes an interim dividend of 6.25p paid on September 15, 2004, and a second interim dividend of 10.7p paid on March 15, 2005. |
17
Table of Contents
The number of issued and paid up Ordinary shares, First Preference shares and Second Preference shares of Shell Transport at the end of 2000-2004 inclusive was:
| Number of issued shares | ||||||||||||||||
| 2004 | 2002-2003 | 2001 | 2000 | |||||||||||||
|
Ordinary share
|
9,624,900,000 | 9,667,500,000 | 9,748,625,000 | 9,943,509,726 | ||||||||||||
|
First Preference
|
2,000,000 | 2,000,000 | 2,000,000 | 2,000,000 | ||||||||||||
|
Second Preference
|
10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | ||||||||||||
The amount of issued and paid up share capital of Shell Transport at the end of 2000-2004 inclusive was:
| Issued and paid up capital (£) | ||||||||||||||||
| 2004 | 2002-2003 | 2001 | 2000 | |||||||||||||
| 2,418,225,000 | 2,428,875,000 | 2,449,156,250 | 2,497,877,432 | |||||||||||||
| per New York Share(a) | ||||||||||||||||||||
| 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
|
Dividends and tax credits — equivalent
payment in US dollars
|
1.89 | 1.62 | 1.44 | 1.29 | 1.24 | |||||||||||||||
| (a) | One New York share, which is evidenced by a Depositary Receipt, equals six 25p Ordinary shares. |
Shell Transport
| per 25p ordinary share(a) | ||||||||
| Quarter ended | Quarter ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
|
Net assets — pence
|
473.3 | 177.0 | ||||||
|
Total assets — pence
|
473.7 | 186.9 | ||||||
|
Basic earnings — pence(b)
|
5.8 | — | ||||||
|
Diluted earnings — pence(b)
|
5.8 | — | ||||||
|
Dividend declared — pence(c)
|
4.55 | — | ||||||
| (a) | The authorised share capital of Shell Transport as set forth in its Memorandum of Association consists of £2,500,000,000 divided into 9,948,000,000 Ordinary shares of 25 pence each and 3,000,000 First Preference shares of £1 each and 10,000,000 Second Preference shares of £1 each. |
| (b) | The basic earnings per share calculation uses a weighted average number of shares at March 31, 2005 of 9,434,732,591 (March 31, 2004: 9,519,320,000). The basic earnings per share calculation has been restated to exclude shares held by Group companies for share options and other incentive compensation plans. The same earnings figure is used in the basic and diluted earnings per share calculation. For the diluted earnings per share calculation the weighted-average number of shares is increased by 20,290,426 for March 31, 2005 (March 31, 2004: 279,000). These numbers relate to share option schemes mentioned above. |
| (c) | Includes an interim dividend of 4.55p to be paid on June 15, 2005. |
The number of issued and paid up Ordinary shares, First Preference shares and Second Preference shares of Shell Transport at the end of March 31, 2004 and March 31, 2005 was:
| Number of issued shares | ||||||||
| Quarter ended | Quarter ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
|
Ordinary share
|
9,603,350,000 | 9,667,500,000 | ||||||
|
First Preference
|
2,000,000 | 2,000,000 | ||||||
|
Second Preference
|
10,000,000 | 10,000,000 | ||||||
18
Table of Contents
The amount of issued and paid up share capital of Shell Transport at the end of March 31, 2004 and March 31, 2005 inclusive was:
| Issued and paid up share capital (£)(a) | ||||||||
| Quarter ended | Quarter ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
| 2,412,837,500 | 2,428,875,000 | |||||||
| per New York Share(b) | ||||||||
| Quarter ended | Quarter ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
|
Dividends and tax credits — equivalent
payment in US dollars
|
0.52 | — | ||||||
| (a) | The issued and paid up share capital includes £12,000,000 in respect of First and Second Preference shares which are classified as liabilities under IFRS. |
| (b) | One New York share, which is evidenced by a Depositary Receipt, equals six 25p Ordinary shares. |
19
Table of Contents
SUMMARY UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited condensed pro forma combined financial information as at and for each of the years ended December 31, 2004, 2003 and 2002 has been presented in U.S. GAAP. With effect from January 1, 2005 we will present our financial statements using IFRS and 2004 periods will be restated accordingly. The unaudited condensed pro forma combined financial information as at and for the quarters ended March 31, 2005 and 2004 have been prepared in accordance with IFRS and presented in U.S. dollars. A reconciliation to U.S. GAAP is provided.
The summary unaudited condensed pro forma combined financial information of Royal Dutch Shell set forth below has been derived from the unaudited condensed pro forma combined financial information included elsewhere in this prospectus. The historical financial information of Royal Dutch Shell have been prepared in accordance with UK GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in U.S. dollars. The historical financial information of the Royal Dutch/ Shell Group have been prepared in accordance with U.S. GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in U.S. dollars. The historical financial information of Royal Dutch have been prepared in accordance with Netherlands GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in euros. The historical financial information of Shell Transport have been prepared in accordance with UK GAAP or, in the case of condensed interim financial information as at and for the quarters ended March 31, 2004 and 2005, International Financial Reporting Standards, and presented in pounds sterling. For the purposes of the unaudited condensed pro forma combined financial information as at and for periods ended December 31, 2004, 2003 and 2002, information derived from the financial statements of Royal Dutch Shell, Royal Dutch and Shell Transport has been converted to U.S. GAAP and presented in U.S. dollars. For purposes of the unaudited condensed pro forma combined financial information as at and for the quarters ended March 31, 2004 and 2005, information derived from the condensed interim financial information of Royal Dutch Shell, Royal Dutch and Shell Transport have been presented under IFRS and in U.S. dollars. You should read the following information together with the unaudited condensed pro forma combined financial information, including the related notes, included under “Unaudited Condensed Pro Forma Combined Financial Information” on page 134.
| Year ended | Year ended | Year ended | |||||||||||
| December 31, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||
| $ million | $ million | $ million | |||||||||||
| (except per share amounts) | (except per share amounts) | (except per share amounts) | |||||||||||
|
(U.S. GAAP)
|
|||||||||||||
|
Income statement data
|
|||||||||||||
|
Sales proceeds — gross
|
337,522 | 263,889 | 218,287 | ||||||||||
|
Sales proceeds — net
|
265,190 | 198,362 | 163,453 | ||||||||||
|
Operating profit
|
31,907 | 21,306 | 17,848 | ||||||||||
|
Interest and other income
|
1,730 | 1,996 | 782 | ||||||||||
|
Interest expense
|
(1,213 | ) | (1,324 | ) | (1,291 | ) | |||||||
|
Income before taxation
|
32,385 | 21,747 | 17,314 | ||||||||||
|
Net income
|
18,182 | 12,322 | 9,671 | ||||||||||
|
Earnings per share ($)
|
|||||||||||||
|
Basic
|
2.69 | 1.81 | 1.41 | ||||||||||
|
Diluted
|
2.68 | 1.81 | 1.41 | ||||||||||
20
Table of Contents
| As at December 31, 2004 | As at December 31, 2003 | As at December 31, 2002 | ||||||||||
| $ million | $ million | $ million | ||||||||||
|
(U.S. GAAP)
|
||||||||||||
|
Balance sheet data
|
||||||||||||
|
Total fixed and other long-term assets
|
130,963 | 125,946 | 111,476 | |||||||||
|
Net current assets/(liabilities)
|
7,033 | (5,203 | ) | (7,771 | ) | |||||||
|
Total debt
|
14,362 | 19,669 | 19,082 | |||||||||
|
Shareholders’ equity
|
90,425 | 78,107 | 66,051 | |||||||||
| Quarter ended | Quarter ended | ||||||||
| March 31, 2005 | March 31, 2004 | ||||||||
| $ million | $ million | ||||||||
| (except per share amounts) | (except per share amounts) | ||||||||
|
(IFRS)
|
|||||||||
|
Income Statement Data
|
|||||||||
|
Sales proceeds — gross
|
90,068 | 74,748 | |||||||
|
Revenue
|
72,156 | 57,268 | |||||||
|
Gross profit
|
13,591 | 9,831 | |||||||
|
Net finance costs and other income
|
(68 | ) | 178 | ||||||
|
Income for the period attributable to equity
holders
|
6,674 | 4,700 | |||||||
|
Earnings per share ($)
|
|||||||||
|
Basic
|
0.99 | 0.69 | |||||||
|
Diluted
|
0.99 | 0.69 | |||||||
| As at March 31, 2005 | As at March 31, 2004 | |||||||
| $ million | $ million | |||||||
| (except per share amounts) | (except per share amounts) | |||||||
|
(IFRS)
|
||||||||
|
Balance Sheet Data
|
||||||||
|
Total non current assets
|
123,905 | 120,280 | ||||||
|
Total net current assets
|
7,992 | (856 | ) | |||||
|
Total debt
|
13,694 | 17,417 | ||||||
|
Total equity
|
92,328 | 79,338 | ||||||
21
Table of Contents
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth selected information regarding earnings, dividends and book value per share for Royal Dutch ordinary shares and Shell Transport ordinary shares on historical and unaudited pro forma bases that reflect the completion of the Transaction based on the historical financial statements of Royal Dutch and Shell Transport. The pro forma data are not indicative of the results of future operations or the actual results that would have occurred had the Transaction consummated at the beginning of the periods presented. You should read this information in conjunction with Royal Dutch’s and Shell Transport’s financial statements, including the related notes, incorporated by reference in this prospectus and with the unaudited condensed pro forma combined information, including the related notes, included under “Unaudited Condensed Pro Forma Combined Financial Information” on page 134.
| 2004 | |||||
|
Royal Dutch (historical)
|
|||||
|
Amounts under Netherlands GAAP
|
|||||
|
Basic earnings per share — euros
|
4.31 | ||||
|
Dividends per share — euros
|
1.79 | ||||
|
Book value per share — euros
|
19.63 | ||||
|
Amounts under U.S. GAAP
|
|||||
|
Basic earnings per share — euros
|
4.35 | ||||
|
Shell Transport (historical)
|
|||||
|
Amounts under UK GAAP
|
|||||
|
Adjusted earnings — pence
|
41.5 | ||||
|
Dividends per share — pence
|
16.95 | ||||
|
Book value per share — pence
|
187.1 | ||||
|
Amounts under U.S. GAAP
|
|||||
|
Earnings per share — pence
|
41.9 | ||||
|
Royal Dutch Shell (pro forma)
|
|||||
|
Amounts under U.S. GAAP
|
|||||
|
Earnings per share — dollars
|
2.69 | ||||
|
Dividends per share — dollars
|
1.11 | ||||
|
Book value per share — dollars
|
13.36 | ||||
|
Royal Dutch (pro forma equivalent per
share)
|
|||||
|
Amounts under U.S. GAAP
|
|||||
|
Basic earnings per share — dollars
|
5.39 | ||||
|
Shell Transport (pro forma equivalent per
share)
|
|||||
|
Amounts under U.S. GAAP
|
|||||
|
Adjusted earnings — dollars
|
0.77 | ||||
22
Table of Contents
| Quarter ended | |||||
| March 31, 2005 | |||||
|
Royal Dutch (historical)
|
|||||
|
Amounts under IFRS
|
|||||
|
Basic earnings per share — euros
|
0.59 | ||||
|
Dividends per share — euros
|
0.45 | ||||
|
Book value per share — euros
|
46.62 | ||||
|
Shell Transport (historical)
|
|||||
|
Amounts under IFRS
|
|||||
|
Adjusted earnings — pence
|
5.8 | ||||
|
Dividends per share — pence
|
4.55 | ||||
|
Book value per share — pence
|
473.3 | ||||
|
Royal Dutch Shell (pro forma)
|
|||||
|
Amounts under IFRS
|
|||||
|
Earnings per share — dollars
|
0.99 | ||||
|
Dividends per share — dollars
|
0.30 | ||||
|
Book value per share — dollars
|
13.71 | ||||
|
Royal Dutch (pro forma equivalent per
share)
|
|||||
|
Amounts under IFRS
|
|||||
|
Basic earnings per share — dollars
|
0.78 | ||||
|
Shell Transport (pro forma equivalent per
share)
|
|||||
|
Amounts under IFRS
|
|||||
|
Adjusted earnings — dollars
|
0.11 | ||||
23
Table of Contents
COMPARATIVE MARKET PRICE INFORMATION
Royal Dutch ordinary shares in New York registry form are listed and traded on the New York Stock Exchange under the symbol “RD”, and Shell Transport ADRs are listed and traded on the New York Stock Exchange under the symbol “SC”. The following table presents the high and low closing sales prices of Royal Dutch ordinary shares in New York registry form and Shell Transport ADRs on the New York Stock Exchange for the periods indicated.
| Royal Dutch | Shell Transport | |||||||||||||||
| High | Low | High | Low | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
1998
|
||||||||||||||||
|
Annual
|
60.38 | 39.75 | 46.50 | 31.00 | ||||||||||||
|
1999
|
||||||||||||||||
|
Annual
|
67.38 | 39.56 | 52.56 | 30.50 | ||||||||||||
|
2000
|
||||||||||||||||
|
Annual
|
65.69 | 50.44 | 54.06 | 40.00 | ||||||||||||
|
2001
|
||||||||||||||||
|
First Quarter
|
64.15 | 53.63 | 52.44 | 46.35 | ||||||||||||
|
Second Quarter
|
62.46 | 53.30 | 53.65 | 45.70 | ||||||||||||
|
Third Quarter
|
59.09 | 39.75 | 50.97 | 38.72 | ||||||||||||
|
Fourth Quarter
|
54.48 | 45.62 | 47.90 | 39.38 | ||||||||||||
|
Annual
|
64.15 | 39.75 | 53.65 | 38.72 | ||||||||||||
|
2002
|
||||||||||||||||
|
First Quarter
|
55.48 | 46.62 | 44.87 | 38.48 | ||||||||||||
|
Second Quarter
|
56.34 | 50.48 | 47.03 | 41.99 | ||||||||||||
|
Third Quarter
|
57.30 | 38.60 | 46.70 | 34.59 | ||||||||||||
|
Fourth Quarter
|
44.93 | 39.76 | 40.02 | 35.56 | ||||||||||||
|
Annual
|
57.30 | 38.60 | 47.03 | 34.59 | ||||||||||||
|
2003
|
||||||||||||||||
|
First Quarter
|
46.88 | 36.69 | 41.25 | 32.28 | ||||||||||||
|
Second Quarter
|
49.81 | 40.56 | 43.18 | 35.81 | ||||||||||||
|
Third Quarter
|
46.79 | 42.84 | 40.25 | 37.30 | ||||||||||||
|
Fourth Quarter
|
52.70 | 43.95 | 45.19 | 37.50 | ||||||||||||
|
Annual
|
52.70 | 36.69 | 45.19 | 32.28 | ||||||||||||
|
2004
|
||||||||||||||||
|
First Quarter
|
54.00 | 45.79 | 46.17 | 39.12 | ||||||||||||
|
Second Quarter
|
53.24 | 47.48 | 46.36 | 39.85 | ||||||||||||
|
Third Quarter
|
53.82 | 48.94 | 47.15 | 42.58 | ||||||||||||
|
Fourth Quarter
|
57.79 | 51.63 | 51.70 | 44.37 | ||||||||||||
|
Annual
|
57.79 | 45.79 | 51.70 | 39.12 | ||||||||||||
|
2005
|
||||||||||||||||
|
January
|
58.73 | 55.37 | 52.70 | 49.78 | ||||||||||||
|
February
|
63.77 | 57.95 | 57.34 | 52.52 | ||||||||||||
|
March
|
65.11 | 59.10 | 58.72 | 53.40 | ||||||||||||
|
April
|
62.00 | 57.75 | 56.25 | 53.38 | ||||||||||||
|
May (through May 16)
|
59.75 | 56.28 | 54.93 | 50.88 | ||||||||||||
24
Table of Contents
RISK FACTORS
By tendering your Royal Dutch ordinary shares, you will be choosing to invest in Class A Shares or Class A ADRs. An investment in us involves risk. In addition to the other information included in this prospectus, holders of Royal Dutch ordinary shares should consider carefully the matters described below in determining whether to accept the offer.
Risks Related to the Transaction
Trading prices in our ordinary shares and/or our ADRs may be subject to fluctuation.
If you tender your Royal Dutch ordinary shares in the offer and the offer is consummated, you will either receive Class A Shares or Class A ADRs. Before completion of the Transaction, there will be no public market for our ordinary shares or our ADRs. The trading prices of our ordinary shares and/or our ADRs may be subject to wide fluctuations. Prices of our ordinary shares and/or our ADRs may fluctuate as a result of a variety of factors beyond our control, including changes in our business, operations and prospects, regulatory considerations and general market and economic conditions.
We may fail to realize the anticipated benefits of the Transaction.
We may not realize the anticipated benefits of the Transaction. Royal Dutch and Shell Transport are proposing the Transaction because they believe it will result in, among other things, (i) increased clarity and simplicity of governance, (ii) increased accountability, (iii) increased management efficiency and (iv) flexibility in issuing equity and debt. We may encounter substantial difficulties in achieving these anticipated benefits and/or these anticipated benefits may not materialize.
Our Class A Shares and Class B Shares and Class A ADRs and Class B ADRs may trade at different prices.
Upon the consummation of the Transaction, we would have two classes of ordinary shares and ADRs outstanding. Each of these may trade at different prices based on, among other things, the fact that dividends to be received by holders of Class A Shares or Class A ADRs will have a Dutch source and dividends to be received by holders of Class B Shares or Class B ADRs are intended to have a UK source (pursuant to the Dividend Access Mechanism). Prices may also differ owing to differing levels of demand in different markets for reasons external to the Royal Dutch/Shell Group such as index inclusion and relative index performance.
Our dividend policy may be different from Royal Dutch’s historical dividend policy.
There can be no assurance that following the Transaction we will continue to declare dividends at the same rate as Royal Dutch has in the past. In setting the level of the dividend, our board will seek to increase dividends at least in line with inflation over time, with the base for the 2005 financial year being the dividends paid by Royal Dutch in respect of the financial year ended December 31, 2004. However, we may change this dividend policy at any time following completion of the Transaction.
We intend to pay dividends quarterly, rather than semi-annually (which has been Royal Dutch’s previous practice). However, we may change this frequency of payment at any time following completion of the Transaction.
Our Articles of Association and your rights thereunder will differ from the Royal Dutch Articles of Association and the rights of Royal Dutch shareholders thereunder and you may be adversely affected by these changes.
Your rights as a holder of our ordinary shares will differ from your rights as a holder of Royal Dutch ordinary shares. In addition, differences arise due to the fact that rights of our shareholders are governed by English law, while the rights of Royal Dutch shareholders are governed by Dutch law. These differences will impact, among other things, meetings of shareholders, information rights, dividends, liquidation rights and pre-emptive rights. In addition, our articles of association require that all disputes (i) between a shareholder in its
25
Table of Contents
We will prepare our financial statements in accordance with International Financial Reporting Standards, which differ from the accounting standards applicable to Royal Dutch’s historical financial statements.
The condensed interim financial information included in this prospectus as at and for the quarter ended March 31, 2005 have been prepared in accordance with accounting standards under the first time adoption provisions set out in International Financial Reporting Standards 1 and the policies described in the notes to the quarterly financial information set forth in the Q1 Form 6-K and on pages G6 - G12. International Financial Reporting Standards (IFRS) is currently being applied in Europe and in other parts of the world simultaneously for the first time. Furthermore, due to a number of new and revised standards included within the body of standards that comprise IFRS, there is not yet a significant body of established practice on which to draw in forming judgements regarding interpretation and application. Accordingly, practice is continuing to evolve and the full financial effect of reporting under IFRS as it will be applied and reported on in our and the Royal Dutch/Shell Group’s first IFRS Financial Statements cannot be determined with certainty at this stage.
In the future, Royal Dutch Shell will prepare its financial information in accordance with IFRS. These accounting standards and policies adopted under IFRS differ from those applicable to Royal Dutch’s historical financial information included, and incorporated by reference, in this prospectus. As at the date of this prospectus, the accounting policies of Royal Dutch Shell are in accordance with both IFRS and those accounting standards that have been adopted for use in the EU.
Risks to Royal Dutch Shareholders who do not tender their Royal Dutch Ordinary Shares in the Offer
The market for Royal Dutch ordinary shares will be less liquid following completion of the offer, and the value of any retained Royal Dutch ordinary shares may be lower.
The market for Royal Dutch ordinary shares will be less liquid following completion of the offer, and the value of any Royal Dutch ordinary shares you retain may be lower following completion of the offer than before completion of the offer. The exchange of Royal Dutch ordinary shares for Class A Shares and Class A ADRs pursuant to the offer will reduce the number of holders of Royal Dutch ordinary shares as well as the number of Royal Dutch ordinary shares that might otherwise trade publicly and, depending upon the number of Royal Dutch ordinary shares so exchanged, will adversely affect the liquidity and market value of the remaining Royal Dutch ordinary shares held by the public. We may also take steps following the offer to change the corporate structure or assets of Royal Dutch and these steps could affect the liquidity and trading value of the Royal Dutch ordinary shares.
26
Table of Contents
We may be able to utilize a Dutch squeeze-out procedure to acquire the Royal Dutch ordinary shares of non-tendering Royal Dutch shareholders.
If the number of Royal Dutch ordinary shares that have been validly tendered and not withdrawn represent at least 95% of the issued share capital of Royal Dutch that is then outstanding, we expect, but are not obligated, to initiate squeeze-out proceedings in accordance with Article 2:92a of the Dutch Civil Code with a view to acquiring all Royal Dutch ordinary shares held by minority holders of Royal Dutch ordinary shares against payment of a price in cash to be determined by a Dutch court. Under these proceedings, the price paid for Royal Dutch ordinary shares held by minority holders of Royal Dutch ordinary shares will be determined by a Dutch court, which could appoint experts to advise it on the value of Royal Dutch ordinary shares. Further, if the squeeze-out proceedings are successful, the minority holders of Royal Dutch ordinary shares will be required to transfer their Royal Dutch ordinary shares against payment of the price determined. Also, upon payment of the amount required to purchase the Royal Dutch ordinary shares into a prescribed bank account, we would become the holder of the Royal Dutch ordinary shares by operation of law. The only remaining right of the minority holders of Royal Dutch ordinary shares would be to receive payment for their Royal Dutch ordinary shares. If you do not tender your Royal Dutch ordinary shares in the offer and we are able to effectuate a squeeze-out, the price determined for the purchase of Royal Dutch ordinary shares may be different from what might have been received upon a sale of such shares prior to the squeeze-out and could be less than such price. Also, if we are able to effectuate a squeeze-out, minority holders of Royal Dutch ordinary shares that are purchased in the squeeze-out will lose the ability to have a continuing interest in the Royal Dutch/Shell Group.
We may restructure Royal Dutch after the completion of the Transaction or take other steps to acquire Royal Dutch ordinary shares.
In addition to the squeeze-out procedures described above, we would have the right following the Transaction to use any other legally permitted method to obtain 100% of the Royal Dutch ordinary shares, including engaging in one or more corporate restructuring transactions, such as a merger, liquidation, transfer of assets or conversion of Royal Dutch into another form or corporate entity, or changing the Royal Dutch articles to alter the corporate or capital structure in a manner beneficial to Royal Dutch Shell, or engaging in one or more transactions with minority holders of Royal Dutch ordinary shares including public or private exchanges or tender offers or purchases for consideration which may consist of Royal Dutch Shell ordinary shares, other securities or cash.
Royal Dutch ordinary shares may be delisted after completion of the offer, and Royal Dutch ordinary shares in New York registry form may no longer meet New York Stock Exchange listing requirements.
Following completion of the offer and depending on the level of acceptance, we intend to request that Royal Dutch seeks to delist the Royal Dutch ordinary shares from the London Stock Exchange and Euronext Amsterdam and the Royal Dutch ordinary shares in New York registry form from the New York Stock Exchange, all as soon as reasonably practicable. In addition, depending on the number of Royal Dutch ordinary shares in New York registry form acquired pursuant to the offer, the Royal Dutch ordinary shares in New York registry form may no longer be eligible for trading on the New York Stock Exchange. While the Royal Dutch ordinary shares could continue to be traded in the over-the-counter market and price quotations could be reported, there can be no assurance that such an over-the-counter market will develop. The extent of the public market for Royal Dutch ordinary shares and the availability of such quotations would depend upon such factors as the number of holders remaining at such time, the interest on the part of securities firms in maintaining a market in Royal Dutch ordinary shares and the possible termination of registration of Royal Dutch ordinary shares under the Exchange Act, which would adversely affect the amount of publicly available information with respect to Royal Dutch.
Royal Dutch may change its dividend policy and its dividends may not be equivalent to the dividends paid on our shares.
Royal Dutch may change its dividend policy following completion of the offer. The holders of Royal Dutch ordinary shares should be aware that there can be no assurance that Royal Dutch will continue to declare dividends to the shareholders at the same rate and/or frequency in the future as it has in the past, or that any
27
Table of Contents
Royal Dutch ordinary shares in New York registry form may cease to be “Margin Securities”.
Royal Dutch ordinary shares in New York registry form currently are “margin securities” under the regulations of the Board of Governors of the U.S. Federal Reserve System, which status has the effect, among other things, of allowing U.S. brokers to extend credit on the collateral of Royal Dutch ordinary shares in New York registry form for purposes of buying, carrying and trading in securities. Upon the delisting of Royal Dutch ordinary shares in New York registry form on the New York Stock Exchange, Royal Dutch ordinary shares in New York registry form might no longer constitute “margin securities” and, therefore, could no longer be used as collateral for the purpose of loans made by U.S. brokers.
28
Table of Contents
FORWARD LOOKING STATEMENTS
The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This prospectus contains historical and forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell, Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements.
Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell, Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions.
These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “objectives”, “outlook”, “probably”, “project”, “will”, “seek”, “target”, “risks”, “goals”, “should” and similar terms and phrases. The following factors could affect the future operations of Royal Dutch Shell, Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group and could cause those results to differ materially from those expressed in the forward-looking statements included in this prospectus:
| • | the failure of the conditions to the Transaction to be satisfied (including the failure of Royal Dutch shareholders to approve entering into the implementation agreement and the failure of Shell Transport shareholders to approve the Scheme); | |
| • | the costs related to the Transaction; | |
| • | the failure of the Transaction to achieve the expected benefits; | |
| • | changes in dividend policy; | |
| • | the development of a trading market in Royal Dutch Shell shares; | |
| • | tax treatment of dividends paid to shareholders; | |
| • | the accounting implications of the Transaction; and | |
| • | other factors affecting the Royal Dutch/ Shell Group’s businesses generally, including, but not limited to, price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, risks associated with the identification of suitable potential acquisition properties and targets and the successful negotiation and consummation of transactions, the risk of doing business in developing countries, legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorization of reserves, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. |
All forward-looking statements contained in this prospectus are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. None of Royal Dutch Shell, Royal Dutch, Shell Transport or any member of the Royal Dutch/ Shell Group undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from the forward-looking statements contained in this prospectus.
29
Table of Contents
EXCHANGE RATE INFORMATION(a)
| €1 = $ | ||||||||||||||||||
| Average(b) | High | Low | Period end | |||||||||||||||
|
Year:
|
||||||||||||||||||
|
1999
|
1.0588 | |||||||||||||||||
|
2000
|
0.9209 | |||||||||||||||||
|
2001
|
0.8909 | |||||||||||||||||
|
2002
|
0.9495 | |||||||||||||||||
|
2003
|
1.1411 | |||||||||||||||||
|
Month:
|
||||||||||||||||||
|
2004
|
||||||||||||||||||
|
January
|
1.2853 | 1.2395 | ||||||||||||||||
|
February
|
1.2848 | 1.2426 | ||||||||||||||||
|
March
|
1.2431 | 1.2088 | ||||||||||||||||
|
April
|
1.2358 | 1.1802 | ||||||||||||||||
|
May
|
1.2274 | 1.1801 | ||||||||||||||||
|
June
|
1.2320 | 1.2006 | ||||||||||||||||
|
July
|
1.2437 | 1.2032 | ||||||||||||||||
|
August
|
1.2368 | 1.2025 | ||||||||||||||||
|
September
|
1.2417 | 1.2052 | ||||||||||||||||
|
October
|
1.2783 | 1.2271 | ||||||||||||||||
|
November
|
1.3288 | 1.2703 | ||||||||||||||||
|
December
|
1.3625 | 1.3224 | ||||||||||||||||
|
2005
|
||||||||||||||||||
|
January
|
1.3476 | 1.2954 | ||||||||||||||||
|
February
|
1.3274 | 1.2773 | ||||||||||||||||
|
March
|
1.3465 | 1.2877 | ||||||||||||||||
|
April
|
1.3093 | 1.2819 | ||||||||||||||||
|
As at May 16, 2005
|
1.2630 | |||||||||||||||||
| £1 = $ | ||||||||||||||||||
| Average(b) | High | Low | Period end | |||||||||||||||
|
Year:
|
||||||||||||||||||
|
1999
|
1.6146 | |||||||||||||||||
|
2000
|
1.5138 | |||||||||||||||||
|
2001
|
1.4382 | |||||||||||||||||
|
2002
|
1.5084 | |||||||||||||||||
|
2003
|
1.6450 | |||||||||||||||||
|
Month:
|
||||||||||||||||||
|
2004
|
||||||||||||||||||
|
January
|
1.8511 | 1.7902 | ||||||||||||||||
|
February
|
1.9045 | 1.8182 | ||||||||||||||||
|
March
|
1.8680 | 1.7943 | ||||||||||||||||
|
April
|
1.8564 | 1.7674 | ||||||||||||||||
|
May
|
1.8369 | 1.7544 | ||||||||||||||||
|
June
|
1.8387 | 1.8090 | ||||||||||||||||
|
July
|
1.8734 | 1.8160 | ||||||||||||||||
|
August
|
1.8459 | 1.7921 | ||||||||||||||||
|
September
|
1.8105 | 1.7733 | ||||||||||||||||
|
October
|
1.8404 | 1.7790 | ||||||||||||||||
|
November
|
1.9073 | 1.8323 | ||||||||||||||||
|
December
|
1.9482 | 1.9125 | ||||||||||||||||
|
2005
|
||||||||||||||||||
|
January
|
1.9058 | 1.8647 | ||||||||||||||||
|
February
|
1.9249 | 1.8570 | ||||||||||||||||
|
March
|
1.9292 | 1.8657 | ||||||||||||||||
|
April
|
1.9197 | 1.8733 | ||||||||||||||||
|
As at May 16, 2005
|
1.8368 | |||||||||||||||||
| (a) | Exchange rates are based upon the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. |
| (b) | Calculated by using the average of the exchange rates on the last business day of each month during the year. |
30
Table of Contents
THE TRANSACTION
General
The terms of the Transaction reflect the current 60:40 ownership of the Royal Dutch/ Shell Group by Royal Dutch and Shell Transport. The Transaction seeks to ensure that both holders of Royal Dutch ordinary shares and Shell Transport ordinary shareholders (and holders of Shell Transport bearer warrants or Shell Transport ADRs) are offered our ordinary shares or our ADRs representing the equivalent economic interest in the RDS Group on implementation of the Transaction as their Royal Dutch ordinary shares, Shell Transport ordinary shares, Shell Transport bearer warrants or Shell Transport ADRs represent in the Royal Dutch/ Shell Group.
The Transaction is to be effected (i) by way of an exchange offer by us for the Royal Dutch ordinary shares; and (ii) by way of a Scheme of Arrangement of Shell Transport under section 425 of the Companies Act.
We will have two classes of ordinary shares, Class A Shares and Class B Shares. Holders of Royal Dutch ordinary shares are being offered Class A Shares in the offer (including in the form of Class A ADRs), Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants are being offered Class B Shares under the Scheme and holders of Shell Transport ADRs are being offered Class B ADRs.
The Class A Shares and the Class B Shares will have identical voting rights (other than as required by law, as described below), and identical economic rights upon liquidation and in respect of dividends, except for the dividend access mechanism by which it is intended that holders of Class B Shares will receive dividends having a UK source, as described under “The Scheme of Arrangement — Dividend Access Mechanism” on page 69. The dividend access mechanism seeks to preserve the current tax treatment of dividends paid to Shell Transport ordinary shareholders (and holders of Shell Transport bearer warrants).
Under the terms of the Transaction, holders of Royal Dutch ordinary shares in bearer or Hague registry form, holders of Royal Dutch ordinary shares in New York registry form, holders of Shell Transport ordinary shares, holders of Shell Transport bearer warrants and holders of Shell Transport ADRs will each receive upon completion of the Transaction, respectively:
|
• for each Royal Dutch
ordinary share in New York registry form tendered
|
1 Class A ADR | |
|
• for each Royal Dutch
ordinary share in bearer or Hague registry form tendered
|
2 Class A Shares | |
|
• for each Shell Transport
ordinary share (including Shell Transport ordinary shares to
which holders of Shell Transport bearer warrants are entitled)
|
0.287333066 Class B Shares | |
|
• for each Shell Transport
ADR
|
0.861999198 Class B ADRs |
Royal Dutch currently owns 60% of the Royal Dutch/ Shell Group (represented by 2,069,520,000 Royal Dutch ordinary shares excluding shares which have been repurchased and are to be cancelled (a) following approval by Royal Dutch shareholders at the Royal Dutch annual general meeting and (b) subject to mandatory procedures under Dutch law) and Shell Transport currently owns 40% (represented by 9,603,350,000 Shell Transport ordinary shares, including Shell Transport ordinary shares to which holders of Shell Transport bearer warrants are entitled) and the exchange ratios have been set to give effect to this ownership of the economic interest in the Royal Dutch/Shell Group.
Assuming that all Royal Dutch shareholders validly tender, and none properly withdraw, their Royal Dutch ordinary shares in the offer and the Transaction is completed, based on the exchange ratio set out above (i) Royal Dutch shareholders will receive a total of 4,139,040,000 Class A Shares (including shares underlying Class A ADRs), which will represent 60% of the total number of our issued ordinary shares, and (ii) Shell Transport shareholders will receive a total of 2,759,360,000 Class B Shares (including shares underlying Class B ADRs), which will represent 40% of the total number of our ordinary shares issued.
31
Table of Contents
A diagramatic representation of the effect of the Transaction appears below:
Before
After
| (1) | Assuming full acceptance of the offer (i) former Royal Dutch shareholders will, on completion of the Transaction, hold 60 percent of the issued ordinary share capital of Royal Dutch Shell and (ii) former Shell Transport ordinary shareholders and holders of Shell Transport Bearer Warrants will hold 40 percent. |
Assuming that not all Royal Dutch shareholders validly tendered their Royal Dutch ordinary shares in the offer, but the Transaction (including the offer) is nevertheless completed on the terms described herein, then immediately following completion of the Transaction (i) the percentage of our share capital and voting rights held by former holders of Royal Dutch ordinary shares will be less than 60%, (ii) the percentage of our share capital and voting rights held by former Shell Transport ordinary shareholders (and holders of Shell Transport ADRs) will be more than 40% and (iii) non-tendering Royal Dutch shareholders will continue to hold a minority equity interest in Royal Dutch (with the majority interest in Royal Dutch being held by Royal Dutch Shell). In that case, if the number of Royal Dutch ordinary shares that have been validly tendered and not withdrawn represent at least 95% of the issued share capital of Royal Dutch that is then outstanding, Royal Dutch Shell expects, but is not obligated to initiate squeeze-out procedures under Dutch law with a view to acquiring all Royal Dutch ordinary shares held by the minority holders of Royal Dutch ordinary shares against payment of a price in cash to be determined by a Dutch court. In addition, Royal Dutch Shell would have the right to use any other legally permitted method to obtain 100% of the Royal Dutch ordinary shares, including engaging in one or more corporate restructuring transactions, such as a merger, liquidation, transfer of assets or conversion of Royal Dutch into another form of corporate entity, or propose changes to the Royal Dutch articles that would alter the corporate or capital structure in a manner beneficial to Royal Dutch Shell, or engaging in one or more transactions with minority holders of Royal Dutch ordinary shares, including public or private exchanges or tender offers or purchases for consideration which may consist of Royal Dutch Shell ordinary shares, other securities or cash. See “Risk Factors — Risks to Royal Dutch Shareholders who do not tender their Royal Dutch Ordinary Shares in the Offer” on page 26.
Background to the Transaction
Since they entered into a scheme of amalgamation dated September 12, 1906 and agreements from 1907 by which the scheme of amalgamation was implemented and pursuant to which they combined their interests in the oil industry, Royal Dutch has owned 60% of the Royal Dutch/ Shell Group and Shell Transport has owned 40% of the Royal Dutch/ Shell Group. All operating activities have been conducted through the Royal Dutch/ Shell Group.
Currently, the corporate and management structure of the Parent Companies and the Royal Dutch/ Shell Group consists of:
| • | Two publicly-held Parent Companies, Royal Dutch and Shell Transport, which do not conduct operational activities. | |
| • | The Royal Dutch/ Shell Group, which consists of (i) two Royal Dutch/ Shell Group holding companies, Shell Petroleum N.V., a Dutch company, and The Shell Petroleum Company Limited, a company incorporated in England and Wales, and (ii) the subsidiary service and operating companies of the Royal |
32
Table of Contents
| Dutch Shell Group holding companies, which together conduct operations in more than 140 countries and territories worldwide. |
Royal Dutch and Shell Transport share in the aggregate net assets and in the aggregate dividends and interest received from the Royal Dutch/ Shell Group holding companies in the ratio of 60:40.
Royal Dutch is entitled to have its nominees elected as a majority of the members of the boards of directors of the Royal Dutch/ Shell Group holding companies, and Shell Transport is entitled to have its nominees elected as a minority of the members of the boards of the Royal Dutch/ Shell Group holding companies.
Royal Dutch
Royal Dutch is managed by a 3-person board of management, consisting exclusively of (executive) managing directors which is supervised by a 7-person supervisory board, consisting exclusively of (non-executive) supervisory directors. The Royal Dutch board of management is charged with the day-to-day management of Royal Dutch. The Royal Dutch supervisory board is not involved in the day-to-day management of Royal Dutch, but is charged with the supervision of the policies of the Royal Dutch board of management and the general course of affairs of Royal Dutch, and further advises the Royal Dutch board of management.
The principal trading markets for Royal Dutch’s ordinary shares are Euronext Amsterdam and The New York Stock Exchange.
Shell Transport
The Board of Shell Transport comprises 11 directors, 9 of whom are non-executive directors and 2 of whom are executive directors (known as Managing Directors).
Managing Directors are appointed by the Shell Transport board of directors from among its members. The Shell Transport board of directors has overall responsibility for the management of Shell Transport. It meets on a regular basis and has a formal schedule of matters reserved to it. These include such matters as approving the Annual Report and Accounts, dividends, material contracts, the approval of new appointments to the Shell Transport board of directors and changes to the relationship between Shell Transport and Royal Dutch.
The principal trading market for Shell Transport’s ordinary shares is the market for listed securities of the London Stock Exchange. American Depository Receipts evidencing Shell Transport’s ordinary shares are listed on The New York Stock Exchange.
The Conference
The supervisory board and the management board of Royal Dutch on the one hand, and the board of directors of Shell Transport on the other, do not have any directors in common. However, all of the directors frequently meet together during the year as a group which is called the Conference. The purpose of the Conference is to receive information from the executive committee about major developments within the Royal Dutch/ Shell Group and to discuss reviews and reports on the business and plans of the Royal Dutch/ Shell Group.
The Executive Committee
The current executive committee, a joint committee established by the boards of the two Royal Dutch/ Shell Group holding companies, consists of the managing directors of the two Royal Dutch/ Shell Group holding companies (the executive committee is the successor to, and replaced, the committee of managing directors on October 28, 2004). The executive committee advises the Parent companies on investment in the Royal Dutch/ Shell Group companies and on the exercise of shareholder rights in these companies. The executive committee guides the Royal Dutch/ Shell Group by providing strategic direction, support and appraisal to Royal Dutch/ Shell Group businesses. The executive committee is chaired by a Chief Executive and is subject to the supervision of the board of directors of Shell Transport and the supervisory board of Royal Dutch. Each member of the current executive committee is also a member of either the board of management of Royal Dutch or a director of Shell Transport. After completion of the Transaction, the current executive committee will no longer exist. The current
33
Table of Contents
On March 5 and March 18, 2004, Royal Dutch and Shell Transport announced that they would be undertaking a review of the overall governance of the Royal Dutch/ Shell Group, including the composition and operation of the parent and holding company boards. On April 19, 2004, Royal Dutch and Shell Transport further announced that in light of the report dated March 31, 2004 of Davis Polk & Wardwell to the Group Audit Committee, which had addressed the facts and circumstances of the reserves recategorisation and led to the adoption of certain remedial actions by the Parent Companies and the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport had decided to accelerate the review of the governance and overall structure of the Royal Dutch/ Shell Group and the Parent Companies. The remedial actions adopted by the Parent Companies and the Royal Dutch/ Shell Group included
| • | establishing a global reserves committee, | |
| • | revising the Royal Dutch/ Shell Group reserves guidelines to comply with SEC requirements, | |
| • | training approximately 3,000 staff members in the revised guidelines, | |
| • | overhauling the offices, and clarifying the roles and responsibilities, of the Royal Dutch/ Shell Group reserves coordinator and Royal Dutch/Shell Group reserves auditor, | |
| • | removing reserves bookings from performance scorecards for calculating bonuses, | |
| • | improving visibility and accounting of reserves issues by senior management and directors, | |
| • | enhancing the accountability of business unit CFOs to the Royal Dutch/ Shell Group CFO, the role of the Royal Dutch/ Shell Group legal counsel and of the disclosure committee, | |
| • | strengthening lines of responsibility for reserves reporting, | |
| • | reducing job rotation, | |
| • | revising the Royal Dutch/ Shell Group’s document retention policy, and | |
| • | promoting communications and compliance. |
The report of Davis Polk & Wardwell, and the remedial actions adopted by the Parent Companies and the Royal Dutch/ Shell Group, are discussed in detail in the 2004 Annual Report on Form 20-F incorporated by reference herein.
On April 28, 2004, Royal Dutch and Shell Transport formed a steering group (the “steering group”) to review the structure and overall governance of Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group. In forming the steering group and establishing its terms of reference, the directors noted that it would be desirable to explore options for changes to the corporate governance of the Royal Dutch/ Shell Group with a view to (i) simplifying the boards and Royal Dutch/ Shell Group executive management and the perception thereof, (ii) improving decision making processes at the Parent Companies and the Royal Dutch/ Shell Group holding companies and (iii) enhancing effective leadership for the Royal Dutch/ Shell Group as a whole. It was noted that any model for structural change would be tested against the status quo. Under the steering group’s terms of reference, it was asked to consider: (i) how to simplify the boards of directors of the Parent Companies and the Royal Dutch/ Shell Group holding companies and the management structures of the Parent Companies and the Royal Dutch/ Shell Group; (ii) how decision-making processes and accountability could be improved; and (iii) ways in which effective leadership for the Parent Companies and the Royal Dutch/ Shell Group as a whole could be enhanced. The steering group was chaired by Lord Kerr of Kinlochard and its members were Maarten van den Bergh, Sir Peter Job, Jonkheer Aarnout Loudon and Jeroen van der Veer. Messrs. Van den Bergh, Van der Veer and Jonkheer Aarnout Loudon are directors of Royal Dutch while Lord Kerr of Kinlochard and Sir Peter Job are directors of Shell Transport. On June 17, 2004, Royal Dutch and Shell Transport publicly announced the formation of the steering group, its members and its terms of reference.
34
Table of Contents
The steering group was assisted by a working group (the “working group”) of senior finance, accounting and legal personnel from the Royal Dutch/Shell Group. The steering group and the working group received legal advice from Slaughter and May, De Brauw Blackstone Westbroek N.V. (“De Brauw”) and Cravath, Swaine & Moore LLP (“Cravath”) on matters concerning English, Dutch and U.S. law, respectively. As described below, the steering group also received certain corporate finance advice from Citigroup and Rothschild. As also described below, the supervisory and management boards of Royal Dutch separately engaged ABN AMRO as their financial advisor and the board of Shell Transport separately engaged Deutsche Bank as its independent financial advisor.
As outlined above, the steering group comprised directors of both Parent Companies. In accordance with its terms of reference from the Parent Companies, the steering group, with the assistance of the working group and financial advisors appointed to assist the steering group and the Parent Companies’ external legal advisors, developed and evaluated alternatives that it then presented to the Parent Company boards for their consideration and evaluation at both joint and separate meetings of the Parent Company directors. (These alternatives are discussed in the paragraphs that follow). In that process each Parent Company board had the assistance of separate financial advisors appointed by that Parent Company for the purpose, as well as the Parent Companies’ legal advisors. The Parent Companies did not engage in separate negotiations with each other over the terms of the Transaction outside of that process.
Between April 28, 2004 and June 2004, the steering group, the working group and the legal advisors met several times to discuss possible alternatives to the current structure and overall governance arrangements that might merit further consideration. The steering group initially considered three groups of possible revised structures: those that altered the Royal Dutch/ Shell Group’s internal structure to create a single intermediate holding company for the Royal Dutch/ Shell Group, without affecting the Parent Companies relationships with each other, those that would modify the existing Parent Company arrangements to obtain greater economic unity at the Parent Company level and those that would result in there being a single new holding company for the two existing Parent Companies. While the alternative of revising the Royal Dutch/ Shell Group’s internal structure had the advantages of being fairly straightforward to implement and an enhancement of internal accountability (by interposing a single intermediate holding company for governance of the Royal Dutch/ Shell Group over the current two intermediate holding companies), the steering group concluded that the formation of a new single intermediate holding company under the existing Parent companies would not address as many of the objectives outlined above as would be desirable, in particular because it would not change the fact that each parent company has a separate board of directors. Accordingly, following its preliminary review, the steering group focused on two principal groups of alternatives, (i) structures in which modifications would be made to the existing arrangements between the Parent Companies (“enhanced dual listed company structures”) and (ii) structures in which the Parent Companies would be replaced by a single publicly traded entity (“single parent company structures”).
During the first few weeks of July 2004, the steering group met with several potential financial advisors and pursuant to an engagement letter dated July 27, 2004, Citigroup and Rothschild were retained by Shell International Limited to provide certain corporate finance advice in connection with the governance and structure review. This corporate finance advice provided by Citigroup and Rothschild was limited to describing and presenting issues for the Royal Dutch/ Shell Group consideration regarding two primary alternative governance structures and to providing a context for the analysis of regulatory, tax and legal advice. The corporate finance advice also included information regarding relevant precedent transactions and summaries of issues relating to various strategic options available to the Royal Dutch/ Shell Group. The material elements of the corporate finance advice provided by Citigroup and Rothschild to the directors of the Parent Companies are summarized below in this “Background to the Transaction”. For important information regarding the nature of the corporate finance advice provided by Citigroup and Rothschild, please refer to “Note Regarding Corporate Finance Advice of Citigroup and Rothschild” below.
Thereafter, the steering group met with members of the working group, representatives of Citigroup and Rothschild and the legal advisors several times. Among other things, the steering group sought advice on where a single parent company should be incorporated and tax resident, taking into account differences in corporate legal requirements, taxation of shareholders and of the Parent Companies and the Royal Dutch/ Shell Group, index
35
Table of Contents
The steering group was advised by De Brauw that the implementation of a single parent company structure would require an exchange offer because a merger transaction would not be available under applicable Dutch law. A shareholder vote would also likely be required to approve any implementation agreement. Since an exchange offer would involve the individual participation of each shareholder, the steering group was further advised that there would likely be some Royal Dutch shareholders remaining immediately after the Transaction. The steering group was advised by Slaughter and May that the implementation of a single parent company structure could be accomplished by a scheme of arrangement under applicable English law, which would result in the cancelation of all of the existing Shell Transport ordinary shares if it were approved by the requisite shareholder vote and by the UK High Court. The steering group was advised by Cravath that the implementation of an exchange offer would require compliance with the U.S. tender offer rules and registration of the shares to be issued under the Securities Act and Exchange Act, and that implementation of a scheme of arrangement should not be subject to the U.S. tender offer rules and should be entitled to an exemption from registration under the Securities Act and the Exchange Act.
The steering group also asked the legal advisors and representatives of Citigroup and Rothschild to consider the feasibility of certain changes to the enhanced dual listed company structures under consideration, in light of the features that had been adopted in dual-listed company structures formed in recent years, including (i) dividend equalization, (ii) pooled voting at the shareholder level on most matters, which would result in, among other things, common boards of directors, and (iii) cross-guarantees by each of Royal Dutch and Shell Transport of certain contractual obligations of each other. The steering group also asked the U.S. legal advisers to consider the tax issues related to the potential tax treatment of share-for-share acquisitions if an enhanced dual listed company structure was implemented.
On August 5, 2004, the steering group met together with members of the working group, the legal advisors and representatives from Citigroup and Rothschild. The steering group was advised that in order to implement a dividend access mechanism for a single parent company structure, it would be necessary to discuss the proposed mechanism with Dutch Revenue Service and they would need to find it acceptable. The necessary confirmation about the treatment of the dividend access mechanism was obtained on October 26, 2004, after a number of meetings with the Dutch Revenue Service. At the August 5, 2004 meeting, the steering group also received preliminary advice that the existing structure or an enhanced dual listed company structure would present certain significant issues under US tax law that would likely make it difficult or impossible in many cases to ensure that stock for stock acquisitions would be tax free in the US, while a single parent company structure would not generally present these problems.
Between August 5, 2004 and the first week of September, the steering group met several times with members of the working group and the legal advisors and representatives of Citigroup and Rothschild. During this period, the steering group received confirmation of the preliminary U.S. tax advice it had received on
36
Table of Contents
Beginning in September 2004, ABN AMRO began to act as financial advisor to Royal Dutch and Deutsche Bank AG London began to provide independent financial advice to Shell Transport.
The directors of the Parent Companies met jointly on September 7, 2004, together with members of the working group and representatives of Citigroup and Rothschild. The directors of the Parent Companies received a report from the steering group on the status of the two structures under consideration, including a summary of the advice received by the steering group over the preceding two months, as described above. The directors reviewed in detail draft governance documents recommended by the steering group, including draft descriptions of the roles and responsibilities of the non-executive Chairman, Chief Executive, the Company Secretary and other principal officers, as well as the executive committee. (The definitive descriptions are set forth in the Implementation Agreement attached as Annex A hereto.) The directors also received a recommendation from the steering group that in either structure the board should initially consist of ten non-executive directors and five executive directors. This recommendation allowed for the initial non-executive directors to consist of six former members of the Royal Dutch board and four members of the Shell Transport board, thereby reflecting the current 60:40 ownership of the Royal Dutch/ Shell Group by Royal Dutch and Shell Transport, without mandating that such relationship be maintained in the future. The recommendation of five executive directors would ensure continuity of responsibility of the current managing directors of Royal Dutch and managing directors of Shell Transport. During this meeting, as they had originally noted on August 5, 2004 to members of the steering committee, Citigroup and Rothschild noted that the exchange ratio in certain precedent transactions in which dual listed company structures had been combined generally had reflected the percentage ownership by each company of the combined business prior to the transaction. In addition, Citigroup and Rothschild reviewed the existing economic relationship between Royal Dutch and Shell Transport and discussed the fact that, if a single parent company structure were to be implemented, an exchange ratio that reflected the existing economic relationship would likely be preferable to both Royal Dutch and Shell Transport. Citigroup and Rothschild’s analysis in this regard included a comparison of the effectiveness and validity of arguments that could be made by either Parent Company in favor of and against a control premium for such Parent Company’s shares, as well as possible shareholder and market reactions to a structure that altered the existing economic relationship between Royal Dutch and Shell Transport. In this respect, Citigroup and Rothschild identified arguments that could be made by either Parent Company in favor of (such as, (i) in the case of Royal Dutch, compensation for dilution of the voting power of the Royal Dutch shareholders in the election of Royal Dutch managing and supervisory directors and indirectly in the election of the Royal Dutch/Shell Group holding companies’ directors and (ii) in the case of Shell Transport, compensation for loss of control of Shell Transport) and against (such as (i) the fact that potentially relevant precedent transactions did not include such a control premium, (ii) the fact that none of the boards was believed to be likely to accept a discount and (iii) the fact that the payment of a premium could affect the appropriate accounting for a transaction) a control premium for each Parent Company’s shares, as well as possible shareholder and market reactions to a structure that altered the existing economic relationship between Royal Dutch and Shell Transport. During this meeting, Citigroup and Rothschild reviewed the two governance structures under consideration and suggested that the Royal Dutch supervisory board and the Royal Dutch management board and Shell Transport board of directors would need to consider whether it would be possible for both companies’ boards to reach agreement on an acceptable structure if such a structure necessitated changes which did not reflect the existing 60/40 economic relationship between Royal Dutch and Shell Transport. It was also acknowledged by the Royal Dutch supervisory board and Royal Dutch management board and the Shell Transport board of directors that the feasibility of dividend access for former Shell Transport shareholders was a significant issue for any single parent company structure.
During the following weeks, the steering group met several times with members of the working group and the legal advisors and representatives of Citigroup and Rothschild. At these meetings the steering group considered, among other things:
| • | the location and role of the headquarters of a single parent company (The Netherlands was considered the most appropriate location for the headquarters of the new parent company given the large proportion |
37
Table of Contents
| of the Royal Dutch/ Shell Group’s central functions that were already based in The Hague). Having a headquarters in The Hague was also consistent with the goal of achieving tax neutrality); | ||
| • | arrangements for annual general meetings of shareholders (in the case of a single parent company structure, it was considered appropriate for these meetings normally to be held in the headquarters city, which would be The Hague); | |
| • | the country of incorporation of the new single parent company (in order to capture the anticipated benefits of FTSE indexation, it would be necessary for the new parent company to be incorporated in the UK); | |
| • | listing of the new shares (since the new parent company would be incorporated under English law it could only achieve a listing in both London and Amsterdam, as well as New York, by having a primary listing for all classes of shares on the London Stock Exchange and additional listings on Euronext Amsterdam and the NYSE); | |
| • | issues surrounding the implementation of an ADR program (the steering group was advised that ADRs offered no discernable disadvantages for investors versus New York registered shares); | |
| • | the name for a single parent company (it was considered desirable for a single parent company to be named Royal Dutch Shell, and the steering group was advised that necessary UK and Dutch approvals had been obtained to use that name); | |
| • | the accounting treatment of the transaction structures under consideration (the steering group was advised on the effects that fair value accounting would have and also advised that the issue of the appropriate accounting was still under review); and | |
| • | the feasibility of a dividend access mechanism, including through the issuance of two classes of shares (the steering group considered it important in connection with a single parent company structure to obtain approval from the Dutch Revenue Service for a dividend access mechanism; the steering group was advised that this may require the use of two classes of shares, which it viewed as acceptable so long as the classes were essentially identical in their corporate rights and obligations, the differences arose solely from the tax treatment of dividends in the applicable jurisdictions and the classes could be merged at the discretion of the Boards). |
The directors of the Parent Companies met jointly again on September 27, 2004. Members of the working group and representatives of Citigroup and Rothschild were present for parts of that meeting. At that meeting, the directors of the Parent Companies received an update on the status of the outstanding issues related to the single parent company structure and the enhanced dual listed company structure. During late September and early October 2004, representatives of Royal Dutch and Shell Transport discussed the impact of a single parent company structure on the direct and indirect voting power of Royal Dutch and Shell Transport shareholders and whether it would be advisable to employ, among other things, differential voting rights between the two classes of shares. The directors noted that Royal Dutch shareholders currently elect all the members of the Royal Dutch supervisory and management boards and Royal Dutch in turn has the right to elect a majority of the directors of the Royal Dutch/ Shell Group holding companies, and that the Shell Transport shareholders currently have the right to elect the members of the Shell Transport board of directors and Shell Transport in turn has the right to elect a minority of the directors of the Royal Dutch/ Shell Group holding companies. The directors also noted that, on the basis of a 60:40 ratio, if all shares of a new single parent company vote together, former Royal Dutch shareholders would initially have a majority of the voting power and former Shell Transport shareholders would initially have a minority of the voting power. As described under “Description of Share Capital of Royal Dutch Shell” on page 91, the Class A Shares and Class B Shares have identical voting rights (other than statutory class voting rights with respect to matters that affect the rights attached to either class of shares differently than the other class).
On October 7, 2004, the Royal Dutch supervisory board met to discuss the status of the structure and governance review. The representatives of the Royal Dutch supervisory board that were members of the steering group explained that, due to a number of outstanding points, it was premature to come to conclusions or reach a
38
Table of Contents
The directors of the Parent Companies met jointly on October 8, 2004, together with members of the working group to review the status of various issues related to the single parent company structure and the enhanced dual listed company structure. Representatives from Citigroup, Rothschild, Slaughter and May and De Brauw attended part of this meeting. The directors of the Parent Companies discussed the proposed dividend policy under each of the two structures. The discussion then focused on the outstanding issues related to the single parent company structure, which included discussions on, among other things: matters related to the characteristics of the two classes of shares (including the treatment of dividends and the dividend access mechanism); the listing of a single parent company’s securities in the U.S. in the form of ADRs (rather than in the form of New York registry shares or another form of security); the possibility of price differentials between the two classes of shares; considerations relating to how the exchange ratio could impact the post-transaction share price; the primary listing of a single parent company’s shares; and possible market and shareholder reactions. Citigroup and Rothschild also discussed with the directors of the Parent Companies the potential market issues that would be raised if the possibility of giving the two classes of shares differential voting rights were pursued and the lack of precedent for differential voting rights in similar transactions. During this meeting, as part of their analysis of alternative governance structures, Citigroup and Rothschild presented a single holding company structure based on an exchange ratio for Shell Transport shareholders of 0.2873 Royal Dutch Shell shares for each Shell Transport share currently held in order to reflect the existing 60:40 economic relationship between Royal Dutch and Shell Transport. This exchange ratio was based on the premise of 2 shares in Royal Dutch Shell for each share of Royal Dutch currently held and was determined taking into account the appropriateness of the resultant trading prices of the Royal Dutch Shell shares on the three principal exchanges on which they will be traded. For important information regarding the nature of the corporate finance advice provided by Citigroup and Rothschild, please refer to “Note Regarding Corporate Finance Advice of Citigroup and Rothschild” on page 41. Please also refer to ABN AMRO’s written opinions addressed to the Royal Dutch supervisory board and the Royal Dutch board of management attached as Annex B and Annex C hereto and to the discussion of these opinions set forth under “Opinion of Royal Dutch’s Financial Advisor” on page 43.
On October 23, 2004, the Shell Transport Board met by teleconference to consider the alternatives under consideration. Representatives of Slaughter and May (in its capacity as counsel to Shell Transport) and Deutsche Bank (independent financial advisers to Shell Transport) also participated in the teleconference.
The directors of the Parent Companies met jointly on October 27, 2004, together with members of the working group and representatives of Citigroup, Rothschild and De Brauw. The directors of the Parent Companies reviewed a draft announcement of the Transaction. At this meeting, the directors of the Parent Companies, who had received corporate finance advice from Citigroup and Rothschild, indicated their belief that the Transaction is in the interests of shareholders of Royal Dutch and Shell Transport as a whole. In providing their advice to the directors of the Parent Companies, Citigroup and Rothschild relied entirely on the commercial assessments of the Transaction of the directors of the Parent Companies. For important information regarding the nature of the corporate finance advice provided by Citigroup and Rothschild, please refer to “Note Regarding Corporate Finance Advice of Citigroup and Rothschild” on page 41.
On October 27, 2004, the Royal Dutch supervisory board met to consider (i) an enhanced dual listed company structure in which a new single group holding company would be formed (owned 60% by Royal Dutch and 40% by Shell Transport) as a Dutch company and the Parent Companies would enter into a dividend equalization agreement and arrangements such that shareholders of both Parent Companies would vote together on matters that affected them similarly, including the election of directors, and (ii) the Transaction. Representatives of ABN AMRO and De Brauw were also present. Representatives of De Brauw reviewed with the Royal Dutch supervisory board their duties under Dutch law in connection with considering the possible structures. ABN AMRO delivered to the Royal Dutch supervisory board its written opinion, addressed to the Royal Dutch supervisory board and Royal Dutch board of management, to the effect that as at October 27, 2004, and based
39
Table of Contents
In their consideration of the possible structures, the Royal Dutch supervisory board noted that the enhanced dual listed company structure would simplify the corporate structure and maintain the current tax treatment of shareholders. In relation to the proposed single parent company structure embodied in the Transaction, the board noted that the structure would generally result in the benefits identified in relation to the enhanced dual listed company structure, and in addition would (i) remove the risk of a conflict between the decision-making bodies of the public parent companies, (ii) simplify the raising of capital in the future and (iii) reduce regulatory burdens resulting from having two publicly-traded Parent Companies. The board also noted that the Transaction appeared to offer Royal Dutch and the Royal Dutch/ Shell Group more benefits than the enhanced dual listed company structure, particularly (i) clarity and simplicity in both management and corporate structure, (ii) improved efficiency with clear lines of authority and an empowered Chief Executive, (iii) accountability through improved clarity in governance and (iv) financial and strategic flexibility. (These reasons are discussed in more detail below under “Reasons for the Transaction”). Thereafter, the Royal Dutch supervisory board unanimously resolved, subject to the conditions set forth under “The Offer — Conditions to the Offer” on page 53, to approve in principle the proposal of the Transaction and to enter into and execute the unification protocol.
In considering the factors noted above and described in more detail below under “Reasons for the Transaction”, the Royal Dutch supervisory and management boards considered as favorable the terms of the Transaction, the opinion of the financial advisors, the expected increased clarity and simplicity of governance, the expected increased accountability and management efficiency, the tax treatment of the Transaction to Royal Dutch and to Dutch and US holders of Royal Dutch shares, the expected accounting treatment, the index inclusion and the expected increased flexibility in issuing equity and debt. The Royal Dutch supervisory and management boards considered as unfavorable the fact that there would be two classes of shares, which may trade at different prices, the likelihood of there being Royal Dutch minority shareholders immediately following the Transaction, the exclusion of the Royal Dutch Shell shares from Eurozone indices such as the Dow Jones EuroStoxx 50 index, and the other risk factors described below and under “Risk Factors” on page 25. The Royal Dutch boards did not quantify or assign relative weightings to any of the factors considered.
On October 27, 2004, the Shell Transport board met to consider the enhanced dual listed company structure and the Transaction. The Shell Transport board unanimously resolved, based on a number of factors, and subject to certain conditions, to approve, in principle, the Transaction and entry into and execution of the unification protocol.
On October 27, 2004, the board of Royal Dutch Shell met and unanimously resolved, and subject to certain conditions, to approve, in principle, the Transaction and entry into and execution of the unification protocol.
On the morning of October 28, 2004, the Royal Dutch board of management met to consider the enhanced dual listed company structure and the Transaction. Representatives of ABN AMRO and De Brauw were also present. The Royal Dutch board of management considered the matters that had been considered by the Royal Dutch supervisory board, including, but not limited to, ABN AMRO’s written opinion dated October 27, 2004. Following consideration of these matters, the Royal Dutch board of management unanimously resolved, based on the factors considered by the Royal Dutch supervisory board, and subject to the conditions set forth under “The Offer — Conditions to the Offer” on page 53, to approve, in principle, the Transaction and entry into and execution of the unification protocol. Following approval by the Royal Dutch board of management, the unification protocol was executed by the parties. Thereafter, Royal Dutch and Shell Transport announced that the outcome of the review was the Transaction.
On May 18, 2005, Royal Dutch Shell, Royal Dutch and Shell Transport entered into the implementation agreement.
We estimate that the total fees and expenses related to the Transaction will be $115 million.
40
Table of Contents
Note Regarding Corporate Finance Advice of Citigroup and Rothschild
Citigroup and Rothschild did not render an opinion regarding the fairness of the consideration offered in the offer from a financial point of view or otherwise, and did not and do not make any recommendation to any holders of Royal Dutch ordinary shares or any other party or parties with respect to the offer. Throughout the process, Citigroup and Rothschild’s advice was provided to the steering group for discussion purposes only and was prepared as a contribution to an overall analysis of available strategic options, rather than as an evaluation of an agreed-upon recommendation or position. Moreover, neither Citigroup nor Rothschild made any independent valuation or appraisal of the assets or liabilities of Royal Dutch Shell, Royal Dutch or Shell Transport, nor was Citigroup or Rothschild furnished with any such appraisals.
From time to time, Citigroup and its affiliates have also (i) maintained banking relationships with Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group, (ii) provided investment banking services such as mergers and acquisitions advice and (iii) executed transactions, for their own account or for the accounts of customers, in the Royal Dutch ordinary shares or the Shell Transport ordinary shares or debt securities of Royal Dutch and Shell Transport. From time to time, Rothschild and its affiliates have also provided investment banking services such as mergers and acquisitions advice to Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group. Citigroup and Rothschild are acting as dealer managers for the offer and as sponsors in connection with the listing of the Royal Dutch Shell ordinary shares on the London Stock Exchange and as co-listing agents in connection with the listing of the Royal Dutch ordinary shares on Euronext Amsterdam. In connection with the services rendered by Citigroup and Rothschild as dealer managers, Royal Dutch Shell has agreed to pay each of Citigroup and Rothschild a fee of $2,000,000. Royal Dutch Shell has also agreed to reimburse Citigroup and Rothschild for certain out-of-pocket expenses incurred by them, and Royal Dutch Shell has agreed to indemnify and hold harmless Citigroup and Rothschild against certain losses, claims, damages or liabilities related to, arising out of or in connection with their engagement as dealer managers, sponsors and co-listing agents.
Reasons for the Transaction
In making their decision that Royal Dutch should enter into the unification protocol and the implementation agreement and propose the Transaction and in making their recommendation that holders of Royal Dutch ordinary shares accept the offer and tender their Royal Dutch ordinary shares, the Royal Dutch board of management and Royal Dutch supervisory board considered, among other things, the following:
| • | Terms of the Transaction: the fact that the exchange ratio to be proposed reflects the ownership of the Royal Dutch/ Shell Group by Royal Dutch and Shell Transport and the other terms of the unification protocol and implementation agreement. | |
| • | Advice and opinion of financial advisors: the written opinion of ABN AMRO addressed to the Royal Dutch board of management and the Royal Dutch supervisory board that, as at October 27, 2004, the exchange ratio to be used in the offer was fair, from a financial point of view, to holders of Royal Dutch shares; and the corporate finance advice provided by Citigroup and Rothschild. ABN AMRO confirmed its opinion by delivering a written opinion dated May 13, 2005 to the Royal Dutch board of management and the Royal Dutch supervisory board. The full text of the written opinions of ABN AMRO dated October 27, 2005 and May 13, 2005 are attached hereto as Annex B and Annex C, respectively, and set forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by ABN AMRO in rendering its opinions. Additional detail concerning the written opinion of ABN AMRO and the corporate finance advice provided by Citigroup and Rothschild is contained under “— Opinion of Royal Dutch’s Financial Advisor” on page 43 and “— Background to the Transaction” on page 32, respectively. | |
| • | Increased clarity and simplicity of governance: the belief that the Transaction will result in a clearer and simpler governance structure, including: |
| — | a single, smaller board initially comprised of 10 non-executive and 5 executive directors, and | |
| — | a simplified senior management structure with a single non-executive Chairman of the board, a single Chief Executive and clear lines of authority. |
41
Table of Contents
| This structure will eliminate any need for the Conference and for the executive committee (as the successor to the committee of managing directors) to be internally accountable to two separate public company boards, each of which has its own Chairman. After completion of the Transaction, the executive committee of Royal Dutch Shell would be responsible for the overall business and affairs of Royal Dutch Shell and have the final authority in all matters of management that are not within the duties and authorities of our board of directors or shareholders. |
| • | Increased accountability: the expectation that the Transaction will lead to increased accountability and clarify lines of authority. This is expected to result from the fact that following completion of the Transaction the Royal Dutch Shell executive committee will report through the Chief Executive to a single board of directors with a single non-executive Chairman. | |
| • | Increased management efficiency: the belief that the Transaction will increase the efficiency of decision making and management processes generally, including through the elimination of dual corporate headquarters in favor of a single corporate headquarters, the elimination of duplication and the centralization of functions. | |
| • | Tax treatment: the fact that (a) the exchange of Royal Dutch ordinary shares in the Transaction would not be subject to tax for Dutch and U.S. federal income tax purposes, and (b) the Transaction would be broadly tax neutral for the Royal Dutch/ Shell Group. See “Material Tax Consequences” for a description of the material tax consequences to U.S. holders of the offer. | |
| • | Expected accounting treatment: the fact that it was expected that the Transaction would be accounted for on an historical cost (or carry-over) basis under International Financial Reporting Standards and U.S. GAAP rather than as a business combination (see Unaudited Condensed Pro Forma Combined Financial Information on page 134 for a more detailed discussion of the accounting treatment for the Transaction). | |
| • | Index inclusion: the fact that our shares would be expected to be included in the FTSE All-Share and FTSE 100 indices with a weighting reflecting our full market capitalization (i.e., both Class A Shares and Class B Shares). Because these indices are widely tracked by investors, we expect this inclusion to have a positive impact upon the overall demand for our shares | |
| • | Flexibility in issuing equity and debt: the fact that the Transaction would result in a single publicly traded entity that would facilitate equity and debt issuances, including on an SEC-registered basis. As described above, the existing structure or an enhanced dual listed company structure would present significant issues under US tax law that would likely make it difficult or impossible in many cases to ensure that stock for stock acquisitions would be tax free in the US, while the single parent company structure would not generally present these problems. The existence of a single parent company that is an SEC registrant will facilitate the issuance of registered debt securities by avoiding any need for multiple obligors or guarantors.(1) |
In the course of their deliberations, the Royal Dutch board of management and Royal Dutch supervisory board also considered certain potentially negative factors relevant to the Transaction, including:
| • | Two classes of shares: the fact that following the Transaction, we would have two classes of ordinary shares outstanding, which may trade at different prices partially as a result of the fact that holders of Class A Shares will receive Dutch source dividends and holders of Class B Shares are expected to receive UK source dividends (pursuant to the dividend access mechanism) and that there may be different levels of incremental demand from investors (including funds) that track stocks included in the FTSE 100 Index. |
| (1) | However, any further issue of Class B Shares will only be made after prior consultation with the Dutch Revenue Service. |
42
Table of Contents
| • | Likelihood of Royal Dutch minority: the likelihood that there would be remaining public shareholders of Royal Dutch immediately following the completion of the offer, which would result in ongoing reporting and administrative costs until and unless such shares are acquired. | |
| • | Elimination from Eurozone-only stock Indices: the risk that our shares would not be included in Eurozone-only indices such as the Dow Jones EuroStoxx 50 index, which would result in the selling of Royal Dutch ordinary shares or Class A Shares by investment funds and other investors that track those indices. Our shares would generally not be included in Eurozone-only indices because companies incorporated in England and Wales are generally not eligible for such indices. | |
| • | Other Risk Factors: the other risks to holders of our shares described above under “Risk Factors” on page 25. These include amongst others the fact that the trading prices of the Royal Dutch Shell ordinary shares and/or ADRs may be subject to fluctuation, the fact that we may not realize the anticipated benefits of the Transaction, the fact that the Class A Shares and the Class B Shares may trade at different prices, the fact that Royal Dutch Shell may in the future have a dividend policy that differs from Royal Dutch’s historical policy, and in addition, the risks to non-tendering Royal Dutch shareholders described therein, including the steps that we may take in the future to acquire the remaining public minority such as corporate restructuring transactions, changes to the Royal Dutch articles and public or private exchanges or tender offers or other purchases. |
This discussion of the information and factors considered by the Royal Dutch board of management and Royal Dutch supervisory board in making their decision is not intended to be exhaustive but is believed to include all material factors considered. In view of the wide variety of factors considered in connection with their evaluation of the Transaction and the complexity of these matters, the Royal Dutch board of management and Royal Dutch supervisory board did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to these factors. In addition, individual members of the Royal Dutch board of management and Royal Dutch supervisory board may have given different weight to different factors.
Recommendation of Royal Dutch’s Management and Supervisory Board
The Royal Dutch supervisory board and the Royal Dutch board of management have unanimously reached the conclusion, on the basis of the considerations stated in this prospectus, that the Transaction between Royal Dutch, Shell Transport and Royal Dutch Shell is in the best interest of Royal Dutch, holders of Royal Dutch ordinary shares and Royal Dutch’s other stakeholders. They are furthermore of the opinion that the offer is fair and reasonable and accordingly unanimously recommend its acceptance.
Opinion of Royal Dutch’s Financial Advisor
In connection with the Transaction, Royal Dutch retained ABN AMRO to act as its financial advisor and render an opinion as to the fairness, from a financial point of view, of the exchange ratio to the holders of Royal Dutch ordinary shares. ABN AMRO delivered a written opinion to the Royal Dutch board of management and Royal Dutch supervisory board dated October 27, 2004 that, as at that date, and based upon and subject to the matters considered and the assumptions and qualifications set forth in the opinion, the exchange ratio was fair, from a financial point of view, to the holders of Royal Dutch ordinary shares. ABN AMRO confirmed its opinion by delivering a written opinion dated May 13, 2005 to the Royal Dutch board of management and the Royal Dutch supervisory board.
The full text of the written opinions of ABN AMRO dated October 27, 2004 and May 13, 2005 are attached hereto as Annex B and Annex C, respectively and set forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by ABN AMRO in rendering its opinions. ABN AMRO provided its opinion dated October 27, 2004 to the Royal Dutch board of management and Royal Dutch supervisory board in connection with their evaluation of the offer and the opinions do not in any way constitute a recommendation by ABN AMRO to any holders of Royal Dutch shares as to whether such holders should accept or reject the offer or otherwise act in relation to the Transaction. This summary does not purport to be a complete description of the analyses performed by ABN AMRO and is qualified by reference to the written opinions of ABN AMRO set forth in Annex B and Annex C hereto, but it
43
Table of Contents
The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Selecting portions of the analyses or the summary set forth below, without considering the analyses as a whole, could create an incomplete or misleading view of the process underlying the opinion of ABN AMRO. In arriving at its opinions, ABN AMRO made qualitative judgments as to the significance and relevance of each analysis and factor that it considered. Accordingly, ABN AMRO believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on selected elements thereof, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.
No company or transaction used in the below analyses as a comparison is identical to Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group or the transaction contemplated to which the exchange ratio relates. The analyses were prepared for the purposes of ABN AMRO providing its opinion dated October 27, 2004 to the Royal Dutch board of management and Royal Dutch supervisory board in connection with their consideration of the offer and do not purport to be appraisals or to reflect ratios at which Royal Dutch ordinary shares, Class A Shares and Class B Shares might trade in the future which may be significantly more or less favorable than as set forth in these analyses. ABN AMRO reviewed and updated such analyses in connection with its preparation of the opinion dated May 13, 2005.
For the purposes of providing its opinion dated May 13, 2005, ABN AMRO:
| • | reviewed certain publicly available business and financial information relating to Royal Dutch, including the audited annual financial statements (the “annual accounts”) for the three consecutive financial years ending December 31, 2004, 2003 and 2002 and the unaudited quarterly financial figures for the period ending March 31, 2005; | |
| • | reviewed certain publicly available business and financial information relating to Shell Transport, including the audited annual accounts for the three consecutive financial years ending December 31, 2004, 2003 and 2002 and the unaudited quarterly financial figures for the period ending March 31, 2005; | |
| • | reviewed certain publicly available business and financial information relating to the Royal Dutch/ Shell Group, including the audited annual accounts for the three consecutive financial years ending December 31, 2004, 2003 and 2002 and the unaudited quarterly financial figures for the period ending March 31, 2005; | |
| • | participated in discussions with and reviewed information provided by the senior management of Royal Dutch with respect to the businesses and prospects of Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group; | |
| • | reviewed the historical stock prices and trading volumes of the Royal Dutch ordinary shares and the Shell Transport ordinary shares; | |
| • | reviewed the financial terms of certain transactions ABN AMRO believed to be comparable to the Transaction; | |
| • | reviewed a draft dated May 10, 2005 of the announcement of final proposals for the Transaction, the announcement relating to the Transaction dated October 28, 2004 and those parts of the unification protocol dated October 28, 2004 and certain other related documents, which ABN AMRO deemed relevant for the purposes of providing its opinion; | |
| • | participated in discussions with, and reviewed information provided by, relevant employees of the Royal Dutch/ Shell Group as well as the tax advisors assisting the Royal Dutch/ Shell Group on the various (potential) tax consequences resulting from the Transaction; and | |
| • | performed such other financial reviews and analyses, as ABN AMRO, in its absolute discretion, deemed appropriate. |
44
Table of Contents
ABN AMRO assumed and relied upon, without independent verification, the truth, accuracy and completeness of the information, forecasts (that may have been made available), data and financial terms provided to it or used by it, assumed that the same were not misleading and does not assume or accept any liability or responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets, operations or liabilities of Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group nor was ABN AMRO provided with such valuation or appraisal. With respect to any financial forecasts that may have been made available, ABN AMRO assumed that they have been reasonably prepared on bases reflecting the best available estimates and judgements of the management of Royal Dutch and Shell Transport as to the future financial performance of Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group, and that no event subsequent to the date of any such financial forecasts and undisclosed to ABN AMRO has had a material effect on them. ABN AMRO does not assume or accept liability or responsibility for (and expresses no view as to) any such forecasts or the assumptions on which they are based. In preparing its opinions, ABN AMRO received specific confirmation from senior management of Royal Dutch that the assumptions specified above were reasonable and no information had been withheld from ABN AMRO that could have influenced the purport of the opinion or the assumptions on which it is based.
Further, ABN AMRO’s opinions are necessarily based on financial, economic, monetary, market and other conditions, including those in the securities and oil and gas markets, as in effect on, and the information made available to ABN AMRO or used by it up to, the respective dates of the opinions. ABN AMRO’s opinions exclusively focus on the fairness, from a financial point of view, of the exchange ratio to the holders of Royal Dutch ordinary shares and do not address any other issues such as the underlying business decision to unite the share capital of Royal Dutch and Shell Transport or to recommend the offer, any transaction involving Shell Transport, or the commercial merits of any of the foregoing, which are matters solely for the Royal Dutch board of management and Royal Dutch supervisory board. In addition, ABN AMRO’s opinions do not in any manner address the prices or volumes at which the Royal Dutch ordinary shares, the Class A Shares or the Class B Shares may trade following consummation of the Transaction. Subsequent developments in the aforementioned conditions may affect the opinions and the assumptions made in preparing the opinions and ABN AMRO is not obliged to update, revise or reaffirm the opinions if such conditions change.
In rendering its opinions, ABN AMRO has not provided legal, regulatory, tax, accounting or actuarial advice and accordingly ABN AMRO does not assume any responsibility or liability in respect thereof. ABN AMRO did not participate in negotiations with respect to the terms of the unification protocol, the offer, the Scheme and the other transactions contemplated by the unification protocol. Furthermore, ABN AMRO assumed that the Transactions will be consummated on the terms and conditions as set out in the unification protocol and the draft dated May 10, 2005 of the announcement of final proposals for the Transaction, without any material changes to, or waiver of, their terms or conditions. Moreover, ABN AMRO assumed that the offer will be tax neutral for most holders of Royal Dutch ordinary shares and Shell Transport ordinary shares.
As described on page 41 under “— Reasons for the Transaction”, the Royal Dutch board of management and Royal Dutch supervisory board took into account a number of factors in evaluating the offer and reaching a determination to recommend the offer, including, but not limited to, ABN AMRO’s opinion dated October 27, 2004. Accordingly, ABN AMRO’s analyses summarized below should not be viewed as determinative of the views of the Royal Dutch board of management and Royal Dutch supervisory board with respect to the offer.
In order to consider the fairness of the exchange ratio, ABN AMRO concluded that it was not necessary to analyze the underlying absolute fundamental value of the assets and operations of the Royal Dutch/ Shell Group as a whole. The exchange ratio determines the apportionment of this value between Royal Dutch and Shell Transport ordinary shareholders, and not the value itself. As a result, ABN AMRO did not perform any fundamental valuation analysis which may have included, inter alia, discounted cash flow analysis and comparable multiples analysis. ABN AMRO performed the analyses described below for purposes of evaluating whether the exchange ratio based on the current Royal Dutch/ Shell Transport 60/40 ownership of the Royal Dutch Shell Group is fair, from a financial point of view, to holders of Royal Dutch ordinary shares. The following is a summary of the financial analyses performed by ABN AMRO in connection with the rendering of its opinion dated October 27, 2004. The analyses were prepared for purposes of ABN AMRO providing its
45
Table of Contents
ABN AMRO reviewed and updated such analyses in connection with its preparation of the opinion dated May 13, 2005.
| Analyses in connection with the opinion dated October 27, 2004 |
| The Offer and the Scheme of Arrangement |
ABN AMRO considered that Royal Dutch Shell will make an offer for the entire issued share capital of Shell Transport to be implemented through a court sanctioned scheme of arrangement on the basis of 0.2874 Class B Shares for each Shell Transport ordinary share (the “Scheme Consideration”). The offer will be interconnected with and inter-conditional on the Scheme. The exchange ratio and the Scheme Consideration (together) reflect the current Royal Dutch/ Shell Transport 60/40 ownership in the Royal Dutch Shell Group (as set forth in the table below).
Royal Dutch Shell ownership by former Royal Dutch and
| Royal Dutch | Shell Transport | Royal Dutch Shell | ||||||||||
|
Current shares outstanding(1)
|
2,074,400,000 | 9,624,900,000 | N/A | |||||||||
|
Exchange Ratio
|
2.0 | 0.2874 | N/A | |||||||||
|
Equivalent Royal Dutch Shell shares(2)
|
4,148,800,000 | 2,765,866,667 | 6,914,666,667 | |||||||||
|
% of Royal Dutch Shell shares
|
60.0% | 40.0% | 100.0% | |||||||||
| (1) | Based on draft announcement, dated October 25, 2004. Excludes Royal Dutch priority shares, which are to be canceled. Excludes Shell Transport preference shares, which are to be bought out for cash (for Shell Transport’s account — Royal Dutch/ Shell Group management has indicated that the cash amount would be in the range of £12-20 million which should not be considered material). |
| (2) | Assumes 100% acceptance of the offer by Royal Dutch shareholders and assumes that Class A Shares and Class B Shares have the same voting and economic rights (including the right to same amount of dividends when declared and paid). |
ABN AMRO considered that the Class A Shares and Class B Shares will have identical voting and economic rights, but the Class B Shares will, through a dividend access mechanism, entitle holders to UK-sourced dividends, whereas the Class A Shares will entitle holders to Dutch-sourced dividends.
Existing agreements between Royal Dutch and Shell Transport
ABN AMRO considered that, based on the scheme for amalgamation between Royal Dutch and Shell Transport dated September 12, 1906, and the agreements from 1907 by which the scheme for amalgamation was implemented, Royal Dutch has 60% ownership in the Royal Dutch/ Shell Group and has the right to nominate 60% of the directors of the Royal Dutch/ Shell Group holding companies. The scheme for amalgamation further specifies that the payment of dividends to Royal Dutch and Shell Transport should be on a 60/40 basis. ABN AMRO also considered certain public statements by Royal Dutch to the effect that arrangements between Royal Dutch and Shell Transport provide, inter alia, that, not withstanding variations in shareholdings, Royal Dutch and Shell Transport shall share in the aggregate net assets and in the aggregate dividends and interests received from the Royal Dutch/ Shell Group in the proportion 60/40 and that the burden of all taxes in the nature of or corresponding to an income tax leviable in respect of such dividends and interests shall fall in the same proportion.
From ABN AMRO’s review of the existing agreements between Royal Dutch and Shell Transport and confirmation by Royal Dutch, ABN AMRO did not identify any material variation from the scheme for amalgamation in which it was agreed that Royal Dutch has a 60% interest and Shell Transport a 40% interest in the Royal Dutch/ Shell Group.
46
Table of Contents
Historic dividend payments
ABN AMRO extracted information regarding the dividends paid and payable from the cash flow statements and balance sheets respectively of Royal Dutch and Shell Transport from their respective annual reports and accounts for the preceding five years. This information was translated at currency exchange rates applicable to those periods. For each year, ABN AMRO calculated the dividends paid and payable by each of Royal Dutch and Shell Transport as a percentage of the total dividends received and receivable.
Over a 5-year period, the average dividends paid and payable from the Royal Dutch/ Shell Group to Royal Dutch and Shell Transport, respectively, have broadly been on a 60/40 basis (60.0/40.0 based on the cash flow statement and 60.1/39.9 based on the balance sheets), matching the 60/40 interests in the Royal Dutch/ Shell Group of Royal Dutch and Shell Transport, respectively.
Historic share buy-back programs
ABN AMRO examined Royal Dutch’s and Shell Transport’s share buy-back programs from February 2001 to September 2004. The total value of shares repurchased by Royal Dutch and Shell Transport respectively was calculated for each buy back date. Shell Transport’s total value repurchased was converted into euro at the prevailing currency exchange rate for each repurchase date. In practice, the 60/40 ownership structure implied by the exchange ratio and Scheme Consideration also broadly applies in the context of share buy backs by Royal Dutch and Shell Transport (Royal Dutch, on average, contributed 59.7% of the total share buy-backs and Shell Transport 40.3%), substantially matching the 60/40 interests in the Royal Dutch/ Shell Group of Royal Dutch and Shell Transport respectively.
Historic trading relationship
ABN AMRO analyzed the historic trading of Royal Dutch ordinary shares and Shell Transport ordinary shares. The share prices were translated at currency exchange rates prevailing at that time. The share prices were subsequently multiplied by the shares outstanding (at the applicable times) of Royal Dutch and Shell Transport respectively to arrive at the historic market capitalizations. The historical trading relationship between the Royal Dutch ordinary shares and Shell Transport ordinary shares has broadly matched the 60/40 interests (as set forth in the table below). When that relationship has deviated from the 60/40 relationship, it appears to have done so for reasons external to the Royal Dutch/ Shell Group, such as index inclusion, relative index performance and taxation changes.
Average market capitalization of Royal Dutch and Shell Transport as a percentage of
| Shell | ||||||||
| Royal Dutch | Transport | |||||||
|
Current (as at the close of business on
October 20, 2004)
|
60.18% | 39.82% | ||||||
|
Six months
|
60.11% | 39.89% | ||||||
|
1 year
|
60.37% | 39.63% | ||||||
|
2 years
|
60.08% | 39.92% | ||||||
|
5 years
|
60.64% | 39.36% | ||||||
|
10 years
|
61.60% | 38.40% | ||||||
|
20 years
|
61.72% | 38.28% | ||||||
Value Residing in the Parent Companies
A review was performed by ABN AMRO on the Parent Companies the purpose of which was to identify any material value that resided with one or other company above the Royal Dutch/ Shell Group holding company level and which may, therefore, have a bearing on the exchange ratio.
This review included a review of various documents, and discussions with the representatives of, and advisers to, Royal Dutch, Shell Transport and the Royal Dutch/ Shell Group. In particular, ABN AMRO placed
47
Table of Contents
The balance sheets of the Parent Companies were analyzed in order to determine whether they had a material bearing on the exchange ratio. The net current assets (“NCAs”) positions for Royal Dutch and Shell Transport were relevant for this analysis because they represented the sum of all line items on the Parent Companies’ balance sheets (namely the Current Assets and Current Liabilities) other than the line items representing the Parent Companies’ respective investments in the Group holding companies. The line items representing the Parent Companies’ respective investments in the Group holding companies were not relevant for purposes of this analysis as they did not identify value residing with one or the other of the Parent Companies above the Group holding company level. An analysis of the balance sheets as at June 30, 2004 showed that Royal Dutch’s NCAs as at June 30, 2004 were €662 million and Shell Transport’s NCAs as at June 30, 2004 were £408 million, which translated at the currency exchange rate of the pound sterling against the euro on June 30, 2004 of 1:1.491 is equivalent to €608 million. The ratio of Royal Dutch’s NCAs to Shell Transport’s NCAs was not in line with the 60/40 ratio.
If the combined NCAs of Royal Dutch and Shell Transport of €1,270 mln were divided between Royal Dutch and Shell Transport on a 60/40 basis, then Royal Dutch’s NCAs would need to be €100 million higher and Shell Transport’s NCAs €100 million lower. However, in the context of the combined market capitalization of Royal Dutch and Shell Transport as at October 15, 2004 and of Royal Dutch/ Shell Group’s net assets as at June 30, 2004, the approximately €100 million difference represents a de minimis amount (0.07% as a percentage of combined market capitalization and 0.16% as a percentage of the Royal Dutch/ Shell Group net assets). In addition, the approximately €100 million difference in NCAs represents 5 cents per Royal Dutch ordinary share or 1 pence per Shell Transport ordinary share. In the context of the fairness, from a financial point of view, of the exchange ratio, ABN AMRO concluded that the difference should not be considered sufficiently material to require any adjustment.
The review performed of the Parent Companies did not reveal any material assets or liabilities that resided solely in one Parent Company or the other, whether on or off balance sheet.
Precedent unification transactions
ABN AMRO reviewed the unification of six former dual-headed company structures;
| • | ABB Ltd., 1999; | |
| • | Dexia SA, 1996; | |
| • | New Zurich Financial Services, 2000; | |
| • | Fortis SA and Fortis NV, 2001; | |
| • | Merita Nordbanken plc, 1999; and | |
| • | SmithKline Beecham plc, 1996. |
Each of the listed transactions was chosen as comparable because it resulted in the unification of public listed companies.
ABN AMRO considered the differences in economic and voting shareholdings in each transaction before and after the unifications, in order to determine whether a premium was paid in favor of one of the two groups of shareholders. ABN AMRO noted that the reasons for, and circumstances surrounding, each of these transactions were different and the characteristics of such transactions and the companies involved were not directly comparable to the offer. Based on an analysis of the economic rights and voting rights before and after the unification for each of these transactions, ABN AMRO concluded that:
| • | Precedent unifications have been undertaken on the same basis as that which existed prior to unification, except in the Dexia unification where the economic ownership pre- and post-unification were marginally, but not materially, different (50/50 before and 50.6/49.4 after); and |
48
Table of Contents
| • | No premia for control have been paid in unification transactions, in the three situations where the unifying partners had unequal economic ownership prior to the unification. |
Pursuant to the opinion letters and the engagement letter between Royal Dutch and ABN AMRO, the opinions as well as the relationship between ABN AMRO on the one hand, and Royal Dutch and its management board and supervisory board on the other hand, are governed by Dutch law and the Dutch courts have exclusive jurisdiction thereover.
The Royal Dutch board of management and the Royal Dutch supervisory board selected ABN AMRO as Royal Dutch’s financial advisor based on ABN AMRO’s qualifications, expertise and reputation. ABN AMRO is an internationally recognized investment banking and advisory firm. As part of its investment banking and financial advisory business, ABN AMRO is continuously involved in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. ABN AMRO is acting as financial advisor to Royal Dutch in connection with the offer, and will receive a fee of €2,000,000, including for rendering the opinions, half of which was payable upon the delivery of the opinion dated October 27, 2004 and the other half of which is payable upon the earlier of (i) the day after the shareholders meeting of Royal Dutch at which the holders of Royal Dutch ordinary shares are requested to consider the offer (regardless of the outcome of such meeting) or (ii) September 30, 2005. The fee amount was agreed upon following negotiation. Royal Dutch has also agreed to reimburse ABN AMRO for reasonable out of pocket expenses incurred by ABN AMRO in performing its services, including the fees and expenses of legal counsel, and to indemnify ABN AMRO and related persons and entities against liabilities, including liabilities under the federal securities laws, relating to or arising from ABN AMRO’s engagement.
From time to time ABN AMRO and its affiliates have also (i) maintained banking relationships with Royal Dutch, Shell Transport or the Royal Dutch/ Shell Group, including overdraft facilities and intraday facilities related to cash management and project financing, (ii) provided investment banking services such as mergers and acquisitions advice and (iii) executed transactions, for their own account or for the accounts of customers, in the Royal Dutch ordinary shares or the Shell Transport ordinary shares or debt securities of Royal Dutch and Shell Transport and, accordingly, may at any time hold a long or short position in such securities. In connection with the Transaction, ABN AMRO has been retained by Royal Dutch Shell to act as Dutch exchange agent in the offer and as co-listing agent in connection with the listing of the Class A Shares and the Class B Shares on Euronext Amsterdam. For its role as Dutch exchange agent and co-listing agent, Royal Dutch Shell has agreed to pay ABN AMRO up to €5,000,000, half of which is payable upon publication of the Dutch offer document, and the other half of which is payable upon the offer being consummated, which is subject to adjustment. For its role as Dutch exchange agent and co-listing agent, Royal Dutch Shell has also agreed to pay ABN AMRO an additional fee of up to €3,000,000, depending on the acceptance level in the offer. Royal Dutch Shell has also agreed to reimburse ABN AMRO for reasonable out of pocket expenses incurred by ABN AMRO in performing its services as Dutch exchange agent and co-listing agent, including the fees and expenses of legal counsel, and to indemnify ABN AMRO and related persons and entities against liabilities, including liabilities under the federal securities laws, relating to or arising from ABN AMRO’s engagement.
In addition, ABN AMRO also assisted Royal Dutch Shell by transferring shares into the Euroclear Nederland clearing system.
In the past two years, the aggregate compensation received by ABN AMRO and its affiliates from Royal Dutch Shell, Royal Dutch and Shell Transport and their affiliates was approximately €8,700,000 (which includes the payment of €1,000,000 received upon delivery of the opinion dated October 27, 2004).
In addition, Jonkheer Aarnout Loudon, who is a member of the Royal Dutch supervisory board, is Chairman of the Supervisory Board of ABN AMRO Holding N.V., the parent company of ABN AMRO. Jonkheer Aarnout Loudon has not been involved in the decisions by Royal Dutch and ABN AMRO in connection with the services provided by ABN AMRO to Royal Dutch or Royal Dutch Shell.
49
Table of Contents
Information Agent
We have engaged Georgeson Shareholder Communications Inc, which is acting as information agent for the offer to, among other things, contact Royal Dutch shareholders in connection with the offer. Under the terms of our agreement with Georgeson, we have agreed to pay Georgeson reasonable and customary fees for its services. We have also agreed to (i) reimburse Georgeson for certain costs and expenses in connection with the Transaction and (ii) to indemnity the Information Agent and related persons and entity against liabilities related to or arising out of Georgeson’s engagement.
Dividend Payments
In setting the level of the dividend, our board will seek to increase dividends at least in line with inflation over time. The base for the 2005 financial year will be the dividends paid by Royal Dutch in respect of the financial year ended December 31, 2004.
Following consummation of the Transaction, dividends declared by us will be paid on a quarterly basis starting with the dividend for the second quarter of 2005. This dividend is expected to be declared on July 28, 2005 and paid in September 2005.
Royal Dutch and Shell Transport have declared dividends on their respective shares in respect of the first quarter of 2005. Our board of directors will take these dividends into account when determining the dividends which we should declare for the remainder of the year.
We will declare dividends in euro. Dividends declared on Class A Shares will be paid in euro, although holders of Class A Shares will be able to elect to receive dividends in pounds sterling. Dividends declared on Class B Shares will be paid in pounds sterling, although holders of Class B Shares will be able to elect to receive dividends in euro. Holders of Royal Dutch Shell ADRs will receive payment in US dollars and will not be able to elect to receive dividends in any other currency. The availability of the dividend currency election may be suspended or terminated by our Board at any time without notice, for any reason and without financial recompense.
For a description of UK, Dutch and U.S. federal income tax consequences of dividend payments, please refer to the “Material Tax Consequences” section on page 74.
Redemption of Royal Dutch Priority Shares
There are 1,500 issued priority shares in the capital of Royal Dutch, each with a nominal value of €448 (the “Royal Dutch priority shares”). Each member of the Royal Dutch supervisory board and of the Royal Dutch board of management is the holder of six Royal Dutch priority shares. The Royal Dutch priority shares foundation holds the other Royal Dutch priority shares. The Board of the Royal Dutch priority shares foundation consists of all members of the Royal Dutch supervisory board and the Royal Dutch board of management.
Royal Dutch priority shares represent certain special rights, which include:
| (a) | determining the number of managing directors and the number of members of the Royal Dutch supervisory board; |
| (b) | drawing up a binding nomination consisting of at least two persons for filling vacancies on the Royal Dutch board of management and the Royal Dutch supervisory board; and |
| (c) | granting consent for amendment of the Royal Dutch articles of association or for dissolution of Royal Dutch. |
As announced on June 17, 2004, a proposal to abolish the Royal Dutch priority shares will be put to the Royal Dutch Annual General Meeting on June 28, 2005.
It will be proposed that the Royal Dutch annual general meeting resolves to amend the Royal Dutch articles of association and to grant authority to the Royal Dutch board of management to buy back all the outstanding Royal Dutch priority shares and subsequently cancel all the Royal Dutch priority shares thus obtained.
50
Table of Contents
These matters will together be put to the Royal Dutch annual general meeting to be voted on in one vote. The Royal Dutch priority shares will be abolished if the majority of holders of Royal Dutch shares present or represented at the Royal Dutch annual general meeting votes in favour of this proposal. The proposed amendment to the Royal Dutch articles of association consists of, among other things, the introduction of a one tier board structure for Royal Dutch and the abolition of the Royal Dutch priority shares as a class of shares (thereby converting the outstanding Royal Dutch priority shares into Royal Dutch ordinary shares).
If passed, the above mentioned resolution shall be implemented by (i) carrying out the buy back of the Royal Dutch priority shares and (ii) executing the deed of amendment of the Royal Dutch articles of association as soon as possible thereafter (which is intended to be on or about 1 July 2005). The subsequent cancelation of the (former) Royal Dutch priority shares will become effective on, and is subject to, completion of the required procedural matters under Dutch law.
The holders of the Royal Dutch priority shares have offered to sell their shares to Royal Dutch, subject to the Royal Dutch annual general meeting resolving to amend the Royal Dutch articles of association whereby the Royal Dutch priority shares are abolished as a separate class.
Interests of Royal Dutch’s Directors and Management in the Offer
You should be aware that members of the Royal Dutch board of management and the Royal Dutch supervisory board may have interests in the Transaction that are in addition to, or may be different from, the interests of Royal Dutch shareholders generally.
As of May 13, 2005, the members of the Royal Dutch supervisory board and the Royal Dutch board of management beneficially owned 511,338 Royal Dutch ordinary shares, including share options exercisable within 60 days of May 13, 2005, representing less than 1% of the outstanding Royal Dutch ordinary shares.
Board Composition
If the Transaction is completed, Royal Dutch will become a subsidiary of Royal Dutch Shell and the following members of the Royal Dutch supervisory board and the Royal Dutch board of management will become directors of Royal Dutch Shell: Aad Jacobs will become the Chairman and each of Jeroen van der Veer, Rob Routs, Linda Cook, Maarten van den Bergh, Wim Kok, Jonkheer Aarnout Loudon, Lawrence Ricciardi and Christine Morin-Postel will become directors.
Employment Arrangements
If the Transaction is completed, members of the Royal Dutch board of management will continue to have the following positions with the RDS Group: (i) Jeroen van der Veer will be the Chief Executive; (ii) Linda Cook will be Executive Director of Gas & Power and (iii) Rob Routs will be Executive Director of Oil Products and Chemicals.
Share Plans
Each of Jeroen van der Veer, Linda Cook and Rob Routs, as well as other key executives, will participate fully in our share plans, which are expected to be established upon consummation of the Transaction, as long as such individuals are employed by us or one of our subsidiaries.
Accounting Matters
We have an accounting year-end of December 31. Our first annual report and accounts following completion of the Transaction will be prepared for the period ending December 31, 2005. Generally, interim information is expected to be published for the three-month periods ending March 31, June 30 and September 30 in each year.
We will prepare our financial statements using International Financial Reporting Standards. We will reconcile our financial statements to U.S. GAAP in accordance with the requirements of the SEC. We will account for the Transaction on an historical cost (or carry-over) basis under International Financial Reporting
51
Table of Contents
For further information on the accounting treatment of the Transaction, see “Unaudited Condensed Pro Forma Combined Financial Information” on page 134.
Regulatory Matters
The offer is conditioned upon all necessary filings or applications having been made in connection with the Transaction and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Transaction. The regulatory filings and applications required in connection with the Transaction include antitrust approvals and other approvals required in relation to applicable investment regulations.
Appraisal Rights
There are no appraisal rights in connection with the offer or the Transaction. For a description of the squeeze-out procedure that may be effected following the offer, see “The Offer — Squeeze-Out Procedure; other Possible Post-Closing Restructurings and Actions” on page 63.
Employee Benefit Matters
Effect of the Transaction on Awards Outstanding under Royal Dutch/ Shell Group Share Plans
The intention is to provide for rollovers of participants’ existing options or other rights over Royal Dutch ordinary shares or Shell Transport ordinary shares into equivalent rights over our ordinary shares where possible and subject to local legal requirements. These rollovers will be effected using the same exchange ratios as are being used in the offer and in the Scheme of Arrangement as set forth under “The Scheme of Arrangement — General” on page 66. This will enable the participants to maintain their economic interests in the Royal Dutch/ Shell Group. For Group employee benefit plans which consist of the granting of options over Royal Dutch ordinary shares, when the Transaction is completed, it is expected that the exercise price for each outstanding option over our ordinary shares will be equal to the exercise price per share of Royal Dutch ordinary shares subject to the option before the exchange, divided by 2.
The exchanged options or rights over our ordinary shares will, so far as possible, be on equivalent terms as to rights of exercise and other substantive terms and conditions as the existing options or rights over Royal Dutch ordinary shares or Shell Transport ordinary shares. It is not intended that the rollovers will lead to any amendments of the terms of the existing options or other rights over Royal Dutch ordinary shares or Shell Transport ordinary shares.
Where there is no ability for Royal Dutch or Shell Transport to require rollover under the rules of the plans (for example under certain share option plans) a rollover will be made available. In relation to the Shell sharesave scheme, which is a UK HMRC approved all employee savings-based stock option plan for UK resident employees and executive directors of The Shell Petroleum Company Limited and its participating subsidiaries, there will also be a right of exercise triggered by the Transaction.
In relation to the share and save plan established by members of the Group in Australia (the “Australian Plan”), which is an Australian revenue approved all employee savings based share purchase plan open to employees of Shell Company of Australia Limited, Shell Information Technology International Pty Ltd. and Shell Refining (Australia) Pty Ltd. certain participants will not be able to rollover their Royal Dutch ordinary shares into Royal Dutch Shell ordinary shares.
52
Table of Contents
THE OFFER
General
If the offer is completed:
| • | for every Royal Dutch ordinary share held in New York registry form you validly tender in the offer and do not properly withdraw, you will receive one Class A ADR; and | |
| • | for every Royal Dutch ordinary share held in bearer or Hague registry form you validly tender in the offer and do not properly withdraw, you will receive two Class A Shares. |
Each Class A ADR will represent two Class A Shares.
Conditions to the Offer
The Transaction can only become effective if (i) all the conditions to the Scheme and (ii) all the conditions to the offer have, in each case, been satisfied or, to the extent permitted by applicable law and the implementation agreement, waived. In addition, Shell Transport has undertaken not to proceed with the Scheme and to withdraw the Scheme in the event that prior to the hearing date, the implementation agreement is terminated in accordance with its terms. When these conditions have been satisfied or, to the extent permitted by applicable law and the implementation agreement, waived, the Transaction will become effective upon the registration of the court order sanctioning the Scheme by the Registrar of Companies in England and Wales, which is expected to occur on July 20, 2005. All conditions to the offer other than the Scheme condition set out in clause (ix) below must be satisfied or waived on or prior to the expiration of the offer period described below under the heading “Offer Period” on page 54 (although it may not be possible to determine whether the minimum acceptance condition has been satisfied until immediately after the expiration of the offer period). In order to facilitate the concurrent completion of the offer and the Scheme, the scheme condition will survive the expiration of the offer period for up to 5 Euronext Amsterdam trading days. Unless the Scheme becomes effective by December 31, 2005, or such later date as Royal Dutch Shell, Shell Transport and Royal Dutch may agree and the UK High Court may allow, the Scheme will not become effective and the Transaction will not proceed.
The offer will be declared unconditional (gestand gedaan) if the following conditions are fulfilled, or to the extent permitted by applicable law and the implementation agreement, waived:
| (i) | the number of Royal Dutch ordinary shares that have been validly tendered for exchange before the expiry of the offer acceptance period and have not been withdrawn representing at least 95 percent of the issued share capital of Royal Dutch that is then outstanding; | |
| (ii) | our ordinary shares being authorized for listing on Euronext Amsterdam subject to the offer being declared unconditional (gestanddoening); | |
| (iii) | the admission to the official list of the UKLA of our ordinary shares becoming effective in accordance with the listing rules of the UKLA or (if we and Shell Transport so determine and subject to the consent of the UK Takeover Panel) the UKLA agreeing or confirming its decision to admit such shares to the official list of the UKLA, and the London Stock Exchange agreeing to admit such shares to trading, subject only to (a) the reclassification of the appropriate number of euro deferred shares as Class A Shares; (b) the allotment of Class B Shares and/or (c) the Scheme of Arrangement becoming effective; | |
| (iv) | our ADRs to be issued in connection with the Transaction being approved for listing on the New York Stock Exchange, subject to official notice of issuance; | |
| (v) | prior to the expiration date of the initial offer acceptance period, no notification being received from the Dutch Authority for the Financial Markets that the offer has been made in conflict with Chapter IIA of the 1995 Securities Act in which case the Admitted Institutions of Euroclear Nederland pursuant to section 32a of the 1995 Securities Decree would not be allowed to co-operate with the execution and settlement of the offer; |
53
Table of Contents
| (vi) | prior to the expiration date of the offer, the Royal Dutch Annual General Meeting being held in accordance with Dutch law to inform Royal Dutch shareholders about the offer and the Royal Dutch Annual General Meeting having resolved to approve the entering into by Royal Dutch of the implementation agreement; | |
| (vii) | all necessary filings or applications having been made in connection with the Transaction and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Transaction (other than those specified in clause (viii)); | |
| (viii) | the U.S. registration statements relating to the Class A Shares and our ADRs having become effective in accordance with the provisions of the Securities Act, no stop order suspending the effectiveness of those registration statements having been issued by the SEC and no proceedings for that purpose having been initiated or threatened by the SEC and not concluded or withdrawn; and | |
| (ix) | the sanction (with or without modification) by the UK High Court of the Scheme and the registration of the order sanctioning the Scheme by the Registrar of Companies of England and Wales. |
The conditions specified in clauses (v), (viii) and (ix) above may not be waived. Subject to the requirements of Dutch tender offer regulations and U.S. federal securities laws, we reserve the right, at any time, and from time to time, to waive any of the other conditions to the offer in any respect (including the minimum acceptance condition), by giving oral or written notice of the waiver to the Dutch exchange agent and the U.S. exchange agent and by making a public announcement in accordance with the procedures outlined under “— Offer Period” on page 54. We have agreed in the implementation agreement not to waive the conditions to the offer or determine whether such conditions have been satisfied without the prior written consent of Royal Dutch and Shell Transport.
Notwithstanding any other provisions of the offer, and in addition to our right to extend and amend the offer at any time, to the extent permitted by the implementation agreement, we will not be required to declare the offer unconditional (gestanddoening), accept for exchange or, subject to any applicable rules and regulations of the SEC relating to our obligation to exchange or return tendered Royal Dutch ordinary shares promptly after termination or withdrawal of the offer and applicable Dutch tender offer regulations, exchange, and may delay the acceptance for exchange of and accordingly the exchange of, any tendered Royal Dutch ordinary shares, and may terminate the offer, unless all the conditions listed above are satisfied or, the extent permitted by applicable law and the implementation agreement, waived. If all conditions to the offer are satisfied or, to the extent permitted by applicable law and the implementation agreement, waived by the party entitled to waive, we will declare the offer unconditional (gestanddoening) and accept for exchange all Royal Dutch ordinary shares that have been validly tendered and not properly withdrawn pursuant to the terms of the offer in accordance with the procedures set forth below under the heading “— Acceptance and Delivery of Securities” on page 61.
Subject to the satisfaction or, to the extent permitted, waiver of all conditions to the offer other than the scheme condition, we expect to make a public announcement on or immediately prior to the hearing date, stating that all conditions except for the scheme condition have been satisfied or waived, and subject to and immediately upon the satisfaction of the scheme condition, the offer will thereafter automatically be declared to be unconditional (gestanddoening) upon the registration of the order sanctioning the Scheme by the Registrar of Companies in England and Wales.
Offer Period
The offer will commence on May 19, 2005 and expire at 5:00 p.m. New York City time (11:00 p.m. Amsterdam time) on July 18, 2005, unless the offer is extended in accordance with Dutch tender offer regulations and U.S. federal securities laws.
If one or more of the offer conditions described in this prospectus under “— Conditions to the Offer” on page 53 is not fulfilled, we may, from time to time, and with the prior written consent of Royal Dutch and Shell Transport, extend the period of time for which the offer is open until all the conditions listed above under “— Conditions to the Offer” have been satisfied or, to the extent permitted, waived.
54
Table of Contents
If we extend, terminate, withdraw or declare the offer unconditional (in accordance with applicable law), we will notify the U.S. exchange agent by written notice or oral notice confirmed in writing. If we determine to extend the offer or to declare the offer unconditional, we will also make an announcement to that effect on the next Euronext Amsterdam trading day after the previously scheduled expiration date of the offer. We will announce any extension of the offer by issuing a press release on, among others, the Dow Jones News Service and by publication in the Daily Official List of Euronext Amsterdam and one or more daily national newspapers in The Netherlands. In addition, notice will be posted on www.shell.com. During an extension, any Royal Dutch ordinary shares validly tendered and not properly withdrawn will remain subject to the offer, subject to the right of each holder to withdraw the Royal Dutch ordinary shares he or she has already tendered. If we extend the period of time during which the offer is open, the offer will expire at the latest time and date to which we extend the offer.
Subject to the requirements of Dutch tender offer regulations and the U.S. federal securities laws (including U.S. federal securities laws which require that material changes to the offer be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which we may choose to make any public announcement, we will have no obligation to communicate any public announcement other than as described above.
We will extend the offer if we change the consideration being offered within 10 U.S. business days of the then-scheduled expiration date of the offer, so that the offer will expire no less than 10 U.S. business days after the publication of the change. If, prior to the expiration date of the offer, we determine to change the consideration being offered in the offer, the change will be applicable to all holders of Royal Dutch ordinary shares whose Royal Dutch ordinary shares are accepted for exchange pursuant to the offer whether or not those Royal Dutch ordinary shares were accepted for exchange prior to the change.
We will also extend the offer, to the extent required by applicable Dutch tender offer regulations or U.S. federal securities laws, if we:
| • | make a material change to the terms of the offer, other than a change in the consideration being offered in the offer; or | |
| • | make a material change in the information concerning the offer, or waive a material condition of the offer. |
We reserve the right to reduce or waive the minimum acceptance condition. In accordance with U.S. federal securities law requirements, we will make an announcement five U.S. business days prior to the date on which any reduction in the minimum acceptance condition may be effected, stating the percentage to which the minimum acceptance condition may be reduced. Any such announcement will be made through a press release and by placing an announcement in a newspaper of national circulation in the United States. Any such announcement will advise shareholders to withdraw their acceptances immediately if their willingness to accept the offer would be affected by a reduction in the minimum acceptance condition. The offer will be open for acceptances for at least five U.S. business days after any reduction in the minimum acceptance condition, which period may include the subsequent offer period, if one is offered.
Subsequent Offer Period
If the offer is declared unconditional, we reserve the right to provide a subsequent offer period of up to 15 Euronext Amsterdam trading days, but in no event more than 20 U.S. business days in length, following the date the offer is declared unconditional. A subsequent offer period is an additional period of time, following the date the offer is declared unconditional, during which any holder of Royal Dutch ordinary shares may tender Royal Dutch ordinary shares not tendered in the offer. A subsequent offer period, if one is provided, is not an extension of the offer, which already will have expired, and Royal Dutch ordinary shares previously tendered and accepted for exchange in the offer will not be subject to any further withdrawal rights. A subsequent offer period, if one is provided will not affect the timing of the acceptance and delivery of Royal Dutch ordinary shares previously tendered and accepted for exchange in the offer, as described below under the heading “— Acceptance and Delivery of Securities”. During the subsequent offer period, tendering shareholders will not have
55
Table of Contents
Procedures for Tendering
We have retained ABN AMRO to act as Dutch exchange agent in connection with the offer made to holders of Royal Dutch ordinary shares in bearer or Hague registry form. We have retained JP Morgan Chase Bank to act as the U.S. exchange agent in connection with the offer for purposes of exchanging Royal Dutch ordinary shares in New York registry form.
Holders of Royal Dutch Ordinary Shares in New York Registry Form
If you hold your Royal Dutch ordinary shares in New York registry form in a brokerage or custody account, you should instruct your broker, dealer, commercial bank, trust company or other entity through which you hold your shares to arrange for the DTC participant holding your shares in its DTC account to tender your shares in the offer to the U.S. exchange agent by means of delivery through the DTC book-entry confirmation facilities (ATOPs) of your shares to the DTC account of the U.S. exchange agent, together with an agent’s message acknowledging that the tendering participant has received and agrees to be bound by the terms of the offer, prior to the expiration date of the offer. All tenders (other than tenders to be made pursuant to the guaranteed delivery procedures set forth below) of Royal Dutch ordinary shares in New York registry form through the DTC book-entry confirmation facilities must be received by the U.S. exchange agent before the expiration date of the offer.
If your Royal Dutch ordinary shares in New York registry form are represented by one or more share certificates, you may tender your Royal Dutch ordinary shares in New York registry form to the U.S. exchange agent by delivering to the U.S. exchange agent a properly completed and duly executed letter of transmittal, with all applicable signature guarantees from an eligible guarantor institution, together with the certificate(s) evidencing your Royal Dutch ordinary shares in New York registry form specified on the face of the letter of transmittal, and any other required documents, prior to the expiration date of the offer.
Registered holders of Royal Dutch ordinary shares in New York registry form should send their properly completed and duly executed letters of transmittal, together with the corresponding share certificate(s), only to the U.S. exchange agent and not to us or to the Dutch exchange agent. To be accepted for exchange, letters of transmittal properly completed and duly executed, together with the corresponding Royal Dutch New York registry share certificate(s), must be received by the U.S. exchange agent before the expiration date of the offer unless the guaranteed delivery procedures described below are utilized.
The method of delivery of share certificate(s) and letters of transmittal for Royal Dutch ordinary shares in New York registry form and all other required documents is at your option and risk, and the delivery will be deemed made only when actually received by the U.S. exchange agent. In all cases, you should allow sufficient time to ensure timely delivery.
Tendered Royal Dutch ordinary shares in New York registry form will be held in an account controlled by the U.S. exchange agent, and, consequently, you will not be able to sell, assign, transfer or otherwise dispose of shares you tender, until such time as (i) you properly withdraw your Royal Dutch ordinary shares in New York registry form from the offer, (ii) your Royal Dutch ordinary shares in New York registry form have been exchanged for Class A ADRs (in which case, you will only be able to sell, assign, transfer or otherwise dispose of the Class A ADRs received in respect of your Royal Dutch ordinary shares in New York registry form tendered in the offer) or (iii) your Royal Dutch ordinary shares in New York registry form have been returned to you if the offer is withdrawn or terminated or because they were not accepted for exchange.
Holders of Royal Dutch Ordinary Shares in Bearer or Hague Registry Form
Holders of Royal Dutch ordinary shares in bearer form who hold their Royal Dutch ordinary shares via a bank or stockbroker should make their acceptance of the offer known to the Dutch exchange agent, ABN AMRO, via their respective bank or stockbroker during the period beginning on May 20, 2005 and ending on the
56
Table of Contents
Holders of Royal Dutch ordinary shares in Hague registry form registered in the name of the relevant holders (aandelen op naam) will receive an application form to make their acceptance of the offer known. The application form should be completed, signed and returned so as to reach N.V. Algemeen Nederlands Trustkantoor ANT at PO Box 11063, 1001 GB Amsterdam, The Netherlands by no later than the expiration date of the offer. The signed application form will constitute the legal deed of transfer.
Holders of Royal Dutch ordinary shares in bearer form represented by already issued share certificates to bearer provided with separate dividend coupons (K-stukken) should note that, in accordance with Royal Dutch’s articles of association, such certificates have been abolished. If such holders wish to tender these Royal Dutch ordinary shares, they should make their acceptance known by transferring their certificates via their bank or stockbroker to the Dutch exchange agent, ABN AMRO, during the period beginning on May 20, 2005 and ending on the expiration date of the offer. The bank or stockbroker may set an earlier deadline for communication by holders of such Royal Dutch ordinary shares in bearer form in order to permit the bank or stockbroker to communicate their acceptances to the Dutch exchange agent, ABN AMRO, in a timely manner.
Guaranteed Delivery Procedures
If you wish to tender your Royal Dutch ordinary shares in New York registry form in the offer and your shares are not immediately available or time will not permit all required documents to reach the U.S. exchange agent prior to the expiration date of the offer or the procedure for book-entry transfer cannot be completed on a timely basis, you may nevertheless validly tender your shares if all the following conditions are satisfied:
| • | your tender is made by or through an “eligible institution”, as defined below; | |
| • | a properly completed and duly executed notice of guaranteed delivery, substantially in the form accompanying this prospectus, is received by the U.S. exchange agent as provided below prior to the expiration date; and | |
| • | the certificate(s) for your Royal Dutch ordinary shares in New York registry form, in form proper for transfer, together with a properly completed and duly executed letter of transmittal (including any required signature guarantees) or, in the case of a book-entry transfer, a book-entry confirmation along with an agent’s message, and any other required documents are received by the U.S. exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. A New York Stock Exchange trading day is a day on which the New York Stock Exchange is open for business. |
The term “eligible institution” means a financial institution that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program. Eligible institutions include commercial banks, savings and loan associations and brokerage houses.
You may deliver a notice of guaranteed delivery by hand, mail or fax to the U.S. exchange agent, and you must include a guarantee by an eligible institution in the form set forth in the notice of guaranteed delivery accompanying this prospectus. In the case of Royal Dutch ordinary shares in New York registry form held through the book-entry transfer system of DTC, the notice of guaranteed delivery must be delivered to the U.S. exchange agent by a DTC participant by means of the DTC book-entry transfer confirmation system.
Signature Guarantees on the Letter of Transmittal
Your signature on the letter of transmittal with respect to Royal Dutch ordinary shares in New York registry form must be guaranteed by an eligible institution unless:
| • | you are the registered holder of the Royal Dutch ordinary shares in New York registry form tendered and you have not completed the box entitled “Special Issuance Instructions” in the letter of transmittal; or |
57
Table of Contents
| • | you are tendering Royal Dutch ordinary shares in New York registry form for the account of an eligible institution. |
If the certificates for Royal Dutch ordinary shares in New York registry form are registered in the name of a person other than the person who signs the letter of transmittal, or if certificates for unexchanged Royal Dutch ordinary shares in New York registry form are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed in the manner we have described above.
Appointment as Proxy
By executing a letter of transmittal, as set forth above, as tendering holder of Royal Dutch ordinary shares, you irrevocably appoint JPMorgan Chase Bank N.A., as U.S. Exchange Agent, or any of them, and any individual designated by any of them or us, and each of them individually, as your attorneys-in-fact and proxies, in the manner set forth in the letter of transmittal, each with full power of substitution, to the full extent of your rights with respect to the Royal Dutch ordinary shares tendered (and any and all other Royal Dutch ordinary shares, securities or rights issued or issuable in respect of the tendered Royal Dutch ordinary shares) and accepted for exchange by us. All such proxies shall be considered coupled with an interest in the tendered Royal Dutch ordinary shares (and any and all other Royal Dutch ordinary shares, securities or rights issued or issuable in respect of the tendered Royal Dutch ordinary shares). This appointment will be effective when, and only to the extent that we accept for exchange such shares. Upon such appointment, all prior proxies and consents given by you with respect to such shares (and any and all other Royal Dutch ordinary shares, securities or rights issued or issuable in respect of the tendered Royal Dutch ordinary shares) will, without further action be revoked, and no subsequent power of attorney, proxies, consents or revocations may be given (and if given will not be deemed effective). Our designees will thereby be empowered to exercise all voting and other rights with respect to such shares (and any and all other Royal Dutch ordinary shares, securities or rights issued or issuable in respect of the tendered Royal Dutch ordinary shares) in respect of any meeting of Royal Dutch’s shareholders or otherwise, as they in their sole discretion deem proper. We reserve the right to require that, in order for Royal Dutch ordinary shares to be validly tendered, immediately upon our acceptance for exchange of such shares, we must be able to exercise full voting, consent and other rights with respect to such shares.
Representations and Warranties of Holders of Royal Dutch Ordinary Shares Tendering in the Offer
By tendering your Royal Dutch ordinary shares in New York registry form in the offer, you will represent and warrant to us that (i) you have full power and authority to accept the offer and to tender, sell, exchange, assign, and transfer the Royal Dutch ordinary shares in New York registry form in respect of which you are accepting the offer (and any and all other Royal Dutch ordinary shares, securities or rights issued or issuable in respect of the tendered Royal Dutch ordinary shares) and (ii) when we accept the tendered Royal Dutch ordinary shares in New York registry form for exchange, we will acquire good title thereto, free and clear from all liens, restrictions, claims and encumbrances and will not be subject to any adverse claim, and together with all rights now or hereinafter attaching thereto, including, without limitation, voting rights and the right to receive all amounts payable to a holder thereof in respect of dividends, interests and other distributions, if any, the record date for which occurs after the date on which the shares are accepted by us.
Each holder who tenders Royal Dutch ordinary shares in bearer form (other than through an Admitted Institution of Euroclear Nederland, or an institution which holds Royal Dutch ordinary shares in bearer form through such Admitted Institution) or Royal Dutch ordinary shares in Hague registry form pursuant to the offer, by such tender, undertakes, represents and warrants to us, that on the date of such tendering through to and including the settlement date (subject to the proper withdrawal of any tender in accordance with the terms and conditions as set out in this document) (i) the tender of any Royal Dutch ordinary shares constitutes an acceptance by the shareholder of the offer, on and subject to the terms and conditions of the offer; (ii) such holder of Royal Dutch ordinary shares has full power and authority to tender, sell, exchange and deliver (leveren), and has not entered into any other agreement to tender, sell, exchange or deliver (leveren), the Royal Dutch ordinary shares stated to have been tendered to any party other than us (together with all rights attaching thereto) and,
58
Table of Contents
By their applications, which must be in writing, the Admitted Institutions of Euroclear Nederland, or institutions which hold Royal Dutch ordinary shares in bearer form through such Admitted Institution, that tender Royal Dutch ordinary shares in bearer form will declare that (i) they hold the tendered Royal Dutch ordinary shares in bearer form in their administration, (ii) they will deliver the tendered Royal Dutch ordinary shares in bearer form to ABN AMRO (securities account 41-46-27-334/Euroclear account 1552) prior to the expiry of the offer period and (iii) each shareholder who accepts the offer irrevocably represents and warrants that the Royal Dutch ordinary shares in bearer form tendered by him or her are being tendered in compliance with the terms and conditions of the offer described in this prospectus. The Admitted Institutions of Euroclear Nederland or institutions which hold Royal Dutch ordinary shares in bearer form through such Admitted Institution, that are not able to deliver the tendered securities to ABN AMRO prior to the expiration of the offer period should give to ABN AMRO a written notice of guaranteed delivery for the Royal Dutch ordinary shares in bearer form tendered, which are not immediately available for delivery, in which the Admitted Institutions of Euroclear Nederland, and the institutions which hold Royal Dutch ordinary shares in bearer form through such Admitted Institutions, unconditionally undertake to deliver such securities to ABN AMRO, as exchange agent no later than 11 a.m. on the third Euronext Amsterdam Trading Day following the expiration of the offer period (subject to extension thereof). Such notice must be received by ABN AMRO prior to the expiry of the offer period.
If the offer is not declared unconditional (gestand gedaan), Royal Dutch ordinary shares in bearer form delivered to ABN AMRO will be re-delivered by ABN AMRO, as exchange agent, to the Admitted Institutions of Euroclear Nederland, or to the institutions which hold shares through such Admitted Institutions, upon public announcement thereof. Any such announcement will be made by us no later than on the fifth Euronext Amsterdam Trading Day following the expiration of the offer period.
Validity of the Tender of Royal Dutch Ordinary Shares
We will determine questions as to the validity, form, eligibility, including, but not limited to, time of receipt, and acceptance for exchange of any tender of Royal Dutch ordinary shares, in our sole discretion, and our determination shall be final and binding. We reserve the right to reject any and all tenders of Royal Dutch ordinary shares that we determine are not in proper form or the acceptance for exchange of or exchange of which may be unlawful. No tender of Royal Dutch ordinary shares will be deemed to have been validly made until all defects and irregularities in tenders of Royal Dutch ordinary shares have been cured or waived. None of Royal Dutch Shell, the U.S. exchange agent, the Dutch exchange agent, the information agent or the dealer managers or any other person will be under any duty to give notification of any defects or irregularities in the tender of any Royal Dutch ordinary shares and none of them will incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of the offer, including, but not limited to, the letter of transmittal and notice of guaranteed delivery and instructions thereto, will be final and binding.
Our acceptance for exchange of Royal Dutch ordinary shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering holder of Royal Dutch ordinary shares and us upon the terms and subject to the conditions of the offer.
Withdrawal Rights
Royal Dutch ordinary shares tendered for exchange may be withdrawn at any time prior to the applicable expiration of the offer. Once the expiration date of the offer has occurred, you will not be able to withdraw any Royal Dutch ordinary shares that you may have tendered. We will not be able to determine if the scheme condition has been satisfied until the order sanctioning the Scheme has been registered by the Registrar of Companies in England and Wales, which is expected to take place on July 20, 2005. Consequently, you will not be able to withdraw your tendered Royal Dutch ordinary shares during the period between the expiration date of
59
Table of Contents
You may not rescind a withdrawal. If you withdraw tendered Royal Dutch ordinary shares, they will be deemed not validly tendered for purposes of the offer. However, you may re-tender withdrawn Royal Dutch ordinary shares at any time prior to the expiration date of the offer by following the procedures described under “— Procedures for Tendering” on page 56.
Withdrawal of Tendered Royal Dutch Ordinary Shares in New York Registry Form
If you tender your Royal Dutch ordinary shares in New York registry form by means of the DTC book-entry confirmation procedures (ATOPs), you may withdraw your tender by instructing your broker, dealer, commercial bank, trust company or other entity to cause the DTC participant through which your Royal Dutch ordinary shares in New York registry form were tendered to deliver a notice of withdrawal to the U.S. exchange agent by means of an agent’s message transmitted through the DTC book-entry confirmation facilities (ATOPs), prior to the expiration date of the offer.
If you tender your Royal Dutch ordinary shares in New York registry form to the U.S. exchange agent by means of physical delivery of a letter of transmittal together with the certificate(s) evidencing your Royal Dutch ordinary shares in New York registry form, you may withdraw your tender by delivering to the U.S. exchange agent a properly completed and duly executed notice of withdrawal prior to the expiration date of the offer. This right does not apply during the subsequent offer period described below.
Withdrawal of Tendered Royal Dutch Ordinary Shares in Bearer or Hague Registry Form
Royal Dutch ordinary shares in bearer or Hague registry form tendered for exchange may be withdrawn at any time prior to the expiration of the offer. This right does not apply during the subsequent offer period described below.
Holders of Royal Dutch ordinary shares in bearer form who make their acceptance known through their bank or stockbroker to the Dutch exchange agent, may withdraw by making a withdrawal request through their bank or stockbroker to the Dutch exchange agent prior to the expiration of the offer.
Holders of Royal Dutch ordinary shares in Hague registry form registered in the name of the relevant holders (aandelen op naam) who tender their Royal Dutch ordinary shares in Hague registry form by means of application form sent to ANT, may withdraw by delivery to ANT of a properly completed and duly executed notice of withdrawal prior to the expiration of the offer.
No Withdrawal Rights During the Subsequent Offer Period
No withdrawal rights will apply to Royal Dutch ordinary shares tendered during the subsequent offer period if one is provided or to Royal Dutch ordinary shares tendered prior to the expiration of the offer and accepted for exchange.
Announcement of the Results of the Offer
Subject to the satisfaction or, to the extent permitted, waiver of all conditions to the offer other than the scheme condition, we expect to make a public announcement on or immediately prior to the hearing date, which is expected to be July 19, 2005, stating that all conditions except for the scheme condition have been satisfied or waived, and that, subject to and immediately upon the satisfaction of the scheme condition, the offer will thereafter automatically be declared to be unconditional (gestanddoening). It is currently anticipated that we will be able to determine if the scheme condition has been satisfied on July 20, 2005. Announcements will be made by means of a press release on the Dow Jones News Service, among others, and by publication in the Daily Official List of Euronext Amsterdam and one or more daily Dutch national newspapers. In addition, notice will be posted on www.shell.com.
60
Table of Contents
Acceptance and Delivery of Securities
If the conditions referred to under “— Conditions to the Offer” on page 53 have been fulfilled or, to the extent permitted, waived and the offer is declared unconditional (gestanddoening), we will accept for exchange and will exchange all Royal Dutch ordinary shares that have been validly tendered and not withdrawn pursuant to the terms of the offer and deliver or procure the delivery of our securities for the account of the tendering holders or, in the case of tendered Royal Dutch ordinary shares in New York registry form, to the depositary for the Class A ADRs, which, in either case, shall be no later than three Euronext Amsterdam trading days after the offer is declared unconditional.
Under no circumstances will interest be paid on the exchange of Royal Dutch ordinary shares, regardless of any delay in making the exchange or any extension of the offer.
Exchange of Royal Dutch ordinary shares in New York registry form accepted for exchange pursuant to the offer will in all cases be made only after timely receipt of (i) certificates representing the tendered Royal Dutch ordinary shares in New York registry form (or a confirmation of a book-entry transfer (a “book-entry confirmation”)), (ii) a letter of transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an agent’s message in connection with a book-entry transfer of such Royal Dutch ordinary shares, and (iii) any other required documents. Accordingly, exchange might not be made to all tendering holders of Royal Dutch ordinary shares in New York registry form at the same time, and will depend upon when certificates representing, or book-entry confirmations of, such Royal Dutch ordinary shares are received by the U.S. exchange agent.
During a subsequent offer period, if one is provided, we will promptly accept for exchange any Royal Dutch ordinary shares tendered during the subsequent offer period at the same exchange ratio as in the offer.
Delivery of Class A Shares
We will deliver or procure the delivery of Class A Shares in exchange for Royal Dutch ordinary shares in bearer and Hague registry form that are validly tendered and not properly withdrawn, within three Euronext Amsterdam trading days after we have declared the offer unconditional, pursuant to the terms and conditions of the offer. We will be deemed to have accepted for exchange Royal Dutch ordinary shares in bearer or Hague registry form validly tendered and not properly withdrawn if and when we have declared the offer unconditional (gestanddoening) in a public announcement. The Dutch exchange agent is then required to deliver Class A Shares in exchange for such Royal Dutch ordinary shares in bearer or Hague registry form on the settlement date, which will be no later than the third Euronext Amsterdam trading day after the public announcement referred to in the preceding sentence. The delivery of the relevant interests to holders of Royal Dutch ordinary shares in bearer form will take place through the book-entry facilities of Euroclear Nederland in accordance with the Securities Giro Act (Wet giraal effectenverkeer) and the procedures determined by Euroclear Nederland and its Admitted Institutions from time to time. The timing of the crediting of interests to the securities account of each person holding interests through Euroclear Nederland may vary depending on the securities account systems of the relevant Admitted Institutions and, if applicable, the banks or financial institutions at which that person maintains a relevant securities account. Subsequently on the settlement date, the banks and brokers will cause the Royal Dutch ordinary shares validly tendered by their respective clients to be transferred in book-entry form into the account of the Dutch exchange agent for further credit to our account. The transfer of the Royal Dutch ordinary shares held in Hague registry form will take place upon the offer being declared unconditional (gestanddoening).
Each holder of Royal Dutch ordinary shares in Hague registry form who validly tenders and does not properly withdraw his or her Royal Dutch ordinary shares in Hague registry form may elect to hold the Class A Shares to which he or she is entitled either through Euroclear Nederland, through the corporate nominee service provided by Lloyds TSB Bank plc (the “Corporate Nominee Service”) or through CREST. For initial settlement, this election is only available to the holders of Royal Dutch ordinary shares in Hague registry form, but after completion of the Transaction, holders of Class A Shares will be entitled, subject to relevant regulatory requirements and in respect of the Corporate Nominee Service, the agreement by the provider of the Corporate Nominee Service (the “Corporate Nominee”) and acceptance by the holder of our shares of the terms and
61
Table of Contents
On the date the Class A Shares are delivered, depending on the election of each holder of Royal Dutch ordinary shares in Hague registry form who validly tenders and does not properly withdraw such shares, (i) settlement will take place as described above or (ii) the number of Class A Shares to which such holder of Royal Dutch ordinary shares in Hague registry form is entitled under the offer will be transferred to the Corporate Nominee (or its nominee) to hold for that person, or (iii) the number of Class A Shares to which such holder of Royal Dutch ordinary shares in Hague registry form is entitled under the offer will be transferred to that holder and will be credited to his nominated CREST account. Holders of Royal Dutch ordinary shares in Hague registry form are urged to consult their own legal, tax and financial advisers with respect to the legal, tax and cost consequences of the settlement options.
If a holder of Royal Dutch ordinary shares in Hague registry form does not make a valid election as to the method of settlement, that person will be not be treated as having validly tendered his or her shares under the offer unless, and until, Royal Dutch Shell receives a valid settlement election from such person prior to the expiration date of the offer or the expiration of the subsequent offer period (if any).
Delivery of Class A ADRs
Subject to the terms and conditions of the offer, upon our acceptance for exchange of Royal Dutch ordinary shares in New York registry form and confirmation from the depositary for the Class A ADRs of deposit of the applicable number of Class A Shares to be represented by the Class A ADRs to be issued in the offer (which in any case shall occur no later than two Euronext Amsterdam trading days following the date that we declare unconditional Royal Dutch shares for exchange), the U.S. exchange agent will deliver the applicable number of Class A ADRs to the tendering holders of Royal Dutch ordinary shares in New York registry form in the following manner:
| • | if you tendered your Royal Dutch ordinary shares in New York registry form by means of DTC’s book-entry confirmation facilities (ATOPs), the U.S. exchange agent will deliver the applicable number of Class A ADRs to the account of the DTC participant who tendered the Royal Dutch ordinary shares in New York registry form on your behalf in the U.S. offer, or | |
| • | if you tendered your Royal Dutch ordinary shares in New York registry form to the U.S. exchange agent by means of physical delivery of a letter of transmittal with the certificate(s) (if any) evidencing your Royal Dutch ordinary shares in New York registry form, the U.S. exchange agent will issue the applicable number of Class A ADRs in “uncertificated/book-entry” form as direct registration securities registered in your name (or your nominee’s name). If you wish to receive the Class A ADRs in certificated form, you will need, upon receipt of a statement from the U.S. exchange agent that Class A ADRs have been issued as “uncertificated/book-entry” form as direct registration securities, to instruct JP Morgan Chase Bank, N.A., as Class A ADR depositary, in accordance with the instructions contained in such statement, to issue certificates for the Class A ADRs. |
Governing Law and Jurisdiction
Except to the extent the U.S. federal securities laws or other laws are mandatorily applicable, the offer will be governed by Dutch law. To the extent permitted by applicable law, any dispute arising in connection with the offer will be subject to the exclusive jurisdiction of the competent court in The Hague, The Netherlands.
Brokerage Commissions
If (i) your Royal Dutch ordinary shares are registered in your name and you tender them to the Dutch exchange agent or ANT or the U.S. exchange agent, as applicable, or (ii) you instruct an Admitted Institution of Euroclear Nederland, or an institution which hold Royal Dutch ordinary shares in bearer form through such Admitted Institution, to tender your Royal Dutch ordinary shares in bearer form, subject to policies of such Admitted Institution it is expected you will not have to pay any brokerage commissions. Admitted Institutions of
62
Table of Contents
Squeeze-Out Procedure; Other Possible Post-Closing Restructurings and Actions
Pursuant to Article 2:92a of the Dutch Civil Code, if the number of Royal Dutch ordinary shares that have been validly tendered and not withdrawn shall represent at least 95% of the issued share capital of Royal Dutch that is then outstanding, we expect, but are not obligated, to initiate proceedings against the minority holders of Royal Dutch ordinary shares to force those minority holders to transfer their Royal Dutch ordinary shares to us against payment of a price in cash to be determined by a Dutch court.
To initiate squeeze-out proceedings, we would have to serve a summons upon the residence of each of the known minority holders of Royal Dutch ordinary shares in accordance with the provisions of the Dutch Code of Civil Procedure. Unknown holders of Royal Dutch ordinary shares can be summoned by a summons served upon the office of the servant of the public prosecution department connected with the Court of Appeals in Amsterdam and a summary of the summons will be published in one or more Dutch daily newspapers. A summary will also be published in the Financial Times and the Wall Street Journal. We expect the minimum notice period required for squeeze-out proceedings to be three months.
Once squeeze-out proceedings have been initiated, the Court of Appeals in Amsterdam may either (i) dismiss the squeeze-out proceedings, in certain limited circumstances, such as that — notwithstanding monetary compensation — one (or more) of the minority holders of Royal Dutch ordinary shares would sustain serious tangible loss by the forced transfer of his (or their) Royal Dutch ordinary shares, or (ii) grant the claim for the squeeze-out in relation to all minority holders of Royal Dutch ordinary shares. If the Court of Appeals in Amsterdam grants the squeeze-out, it will determine a price to be paid for the Royal Dutch ordinary shares held by the minority. The court can appoint experts to offer an opinion on the value of such shares before its determination. The price determined by the Court of Appeals in Amsterdam will be increased by the statutory interest rate applicable in The Netherlands, at present 4% per annum, for the period from the reference date for the price determined by the Dutch court until the date of transfer. Any dividends or other distributions, that have been made payable to the holders of Royal Dutch ordinary shares within such period will be deemed a partial payment of the transfer price to be paid to the minority holders of Royal Dutch ordinary shares.
The minority holders of Royal Dutch ordinary shares will be required to transfer their Royal Dutch ordinary shares on the date set by us for the payment of the price (determined by the Dutch court) and the transfer of the Royal Dutch ordinary shares can be set by Royal Dutch Shell once the order to transfer has become final, which — barring an appeal to the Dutch Supreme Court — would be three months after the order is made.
Upon payment of the amount required to purchase the Royal Dutch ordinary shares into a bank account of the consignment office (administered by the Ministry of Finance), we would become the holder of the Royal Dutch ordinary shares by operation of law. As a result of and upon consignment, title to the Royal Dutch ordinary shares would pass to us without any action by the minority holders of Royal Dutch ordinary shares. The only remaining right of the minority holders of Royal Dutch ordinary shares would be the right to receive payment for their Royal Dutch ordinary shares, which they could collect from the consignment office. We would be required to publish an advertisement regarding the payment to the consignment office and the price paid per share in a Dutch daily newspaper at the time of the consignment and will also place advertisements containing the same information in the Financial Times and the Wall Street Journal.
Trading in Royal Dutch Ordinary Shares during the Offer and after the Expiration Date of the Offer
Royal Dutch ordinary shares not tendered in the offer will continue to trade on Euronext Amsterdam and the London Stock Exchange, and Royal Dutch ordinary shares in New York registry form not tendered in the offer will continue to trade on the New York Stock Exchange, during the offer. The trading in Royal Dutch ordinary
63
Table of Contents
Listing of Our Securities
New York Stock Exchange
We have been approved, subject to official notice of issuance, to list the Class A ADRs and Class B ADRs on the New York Stock Exchange under the symbols “RDS.A” and “RDS.B”, respectively. Subject to official notice of issuance, trading on the New York Stock Exchange is expected to commence on or about July 20, 2005.
Euronext Amsterdam
An application has been made, subject to the offer being declared unconditional (gestanddoening), to list the Class A Shares and the Class B Shares on Euronext Amsterdam under the symbols “RDSA” and “RDSB”, respectively. Subject to the offer being declared unconditional (gestanddoening), trading on Euronext Amsterdam is expected to commence at 9:00 a.m. (Amsterdam time) on July 20, 2005.
London Stock Exchange
Applications have been made to the UKLA for the Class A Shares and the Class B Shares to be admitted to the official list of the UKLA and to the London Stock Exchange for the Class A Shares and the Class B Shares to be admitted to trading on the London Stock Exchange’s market for listed securities under the symbols “RDSA” and “RDSB” respectively. These applications are expected to become effective and dealings in Class A Shares and Class B Shares for normal settlement are expected to commence at 8:00 a.m. (London time) which, subject to the sanction of the Scheme by the UK High Court, is expected to be July 20, 2005.
Delisting of Royal Dutch Ordinary Shares
Following completion of the offer and depending on the number of Royal Dutch ordinary shares acquired pursuant to the offer, we intend to request that Royal Dutch seek the delisting of the Royal Dutch ordinary shares from the London Stock Exchange and Euronext Amsterdam and the Royal Dutch ordinary shares in New York registry form from the New York Stock Exchange as soon as reasonably practicable following the completion of the Transaction. In addition, depending on the number of Royal Dutch ordinary shares in New York registry form acquired pursuant to the offer, the Royal Dutch ordinary shares in New York registry form may no longer be eligible for trading on the New York Stock Exchange.
In order to seek de-listing of the Royal Dutch ordinary shares with the co-operation of Euronext Amsterdam, we and our subsidiaries (other than Royal Dutch and its subsidiaries) must, in general, hold for our account at least 95% of the Royal Dutch ordinary shares.
While Royal Dutch ordinary shares could continue to be traded in the over-the-counter market and price quotations could be reported, there can be no assurance that such an over-the-counter market will develop. The extent of the public market for Royal Dutch ordinary shares and the availability of such quotations would depend upon such factors as the number of holders of Royal Dutch ordinary shares remaining at such time, the interest on the part of securities firms in maintaining a market in Royal Dutch ordinary shares, and the possible termination of registration of Royal Dutch ordinary shares under the Exchange Act, which would adversely affect the amount of publicly available information with respect to Royal Dutch.
64
Table of Contents
If the Royal Dutch ordinary shares in New York registry form are delisted from the New York Stock Exchange and Royal Dutch has fewer than 300 holders of Royal Dutch ordinary shares in the United States, Royal Dutch will seek to deregister the Royal Dutch ordinary shares under the Exchange Act.
Certain Consequences of the Offer
Please see “Risk Factors — Risks to Royal Dutch Shareholders Who Do Not Tender their Royal Dutch Ordinary Shares in the Offer” on page 26 for a discussion of potential consequences to holders of Royal Dutch ordinary shares who do not tender their Royal Dutch ordinary shares, if the Transaction is consummated.
Resale of Class A ADRs and Class A Shares
The Class A ADRs and Class A Shares received by holders of Royal Dutch ordinary shares in the offer will not be subject to any restrictions on transfer arising under the Securities Act, except for Class A ADRs and Class A Shares received by any Royal Dutch shareholder who is, or is expected to be, an “affiliate” of Royal Dutch or Royal Dutch Shell for purposes of Rule 145 under the Securities Act. It is expected that these shareholders will agree not to transfer any Class A ADRs and Class A Shares received in the offer except pursuant to an effective registration statement under the Securities Act or in a transaction not required to be registered under the Securities Act. This prospectus does not cover resales of Class A ADRs and Class A Shares received by any person upon completion of the offer, and no person is authorized to make any use of this prospectus in connection with any resale.
65
Table of Contents
THE SCHEME OF ARRANGEMENT
General
The offer is conditional on the effectiveness of the Scheme of Arrangement. As a result of the Scheme of Arrangement, we will become the new parent company of Shell Transport. Pursuant to the Scheme of Arrangement, all existing Shell Transport ordinary shares, including Shell Transport ordinary shares underlying the Shell Transport ADRs, will be cancelled and Shell Transport ordinary shareholders will receive 0.287333066 Class B Shares for every Shell Transport ordinary share. Holders of Shell Transport ADRs will receive 0.861999198 Class B ADRs for each Shell Transport ADR.
The Scheme of Arrangement requires approval by a majority in number representing three-quarters in value of the Shell Transport ordinary shareholders who vote at the meeting convened by the UK High Court for the purpose of considering the Scheme of Arrangement (including those holders of Shell Transport bearer warrants present and voting, either in person or by proxy at the meeting). As the proposed Scheme of Arrangement includes a reduction of share capital, a separate special resolution of the Shell Transport shareholders (including the holders of Shell Transport preference shares) is also necessary (requiring a 75% majority of those voting). The Shell Transport ordinary shares will be cancelled and holders of the Shell Transport ordinary shares whose names appear in the register of members of Shell Transport at the prescribed time and holders of Shell Transport bearer warrants will receive Class B Shares.
If the required number of Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants approves the Scheme of Arrangement, and the required number of Shell Transport shareholders approves the reduction of share capital, there will be a UK High Court hearing to approve the Scheme of Arrangement (the “hearing”).
The hearing is expected to be held on July 19, 2005. Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants will have the opportunity to attend the hearing to support or oppose the Scheme of Arrangement and to appear in person or be represented by counsel.
Once the Scheme of Arrangement has been approved by the UK High Court, the Scheme of Arrangement will become effective upon registration of the order of the UK High Court sanctioning the Scheme of Arrangement by the Registrar of Companies in England and Wales, which is expected to occur on July 20, 2005. Unless the Scheme becomes effective by December 31, 2005, or such later date as Shell Transport and Royal Dutch may agree and the UK High Court may allow, the Scheme of Arrangement will not become effective and the Transaction will not proceed, in which event the position of the holders of Shell Transport ordinary shares and Shell Transport bearer warrants will remain unchanged. If the Scheme of Arrangement does come into effect, it is binding on all holders of Shell Transport ordinary shares and on Shell Transport.
In seeking to preserve the current tax treatment of dividends for Shell Transport ordinary shareholders, it is intended that holders of Class B Shares would receive dividends having a UK source rather than dividends having a Dutch source to the extent that dividend payments having a UK source are received pursuant to a dividend access mechanism (as described under “— Dividend Access Mechanism” on page 69). Dividend income having a UK source paid through the dividend access mechanism would not be subject to Dutch withholding tax. The other rights attaching to Class B Shares will be identical to those attaching to the Class A Shares received by tendering holders of Royal Dutch ordinary shares. For a summary of the principal terms of our articles of association, see “Description of Share Capital of Royal Dutch Shell” on page 91. Similarly, the other rights attaching to Class B ADRs are the same as those attaching to Class A ADRs.
It is expected that the Scheme of Arrangement will become effective on July 20, 2005, and trading in the Class B Shares issued pursuant to the Scheme of Arrangement and in Class B ADRs arising from the Scheme of Arrangement will commence on July 20, 2005.
Shell Transport has been advised by its legal advisers that the UK High Court would be unlikely to approve or impose any amendment to the Scheme of Arrangement which might be material to the interests of Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants unless Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants were informed of any such amendment. It will be a
66
Table of Contents
Conditions to the Scheme of Arrangement
The Scheme of Arrangement is conditional upon:
| (i) | the approval by a majority in number representing three-fourths in value of the Shell Transport ordinary shareholders and holders of Shell Transport bearer warrants present and voting, either in person or by proxy, at the Court Meeting; | |
| (ii) | the passing of the special resolution required to approve and implement the Scheme and the associated reduction of capital and to amend the Shell Transport articles of association as set out in the notice of the Shell Transport Extraordinary General Meeting; | |
| (iii) | the passing of the special resolutions for the cancelation and repayment of the Shell Transport preference shares as set out in the notice of the Shell Transport Extraordinary General Meeting; | |
| (iv) | the admission to the official list of the UKLA of our Class A Shares and Class B Shares becoming effective in accordance with the listing rules of the UKLA or (if Royal Dutch Shell and Shell Transport so determine and subject to the consent of the UK Takeover Panel) the UKLA agreeing or confirming its decision to admit such shares to the official list of the UKLA, and the London Stock Exchange agreeing to admit such shares to trading, subject only to (a) the re-classification of the appropriate number of euro deferred shares as Class A Shares, (b) the allotment of Class B Shares and/or (c) the Scheme of Arrangement becoming effective; | |
| (v) | our Class A Shares and Class B Shares being authorized for listing on Euronext Amsterdam, subject to the offer being declared unconditional (gestanddoening); | |
| (vi) | our ADRs to be issued in connection with the Transaction being approved for listing on the New York Stock Exchange, subject to official notice of issuance; | |
| (vii) | all necessary filings or applications having been made in connection with the Transaction and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Transaction; | |
| (viii) | the conditions to the offer (other than the scheme condition) having been satisfied or waived on or before the date on which the order sanctioning the Scheme is made or expressed to take effect; | |
| (ix) | the sanction (with or without modification) by the UK High Court of the reduction of capital involved in the cancelation and repayment of the Shell Transport First preference shares and Shell Transport Second preference shares and the registration by the Registrar of Companies of England and Wales of the order confirming the reduction of capital relating to the Shell Transport preference shares; and | |
| (x) | the sanction (with or without modification) by the UK High Court of the Scheme and the registration by the Registrar of Companies of England and Wales of the Order sanctioning the Scheme of Arrangement. |
The conditions in clauses (i), (ii), (viii) and (x) above may not be waived. Shell Transport has agreed in the implementation agreement not to waive the conditions of the Scheme or to determine whether such conditions have been satisfied without the prior written consent of Royal Dutch.
67
Table of Contents
Cancelation and repayment of Shell Transport First Preference Shares and Shell Transport Second Preference Shares
In conjunction with the implementation of the Transaction, Shell Transport proposes to cancel and repay the Shell Transport preference shares as:
| • | it is intended that no Shell Transport shares should be listed following the time the Offer becomes unconditional (gestanddoening) in all respects and the Scheme becomes effective; | |
| • | the cancelation and repayment of the Shell Transport preference shares will simplify the capital structure of Shell Transport and will remove a possible issue relating to the payment of dividends by Royal Dutch Shell in the future, including to former holders of Shell Transport ordinary shares; and |
Shell Transport will seek approval from its shareholders, to be given by special resolutions at the Shell Transport Extraordinary General Meeting, to cancel and repay the Shell Transport preference shares by means of a reduction of capital.
If the special resolutions relating to the Shell Transport preference shares are passed at the Shell Transport Extraordinary General Meeting, and subject to the sanctioning of the Court:
| (i) | in consideration for the cancelation of the Shell Transport First preference shares, holders of Shell Transport First preference shares at 6.00 p.m. on the business day immediately preceding the day on which the cancelation and repayment of the Shell Transport preference shares becomes effective will receive from Shell Transport, for each Shell Transport First preference share, £1.0448 (subject to rounding), comprising: |
| • | the £1 of capital paid up on such share; | |
| • | a premium of £0.0284 calculated by reference to the average share price of the Shell Transport First preference shares (adjusted to take account of unpaid arrears of dividend down to the dividend payment date on April 1, 2005) in the six months preceding April 18, 2005 (being the date thirty clear days before the date of the notice convening the Shell Transport Extraordinary General Meeting); and | |
| • | £0.0164, being the fixed dividend on such share down to the date of the repayment of capital (which is expected to be July 19, 2005); and |
| (ii) | in consideration for the cancelation of the Shell Transport Second preference shares, holders of Shell Transport Second preference shares at 6.00 p.m. on the business day immediately preceding the day on which the cancelation and repayment of the Shell Transport preference shares becomes effective will receive from Shell Transport, for each Shell Transport Second preference share, £1.4735 (subject to rounding), comprising: |
| • | the £1 of capital paid up on such share; | |
| • | a premium of £0.4410 calculated by reference to the average share price of the Shell Transport Second Preference Shares (adjusted to take account of unpaid arrears of dividend down to the dividend payment date on February 1, 2005) in the six months preceding April 18, 2005 (being the date thirty clear days before the date of the notice convening the Shell Transport Extraordinary General Meeting); and | |
| • | £0.0325, being the fixed dividend on such share down to the date of the repayment of capital (which is expected to be July 19, 2005). |
Amounts payable to holders of Shell Transport preference shares in respect of the premium and the fixed dividend will each be rounded up to the nearest number of whole pence.
The figures set out above have been calculated on the assumption that payment to the holders of Shell Transport preference shares takes place on July 19, 2005. If payment takes place after July 19, 2005, the amount
68
Table of Contents
The figures set out above have also been calculated in accordance with the Shell Transport articles save that the share price data necessary to derive the premium payable in respect of the Shell Transport first preference shares has, for the period following 20 January 2005, been taken from Datastream rather than the London Stock Exchange Daily Official List. This is because the London Stock Exchange Daily Official List ceased to quote prices for the Shell Transport First Preference Shares on 20 January 2005. The Shell Transport Board does not consider that this should result in any disadvantage to the holders of Shell Transport First Preference Shares.
The Scheme is conditional on the cancelation and repayment of the Shell Transport preference shares. The cancelation and repayment of the Shell Transport preference shares is not, however, contingent upon the Scheme becoming effective.
Dividend Access Mechanism
General
The dividend access mechanism seeks to preserve the current tax treatment of dividends paid to holders of Shell Transport ordinary shares and holders of Shell Transport bearer warrants. Information relating to our dividend policy is set out under “The Transaction – Dividend Payments” on page 50.
Dividends paid on Class A Shares will have a Dutch source for tax purposes and will be subject to Dutch withholding tax. For further details regarding the tax treatment of dividends paid on the Class A Shares, please refer to “Material Tax Consequences” on page 74.
It is intended that holders of Class B Shares will receive dividends that have a UK source for tax purposes and accordingly will not be subject to Dutch withholding tax. The dividend access mechanism has been established for this purpose.
Description of Dividend Access Mechanism
Pursuant to the Scheme of Arrangement, a dividend access share will be issued by Shell Transport to Hill Samuel Offshore Trust Company Limited as dividend access trustee. Pursuant to a declaration of trust executed in advance of the effective date, Hill Samuel Offshore Trust Company Limited will hold any dividends paid in respect of the dividend access share on trust for the holders of Class B Shares from time to time and will arrange for prompt disbursement of such dividends to holders of Class B Shares. Interest and other income earned on unclaimed dividends will be for the account of Shell Transport and any dividends which are unclaimed after 12 years will revert to Shell Transport. Holders of Class B Shares will not have any interest in the dividend access share and will not have any rights against Shell Transport as issuer of the dividend access share. The only assets held on trust for the benefit of the holders of Class B Shares will be dividends paid to the dividend access trustee in respect of the dividend access share. As the dividend paid on the dividend access share will be a dividend having a UK source, there will be no UK or Dutch withholding tax on it and certain holders of Class B Shares or Class B ADRs will be entitled to a UK tax credit in respect of their proportional share of such dividend.
Following completion of the Transaction, the Shell Transport articles of association will state that the maximum dividend that can be declared by Shell Transport on the dividend access share in respect of a specified period will be an amount equal to the aggregate dividend declared by us on the Class B Shares in respect of such period. In addition, the dividends that Shell Transport may pay on the dividend access share in any year will be limited to a total of €3.3 billion. This limit can be varied by a resolution of the shareholders of Shell Transport from time to time and will not be less than the aggregate dividends declared on the Class B Shares in any year.
At the Shell Transport Extraordinary General Meeting, a special resolution will be proposed to change the Shell Transport articles of association to implement, among other things, changes necessary to establish the dividend access mechanism. The issue of the dividend access share to the dividend access trustee will take place on the date on which the Scheme of Arrangement becomes effective, and it will be subject to the terms of the Shell Transport articles of association, as amended on that date.
69
Table of Contents
Operation of the Dividend Access Mechanism
Following the declaration of a dividend by us on the Class B Shares, Shell Transport may declare a dividend on the dividend access share. Shell Transport will not declare a dividend on the dividend access share before we declare a dividend on the Class B Shares, as Shell Transport will need to know what dividend we have declared on the Class B Shares. This is to ensure that the dividend declared on the dividend access share does not exceed an amount equal to the total dividend declared by us on the Class B Shares.
Before Shell Transport can declare any dividend, the Shell Transport directors will need to consider Shell Transport’s financial condition and amount of distributable reserves. It is the expectation and the intention, although there can be no certainty, that holders of Class B Shares will receive dividends via the dividend access mechanism.
To the extent that a dividend is declared by Shell Transport on the dividend access share and paid to the dividend access trustee, the holders of the Class B Shares will be beneficially entitled to receive their share of that dividend pursuant to the declaration of trust (and arrangements will be made to ensure that the dividend is paid in the same currency in which they would have received a dividend from us). No dividend declared and paid by Shell Transport on the dividend access share will be paid to holders of Class A Shares in respect of their Class A Shares.
Our articles of association provide that if any amount is paid by Shell Transport by way of a dividend on the dividend access share and paid by the dividend access trustee to any holder of Class B Shares, the dividend which we would otherwise pay on the Class B Shares will be reduced by an amount equal to the amount paid to such holders of Class B Shares by the dividend access trustee.
We will have a full and unconditional obligation, in the event that the dividend access trustee does not pay an amount to holders of Class B Shares on a cash dividend payment date (even if that amount has been paid to the dividend access trustee), to pay immediately the dividend declared on the Class B Shares. The right of holders of Class B Shares to receive distributions from the dividend access trustee will be reduced by an amount equal to the amount of any payment actually made by us on account of any dividend on Class B Shares.
Any payment by us will be subject to Dutch withholding tax (unless in any particular case an exemption is obtained under Dutch law or the provisions of an applicable tax treaty). If for any reason no dividend is paid on the dividend access share, holders of Class B Shares will only receive dividends from us directly.
The dividend access mechanism may be suspended or terminated at any time (subject to any regulatory requirement) by our directors or the directors of Shell Transport, for any reason and without financial recompense. This might, for instance, occur in response to changes in relevant tax legislation.
The dividend access mechanism has been approved by the Dutch Revenue Service pursuant to an agreement (vaststellingsovereenkomst) with us and Royal Dutch dated October 26, 2004 as supplemented and amended by an agreement between the same parties dated 25 April 2005. The agreement states, among other things, that dividend distributions on the dividend access share by Shell Transport will not be subject to Dutch dividend withholding tax provided that the Dividend Access Mechanism is structured and operated substantially as set out above.
70
Table of Contents
SUMMARY OF THE IMPLEMENTATION AGREEMENT
The following description of the implementation agreement describes the material terms of the agreement and its schedules but does not purport to describe all the terms of the agreement. The complete text of the implementation agreement was filed as an exhibit to the registration statement of which this prospectus is a part. See “Where You Can Find More Information” on page 132 for information on how you can obtain a copy of the implementation agreement. We urge you to read carefully the entire implementation agreement because it contains important information and it is the legal document that governs the combination.
Overview
The arrangements contemplated by the implementation agreement include:
| • | the conditions to and conduct of the Transaction, | |
| • | the recommendations and approvals of Royal Dutch and Shell Transport in connection with the offer and the Scheme of Arrangement, | |
| • | the corporate governance arrangements that will exist after the Transaction, and | |
| • | other provisions of the implementation agreement. |
Summary of Implementation Agreement
The implementation agreement governs the implementation of the Transaction and was executed by and among Royal Dutch, Shell Transport and Royal Dutch Shell on May 18, 2005.
Key provisions of the implementation agreement include:
Statement of Principles. Royal Dutch and Shell Transport have acknowledged the following statement of principles as a means of changing the relationship between them: “Mindful of the advantages conferred on their shareholders, businesses, employees and other stakeholders by the national origins of Royal Dutch and Shell Transport and their respective cultures and heritage, and anxious that those advantages are not lost in future, while being conscious of the international character and business of the Royal Dutch/ Shell Group, Royal Dutch and Shell Transport will use all reasonable endeavours to ensure that proper account shall be taken in our creation and conduct, of the national origins, cultures and heritage of Royal Dutch and Shell Transport, in particular with respect to: (i) the business principles by which business is conducted; (ii) the appointment of our Directors; (iii) our governance; (iv) the terms of reference of any committee of our board; and (v) the drafting of any agreements by which the new structure is implemented.”
Communications with Shareholders and Annual General Meetings. To accomplish the objectives envisaged by the statement of principles described above, Royal Dutch Shell, Royal Dutch and Shell Transport have agreed that our Annual Report and Accounts will be in English and a Dutch translation will be made available on request. All other Shareholder publications will be produced in English with a Dutch translation being made available should the board consider it appropriate to do so. Furthermore, Royal Dutch Shell, Royal Dutch and Shell Transport have agreed that our general meetings will generally be held in The Netherlands, drawing as necessary on technological links to permit active two-way participation by persons physically present in the UK and The Netherlands.
Conditions of the Transaction. We have agreed with Royal Dutch and Shell Transport that the Transaction is conditional upon the offer becoming unconditional and the Scheme of Arrangement becoming effective in accordance with their terms by December 31, 2005 (or such later date as the parties may agree and the UK High Court may allow). Royal Dutch, Shell Transport and Royal Dutch Shell have agreed that the offer and the Scheme of Arrangement shall be conditional upon the satisfaction (or waiver where permitted by the terms thereof) of the conditions set out in the scheme document and the offer documents. Furthermore, we have agreed with Royal Dutch and Shell Transport, subject to their respective directors’ fiduciary duties, to use all reasonable endeavours to implement the Transaction in the form described in the scheme document, the offer documents and the Listing Particulars and as otherwise provided in the implementation agreement, provided that the implementation
71
Table of Contents
Conduct of Business. Royal Dutch Shell, Royal Dutch and Shell Transport have undertaken that, between the date of the implementation agreement and completion of the Transaction (or, if earlier, termination of the implementation agreement), they will conduct business in the ordinary and usual course and will not, subject to the fiduciary duties of their directors, take any step which might jeopardize or hinder completion of the Transaction.
The Offer and the Scheme. We have agreed with Royal Dutch and Shell Transport to make the offer on the terms set out in the offer documents. Royal Dutch has agreed, subject to its directors’ fiduciary duties, to use all reasonable endeavours to procure the satisfaction of the conditions to the offer and to implement the offer in accordance with its terms as set out in the offer documents. In addition, we have agreed not to vary, terminate or withdraw the offer or to waive the conditions to the offer or to determine whether such conditions have been satisfied without the prior written consent of Royal Dutch and Shell Transport.
Similarly, Shell Transport has agreed, subject to its directors’ fiduciary duties, to use all reasonable endeavours to procure the satisfaction of the conditions to the Scheme and to implement the Scheme of Arrangement in accordance with its terms as set out in the scheme document with, or subject to, any modification, addition or condition approved or imposed by the UK High Court. Shell Transport has agreed not to vary (including accepting any modification, addition or condition imposed by the UK High Court), terminate or withdraw the Scheme or to waive the conditions to the Scheme or to determine whether any of the conditions to the Scheme have been satisfied without the prior written consent of Royal Dutch.
Constitution and Governance. We have agreed with Royal Dutch and Shell Transport that we will adopt certain corporate governance arrangements and that we will comply with such arrangements. These governance arrangements relate to:
| • | the role, appointment, composition and responsibilities of the board of directors, | |
| • | the role and responsibilities of the non-executive directors, | |
| • | the establishment and composition of committees of the board of directors, | |
| • | meetings of the board of directors and committees of the board, | |
| • | the appointment and responsibilities of the Chairman and Deputy Chairman of the board of directors, | |
| • | the appointment, suspension and removal of the Chief Executive, | |
| • | the responsibilities, authorities and accountability of the Chief Executive and the executive committee of Royal Dutch Shell, and | |
| • | the composition and meetings of the executive committee. |
The exact terms of the corporate governance arrangements agreed by Royal Dutch Shell, Royal Dutch and Shell Transport are outlined in Schedule 2 of the Implementation Agreement which is attached as Annex A of this prospectus.
Termination of Existing Agreements. Currently, there are a number of agreements in force between Shell Transport and Royal Dutch. These agreements regulate their respective economic rights in their combined business interests and/or the management and governance of their combined business interests. Royal Dutch and Shell Transport have agreed that, with effect from completion of the Transaction, all these existing agreements will terminate automatically.
Termination. Royal Dutch may terminate the implementation agreement in the event that the resolution approving the Scheme of Arrangement is not passed at the court meeting for the Scheme by the requisite majority. Furthermore, the implementation agreement will terminate automatically if a resolution approving the implementation agreement is put to the shareholders of Royal Dutch and is not approved by the requisite majority. In addition, if, by December 31, 2005, any of the conditions to the Scheme or the offer have not been
72
Table of Contents
Governing Law and Arbitration. The implementation agreement is governed by English law and disputes are to be settled by arbitration to be held in The Hague in accordance with the UNCITRAL Arbitration Rules, the authority being the International Chamber of Commerce’s International Court of Arbitration.
73
Table of Contents
MATERIAL TAX CONSEQUENCES
Material U.S. Federal Income Tax Consequences of the Offer
General
The following describes the material U.S. federal income tax consequences to holders of Royal Dutch ordinary shares of the offer and of the ownership and disposition of Class A Shares or Class A ADRs. This description is the opinion of our U.S. tax counsel, Cravath, Swaine & Moore LLP, and is limited as described below. This description applies only to holders of Royal Dutch ordinary shares that are U.S. holders.
For purposes of this description, a U.S. holder means:
| • | a citizen or resident of the United States, | |
| • | a corporation, or other entity taxable as a corporation, created or organized under the laws of the United States or any of its political subdivisions, | |
| • | a trust, if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust or (ii) the trust has made a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person, or | |
| • | an estate that is subject to U.S. federal income tax on its income regardless of its source. |
If a partnership holds Royal Dutch ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Each partner of a partnership holding Royal Dutch ordinary shares is urged to consult his, her or its own tax advisor.
For U.S. federal income tax purposes, a U.S. holder of Class A ADRs will generally be treated as the beneficial owner of the underlying Class A Shares.
This description is based upon the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations, administrative rulings and judicial decisions currently in effect, all of which are subject to change, possibly with retroactive effect. The description applies only to holders of Royal Dutch ordinary shares that hold their Royal Dutch ordinary shares as a capital asset (generally, for investment purposes). Further, the description does not address all aspects of U.S. federal income taxation that may be relevant to a particular shareholder in light of his, her or its personal investment circumstances or to shareholders subject to special treatment under the U.S. federal income tax laws, including:
| • | insurance companies, | |
| • | tax-exempt organizations, | |
| • | dealers in securities or foreign currency, | |
| • | banks or trusts, | |
| • | persons that hold their Royal Dutch ordinary shares as part of a straddle, a hedge against currency risk or a constructive sale or conversion transaction, | |
| • | holders that have a functional currency other than the U.S. dollar, | |
| • | investors in pass-through entities, | |
| • | shareholders who acquired their Royal Dutch ordinary shares through the exercise of options, or otherwise as compensation or through a tax-qualified retirement plan, or | |
| • | holders of options granted under any Royal Dutch benefit plan. |
Furthermore, this description does not address any non-income tax or any state, local or non-U.S. tax consequences of the offer or ownership and disposition of our ordinary shares or ADRs. The description also does not address the tax consequences of any other transaction. Accordingly, each holder of Royal Dutch ordinary
74
Table of Contents
The Offer
The Exchange. Other than with respect to certain U.S. holders who own at least 5% of our ordinary shares (including ordinary shares underlying our ADRs) after the completion of the offer and Scheme of Arrangement, the material U.S. federal income tax consequences to U.S. holders who exchange their Royal Dutch ordinary shares in the offer are as follows:
| • | The exchange of Royal Dutch ordinary shares for our ordinary shares or ADRs will constitute a tax-free transaction governed by Section 351 of the Code. | |
| • | No gain or loss will be recognized by U.S. holders of Royal Dutch ordinary shares on the exchange of such ordinary shares for our ordinary shares or ADRs. | |
| • | The aggregate adjusted tax basis of our ordinary shares or ADRs received in the transaction by a U.S. holder of Royal Dutch ordinary shares will be equal to the aggregate adjusted tax basis of such U.S. holder’s Royal Dutch ordinary shares exchanged for our ordinary shares or ADRs. | |
| • | The holding period of our ordinary shares or ADRs received in the offer by a U.S. holder of Royal Dutch ordinary shares will include the holding period of such U.S. holder’s Royal Dutch ordinary shares exchanged for our ordinary shares or ADRs. |
A U.S. holder who holds at least 5% of our ordinary shares (including ordinary shares underlying our ADRs) by vote or value after the offer and Scheme of Arrangement are consummated will qualify for tax-free treatment with respect to the exchange, as described above, only if the U.S. holder files a “gain recognition agreement” with the Internal Revenue Service. A gain recognition agreement is an agreement between the U.S. holder and the Internal Revenue Service that generally would require the U.S. holder to retroactively recognize gain, with interest, on the exchange of Royal Dutch ordinary shares for our ordinary shares or ADRs in the event that, at any time prior to the close of the fifth year following the year in which the offer occurs, we dispose of part or all of the Royal Dutch ordinary shares we acquire in the offer or Royal Dutch disposes of substantially all of its assets. Each U.S. holder who holds at least 5% of our ordinary shares after the completion of the offer and Scheme of Arrangement is urged to consult his, her or its own tax advisor concerning the decision to file a gain recognition agreement and the procedures to be followed in connection with such filings.
Non-Tendering U.S. Holders. A non-tendering U.S. holder who or that does not tender his, her or its Royal Dutch ordinary shares in the offer will not recognize any gain or loss as a result of the offer unless such U.S. holder’s Royal Dutch ordinary shares are purchased for cash pursuant to a “squeeze-out”. The receipt of cash by a U.S. holder in exchange for his, her or its Royal Dutch ordinary shares pursuant to a “squeeze-out” generally will result in taxable gain or loss to such U.S. holder for U.S. federal income tax purposes based upon the difference between the U.S. Dollar amount of cash received by such U.S. holder and such U.S. holder’s adjusted tax basis in such Royal Dutch ordinary shares. Such gain or loss will constitute capital gain or loss and will constitute long-term capital gain or loss if the U.S. holder has held those Royal Dutch ordinary shares for more than 12 months. For non-corporate U.S. holders, any such long-term capital gain will be taxed at a maximum rate of 15%. The deductibility of capital losses is subject to limitations. Capital gains or losses recognized pursuant to a “squeeze-out” should generally constitute gains or losses from sources within the United States. See “— Ownership and Disposition of our Ordinary Shares or ADRs — Taxation of Sale or Other Disposition” on page 77 for a discussion of the determination of the U.S. Dollar value of any “squeeze-out” payments and the recognition of any foreign currency gain or loss to the extent such payments are made in a currency other than U.S. Dollars.
Backup Withholding. Certain non-corporate holders of Royal Dutch ordinary shares may be subject to backup withholding at a 28% rate on cash payments received pursuant to a squeeze-out. Backup withholding will not apply, however, to a holder of Royal Dutch ordinary shares who (1) furnishes a correct taxpayer identification number and certifies that he, she or it is not subject to backup withholding on the substitute Form W-9 included in
75
Table of Contents
Ownership and Disposition of Our Ordinary Shares or ADRs
Taxation of Cash Distributions and Distributions of Stock. The gross amount of any distribution (other than in liquidation), including the fair market value of all distributions of our ordinary shares or ADRs whenever a holder may elect to receive cash distributions instead of distributions of our ordinary shares or ADRs, that a U.S. holder receives with respect to our ordinary shares or ADRs (before reduction for any Dutch tax, if any, withheld from such distributions) generally will be includible in such U.S. holder’s gross income on the day on which, in the case of a holder of our ordinary shares, such holder receives such distribution or, in the case of a holder of our ADRs the depositary receives such distribution on behalf of the holder of the applicable ADRs. Depending on the amount of the dividend and the amount of the U.S. holder’s adjusted tax basis in the applicable ordinary shares or ADRs, distributions will be taxed in the following manner:
To the extent that distributions paid by us with respect to the underlying ordinary shares do not exceed our earnings and profits (“E&P”), as calculated for U.S. federal income tax purposes, such distributions will be taxed as dividends. The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”), enacted on May 28, 2003, reduced the maximum rate of tax imposed on certain dividends received by U.S. holders that are individuals to 15% (5% for individuals in the lower tax brackets and 0% for these taxpayers in 2008) (the “Reduced Rate”), so long as certain holding period requirements are met. The Reduced Rate applies to dividends received after December 31, 2002 and before January 1, 2009. In order for dividends paid by a non-U.S. corporation to be eligible for the Reduced Rate, the non-U.S. corporation must be a Qualified Foreign Corporation (“QFC”) within the meaning of the Act and must not be a passive foreign investment company (a “PFIC”) in either the taxable year of the distribution or the preceding taxable year. We believe that we will be a QFC and will not be a PFIC. As a result, dividends received by individual U.S. holders before January 1, 2009 will generally constitute qualified dividend income (“QDI”) for U.S. federal income tax purposes and taxable at rates applicable to net capital gains (see “— Taxation of Sale or Other Disposition” on page 77), provided that certain holding period and other requirements are satisfied. There can be no assurance, however, that we will continue to be considered a QFC or that we will not be classified as a PFIC in the future. Thus, there can be no assurance that our dividends will continue to be eligible for the Reduced Rate. Special rules apply for purposes of determining the recipient’s investment income (which limits deductions for investment interest) and non-U.S. income (which may affect the amount of foreign tax credit) and to certain extraordinary dividends. Each U.S. holder that is an individual is urged to consult his or her own tax advisor regarding the possible applicability of the Reduced Rate under the Act and the related restrictions and special rules.
Because we are not a U.S. corporation, dividends we pay generally will not be eligible for the dividends received deduction allowable to corporations under the Code.
To the extent that distributions by us exceed our E&P, such distributions will be treated as a tax-free return of capital, to both individual and corporate U.S. holders, to the extent of each such U.S. holder’s adjusted tax basis in our ordinary shares or ADRs, and will reduce such U.S. holder’s adjusted tax basis in the ordinary shares or ADRs on a dollar-for-dollar basis (thereby increasing any gain or decreasing any loss on a disposition of the ordinary shares or ADRs). To the extent that the distributions exceed the U.S. holder’s adjusted tax basis in the ordinary shares or ADRs, such U.S. holder will be taxed as having recognized gain on the sale or disposition of the ordinary shares or ADRs (see “— Taxation of Sale or Other Disposition” on page 77).
It is anticipated that any distributions on our ordinary shares will be made in euros or pounds sterling; any dividends so paid generally will be includible in a U.S. holder’s gross income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day the U.S. holder receives the dividend.
Holders of our ADRs will receive dividend payments in U.S. dollars from the depositaries. It is anticipated that we will pay to the depositaries a U.S. dollar amount calculated by reference to the exchange rate in effect on
76
Table of Contents
Dividends paid by us generally will be treated as foreign source income for U.S. foreign tax credit limitation purposes. Subject to certain limitations, U.S. holders may elect to claim a foreign tax credit against their U.S. federal income tax liability for non-U.S. tax withheld (if any) from dividends received in respect of the ordinary shares or ADRs. (See “— Dutch Tax Considerations — Withholding Tax on Dividend Payments” on page 79 for a discussion of Dutch withholding taxes and applicable treaty exemptions.) The limitation on non-U.S. taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends paid in respect of our ordinary shares or ADRs generally will be “passive income” and therefore any U.S. federal income tax imposed on these dividends cannot be offset by excess foreign tax credits that such U.S. holders may have from non-U.S. source income not qualifying as passive income. In the case of certain types of U.S. holders, any such dividends may be treated as a different class of income for purposes of calculating the U.S. foreign tax credit limitations. U.S. holders that do not elect to claim a foreign tax credit may instead claim a deduction for non-U.S. tax withheld (if any).
Distributions of ordinary shares and ADRs to U.S. holders with respect to their holdings of ordinary shares and ADRs, as the case may be (such previously held ordinary shares or ADRs being “Old Stock”), that are pro rata with respect to their holdings of Old Stock will generally not be subject to U.S. federal income tax (except with respect to cash received instead of fractional ordinary shares and ADRs). A U.S. holder’s adjusted tax basis in the ordinary shares and ADRs so received will be determined by allocating the U.S. holder’s adjusted tax basis in the Old Stock between the Old Stock and the ordinary shares and ADRs so received.
Taxation of Sale or Other Disposition. Unless a nonrecognition provision applies, a U.S. holder will recognize capital gain or loss upon a sale or other disposition of ordinary shares or ADRs in an amount equal to the difference between the amount realized on their disposition and such U.S. holder’s adjusted tax basis in the ordinary shares or ADRs. Under current law, capital gains realized by corporate and individual taxpayers are generally subject to U.S. federal income taxes at the same rate as ordinary income, except that long-term capital gains realized by non-corporate U.S. holders are subject to U.S. federal income taxes at a maximum rate of 15% for taxable years beginning before January 1, 2009 (and 20% thereafter). Certain limitations exist on the deductibility of capital losses by both corporate and individual taxpayers. Capital gains and losses on the sale or other disposition by a U.S. holder of ordinary shares or ADRs generally should constitute gains or losses from sources within the United States.
For cash basis U.S. holders who receive foreign currency in connection with a sale or other taxable disposition of ordinary shares or ADRs, the amount realized will be based on the U.S. dollar value of the foreign currency received with respect to such ordinary shares or ADRs as determined on the settlement date of such sale or other taxable disposition.
Accrual basis U.S. holders may elect the same treatment required of cash basis taxpayers with respect to a sale or other taxable disposition of ordinary shares or ADRs, provided that the election is applied consistently from year to year. Such election may not be changed without the consent of the Internal Revenue Service. Accrual basis U.S. holders who or which do not elect to be treated as cash basis taxpayers (pursuant to the Treasury Regulations applicable to foreign currency transactions) for this purpose may have a foreign currency gain or loss for U.S. federal income tax purposes because of differences between the U.S. dollar value of the foreign currency received prevailing on the date of the sale or other taxable disposition of ordinary shares or ADRs and the date of payment. Any such foreign currency gain or loss generally will constitute gain or loss from
77
Table of Contents
Deposits, Withdrawals and Pre-Releases. Deposits and withdrawals by U.S. holders of ordinary shares in exchange for ADRs and of ADRs in exchange for ordinary shares will not be subject to any U.S. federal income tax. The U.S. Treasury Department, however, has expressed concerns that parties involved in transactions where depositary shares are pre-released may be taking actions that are not consistent with the claiming of foreign tax credits by the holders of the applicable ADRs. Accordingly, the analysis of the creditability of Dutch taxes described above could be affected by future actions that may be taken by the U.S. Treasury Department.
United States Backup Withholding and Information Reporting. In general, information reporting requirements will apply to payments of dividends on ordinary shares or ADRs and the proceeds of certain sales of ordinary shares or ADRs in respect of U.S. holders other than certain exempt persons (such as corporations). A 28% backup withholding tax (31% for 2011 and thereafter) will apply to such payments if the U.S. holder fails to provide a correct taxpayer identification number or other certification of exempt status or, with respect to certain payments, the U.S. holder fails to report in full all dividend and interest income and the Internal Revenue Service notifies the payer of such under-reporting. Amounts withheld under the backup withholding rules may be credited against a holder’s U.S. federal tax liability, and a refund of any excess amounts withheld under the backup withholding rules may be obtained by filing the appropriate claim form with the Internal Revenue Service.
Dutch Tax Considerations
General
The following describes the material Dutch tax consequences for a U.S. holder of Royal Dutch ordinary shares or of Class A Shares or Class A ADRs who is neither resident nor deemed to be resident in The Netherlands for Dutch tax purposes and, in the event such holder is an individual, has not opted to be treated as a resident in The Netherlands for the purposes of the Dutch Income Tax Act 2001, in respect of the offer and the ownership and disposal of Class A Shares received pursuant to the offer. This description is the opinion of our Dutch tax counsel, De Brauw Blackstone Westbroek N.V., and is limited as described in this section. This description is not intended to be applicable in all respects to all categories of U.S. holders. This section does not purport to describe all possible Dutch tax considerations or consequences that may be relevant to a U.S. holder. Any Holder of Royal Dutch ordinary shares is advised to consult with his tax advisors with regard to the tax consequences of the offer and the ownership and disposal of Class A Shares or Class A ADRs received pursuant to the offer in his particular circumstances. This section does not purport to describe the possible Dutch tax considerations or consequences that may be relevant to a U.S. holder of Royal Dutch ordinary shares or Class A Shares or Class A ADRs who receives or has received any benefits from these securities as employment income, deemed employment income or otherwise as compensation.
Neither does this section purport to describe the possible Dutch tax considerations or consequences that may be relevant to a U.S. holder of Royal Dutch ordinary shares or of “A” Shares who has a (fictitious) substantial interest in Royal Dutch or in Royal Dutch Shell.
Generally, a holder has a substantial interest if such holder, alone or together with his partner, has, or if certain relatives of the holder or his partner have, directly or indirectly:
| (i) | the ownership of, or certain rights over, shares representing five per cent. or more of the total issued and outstanding capital of Royal Dutch Shell or of the issued and outstanding capital of any class of shares of Royal Dutch or Royal Dutch Shell; | |
| (ii) | the rights to acquire shares, whether or not already issued, representing five per cent. or more of the total issued and outstanding capital of Royal Dutch or Royal Dutch Shell, or of the issued and outstanding capital of any class of shares of Royal Dutch or Royal Dutch Shell; or | |
| (iii) | certain profit participating certificates that relate to five per cent. or more of the annual profit of Royal Dutch or Royal Dutch Shell or to five per cent. or more of the liquidation proceeds of Royal Dutch or Royal Dutch Shell. |
78
Table of Contents
A holder has a fictitious substantial interest if (a) he has disposed of, or is deemed to have disposed of, all or part of a substantial interest or (b) he is an individual and has transferred a business enterprise in exchange for shares, on a non-recognition basis.
Except as otherwise indicated, this section only addresses Dutch tax legislation and regulations, as in effect on the date hereof and as interpreted in published case law on the date hereof and is subject to change after such date, including changes that could have retroactive effect. A change in legislation or regulations may thus invalidate all or part of this section. Unless otherwise specifically stated herein, this section does not express any opinion on Dutch international tax law or on the rules promulgated under or by any treaty or treaty organization and does not express any opinion on any Dutch legal matter other than Dutch tax law.
Withholding tax on dividend payments
Dividends distributed by us to a U.S. holder of a Class A Share or a Class A ADR are generally subject to withholding tax imposed by The Netherlands at a rate of 25 percent. Dividends distributed by us include, but are not limited to:
| (i) | distributions in cash or in kind, whatever they may be named or in whatever form; | |
| (ii) | proceeds from our liquidation or, as a rule, proceeds from the repurchase of shares by us, in excess of the average paid-in capital recognized for Dutch dividend withholding tax purposes; | |
| (iii) | the par value of shares issued to a holder of shares or an increase in the par value of shares, to the extent that no capital contribution, recognized for Dutch dividend withholding tax purposes, has been made or will be made; and | |
| (iv) | partial repayment of paid-in capital that is: |
| (a) | not recognized for Dutch dividend withholding tax purposes; or | |
| (b) | recognized for Dutch dividend withholding tax purposes, to the extent that we have net profits (zuivere winst), unless (I) the general meeting of our shareholders has resolved in advance to make such repayment and (II) the par value of the shares concerned has been reduced by an equal amount by way of an amendment to our articles of association. |
As stated above under (ii), Dutch tax law treats share buy backs for cancellation as being subject to withholding tax unless an exemption applies by virtue of their being carried out within certain annual quantitative limits. These quantitative limits have been agreed with the Dutch Revenue Service for the Class A Shares (including Class A ADRs) and the limits will not restrict the share buy back program announced for 2005. Buy backs of Class A Shares (including Class A ADRs) within these limits will not be subject to Dutch withholding tax. However, no quantitative limits on which to base an exemption (or other mitigation of the withholding tax) for buy backs of Class B Shares have been agreed with the Dutch Revenue Service and so, if repurchases of Class B Shares were undertaken, they would potentially give rise to Dutch withholding tax at the rate of 25 percent.
Accordingly, Royal Dutch Shell expects to buy back Class A Shares (including Class A ADRs) in preference to Class B Shares, unless and until exemption from or other mitigation of withholding tax on buy backs of Class B Shares is agreed with the Dutch Revenue Service. In any event, any withholding tax arising on a buy back of would be borne by us and not the selling shareholder.
A U.S. holder who is entitled to the benefits of the 1992 Double Taxation Convention between the United States and The Netherlands, as amended most recently by the Protocol signed March 8, 2004 (the “Convention”), will be entitled to a reduction in the Dutch withholding tax, either by way of a full or partial exemption at source or by way of a full or partial refund, as follows:
| • | if the U.S. holder is an exempt pension trust as described in article 35 of the Convention, or an exempt organization as described in article 36 of the Convention, the U.S. holder will be exempt from Dutch dividend withholding tax; |
79
Table of Contents
| • | if the U.S. holder is a company which holds directly at least 10 percent of the voting power in us, the U.S. holder will be subject to Dutch dividend withholding tax at a rate not exceeding 5%; and | |
| • | in all other cases, the U.S. holder will be subject to Dutch dividend withholding tax at a rate not exceeding 15%. |
According to Dutch domestic anti-dividend stripping rules, no exemption from or reduction in or refund of, Dutch dividend withholding tax will be granted if the recipient of the dividend paid by us is not considered to be the beneficial owner (uiteindelijk gerechtigde) of such dividends as meant in these rules.
Dutch Taxes on Income and Capital Gains
A U.S. holder will not be subject to Dutch taxes on income or on capital gains in respect of the exchange of Royal Dutch ordinary shares for Class A Shares or Class A ADRs pursuant to the offer or, after the exchange, the ownership and disposal of Class A Shares or Class A ADRs, other than Dutch withholding tax as described above, in each case, except if:
| (i) | such holder derives profits from an enterprise, whether as entrepreneur (ondernemer) or pursuant to a co-entitlement to the net worth of such enterprise, other than as an entrepreneur or a shareholder, which enterprise is, in whole or in part, carried on through a permanent establishment (vaste inrichting) or a permanent representative (vaste vertegenwoordiger) in The Netherlands to which the Royal Dutch ordinary shares, the Class A Shares or the Class A ADRs are attributable; or | |
| (ii) | the holder is an individual who derives benefits from miscellaneous activities (resultaat uit overige werkzaamheden) performed in The Netherlands in respect of the Royal Dutch ordinary shares, the Class A Shares or the Class A ADRs, including, without limitation, activities which are beyond the scope of active portfolio investment activities. |
With respect to the exchange of Royal Dutch ordinary shares for Class A Shares pursuant to the offer, the Dutch Revenue Service has confirmed that the roll over facility of article 3.55 Income Tax Act 2001 is applicable both to individuals and, pursuant to article 8 and article 18, Corporate Income Tax Act 1969, to entities. Consequently, on the occasion of the exchange capital gains would not have to be recognized and may be deferred for purposes of the Income Tax Act 2001 or the 1969 Corporate Income Tax Act.
Dutch Gift, Estate and Inheritance Tax
No Dutch gift tax or inheritance tax is payable in respect of any gift of Class A Shares or Class A ADRs by, or inheritance of Class A Shares or Class A ADRs on the death of, a U.S. holder of Class A Shares or Class A ADRs, except if:
| (i) | the U.S. holder is a resident or is deemed to be a resident of The Netherlands; |
| (ii) | at the time of the gift or the death of the U.S. holder, such U.S. holder has an enterprise (or an interest in an enterprise) which is, in whole or in part, carried on through a permanent establishment or permanent representative in The Netherlands to which the Class A Shares or Class A ADRs are attributable; or | |
| (iii) | the Class A Shares or Class A ADRs are acquired by way of a gift from a holder who passes away within 180 days after the date of the gift and who is not and is not deemed to be a resident of The Netherlands at the time of the gift, but is or is deemed to be at the time of his death a resident of The Netherlands. |
Dutch Turnover Tax
No Dutch turnover tax (Valued Added Tax) will arise in respect of the exchange of Royal Dutch ordinary shares for Class A Shares or Class A ADRs pursuant to the offer.
80
Table of Contents
UK Tax Considerations
General
The following describes the material UK tax consequences for a U.S. holder of the offer and of the ownership and disposal of Class A Shares or Class A ADRs received in the offer. This description is the opinion of our UK tax counsel, Slaughter and May, as to the matters of law set out in this section headed “UK Tax Considerations”. It is based on current UK law and on what is understood to be the current practice of UK HMRC, both of which are subject to change, possibly with retroactive effect. Any change in applicable laws or the facts and circumstances surrounding the offer, or any inaccuracy in the documents upon which Slaughter and May have relied, may affect the continuing validity of their opinion. Slaughter and May assume no responsibility to inform you of any such change or inaccuracy that may occur or come to their attention. The opinion of Slaughter and May is being provided to Royal Dutch Shell in connection with the registration statement of which this prospectus forms a part and may not be reproduced, quoted, summarized or relied upon by any other person or for any other purpose without the express written consent of Slaughter and May. Apart from the last paragraph under the heading “UK Tax on Income and Chargeable Gains” below, it applies only to U.S. holders who hold their Royal Dutch ordinary shares and Class A Shares or Class A ADRs as an investment and are the absolute beneficial owners of them, who are not resident or ordinarily resident for tax purposes in the UK or carrying on a trade (or profession or vocation) in the UK and who are not (and have not in the previous seven years been) employees of Royal Dutch or of any person connected with Royal Dutch.
The paragraphs below do not attempt to describe all possible UK tax considerations that may be relevant to a U.S. holder. Any U.S. holders who are in any doubt about any aspect of their particular tax position are advised to consult appropriate independent tax advisors.
UK Tax on Income and Chargeable Gains
U.S. holders who satisfy the criteria set out in the first paragraph above under the heading “— General” will not be subject to UK tax on income or chargeable gains in respect of the exchange of Royal Dutch ordinary shares for Class A Shares or Class A ADRs or, after the exchange, in respect of the ownership and disposal of Class A Shares or Class A ADRs or the receipt of any dividends that are paid on them.
There is however an exception to this rule in the case of a U.S. holder who is an individual, who has ceased to be either resident or ordinarily resident for tax purposes in the UK (or is regarded as non-resident for the purposes of a relevant double taxation treaty (“Treaty Non-Resident”)) but then resumes residence or ordinary residence (or, as the case may be, ceases to be regarded as Treaty Non-Resident) before five complete tax years have passed. Such a holder may be liable to UK capital gains tax (subject to any available exemption or relief) if he or she made a disposal of Royal Dutch ordinary shares, Class A Shares or Class A ADRs while non-resident.
It should be noted that the exchange of Royal Dutch ordinary shares for Class A Shares or Class A ADRs will in principle constitute a disposal of those Royal Dutch ordinary shares for the purposes of UK tax on chargeable gains. Accordingly, a U.S. holder who has a connection with the UK which prevents that holder satisfying the criteria set out in the first paragraph above under the heading “General” may be liable to UK tax on chargeable gains in respect of that exchange, subject to any available exemption or relief. We encourage a U.S. holder who has such a connection with the UK to consult with appropriate independent tax advisors regarding other UK tax considerations that may, following the exchange, be relevant to that holder.
UK Inheritance Tax
A U.S. holder who is an individual domiciled in the U.S. for the purposes of the UK/U.S. Estate and Gift Tax Treaty and who is not a national of the UK for the purposes of the UK/U.S. Estate and Gift Tax Treaty will not be subject to UK inheritance tax in respect of the Class A Shares or Class A ADSs on the individual’s death or on a gift of such Class A Shares or Class A ADSs made during the individual’s lifetime unless, inter alia, they are part of the business property of the individual’s permanent establishment situated in the UK or pertain to the individual’s UK fixed base used for the performance of independent personal services. In the exceptional case where Class A Shares or Class A ADSs are subject to both UK inheritance tax and U.S. federal estate or gift tax, the UK/U.S. Estate and Gift Tax Treaty generally provides for tax paid in the UK to be credited against tax payable in the U.S., based on priority rules set out in that treaty.
81
Table of Contents
UK Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
A holder of Royal Dutch ordinary shares who accepts the offer before the expiration date of the offer or during a subsequent offer period (if any) will not have any resulting liability for stamp duty or SDRT. Nor will it be necessary for a holder of Class A Shares or Class A ADRs to pay SDRT or, in practice, stamp duty in consequence of the ownership or disposal of Class A Shares or Class A ADRs following completion of the offer; one reason for this is that any stamp duty or SDRT that might be due in relation to a disposal will normally be paid by the transferee rather than the transferor.
82
Table of Contents
DIRECTORS AND SENIOR MANAGEMENT
Our articles of association provide that our board of directors must consist of not less than three members nor more than twenty members at any time. We have a single-tier board of directors headed by a Non-Executive Chairman, with management led by a Chief Executive. Our board comprises ten Non-Executive Directors (including the Chairman) and five Executive Directors (including the Chief Executive and the Chief Financial Officer).
Six of the ten Non-Executive Directors on our board have been drawn from the seven members of the Royal Dutch supervisory board; four have been drawn from the nine Non-Executive Directors of the Shell Transport board. Five of the ten Non-Executive Directors are expected to be replaced by 2008, namely the Chairman in 2006 and two more in each of 2007 and 2008. The retiring Non-Executive Directors will be replaced by candidates with the appropriate experience and qualifications to ensure the continued effectiveness of our board’s supervision of us and our group companies.
The business address for all of the directors is Carel van Bylandtlaan 30, 2596 HR The Hague, The Netherlands. All of the directors were appointed in 2004.
As of May 13, 2005, the members of our board, their respective ages and their principal occupation are:
| Name | Age | Position | ||||
|
Aad Jacobs
|
68 | Chairman and Chairman of the Nomination and Succession Committee(3) | ||||
|
Lord Kerr of Kinlochard
|
63 | Deputy Chairman(1)(3) (and senior independent Non-Executive Director) | ||||
|
Jeroen van der Veer
|
57 | Chief Executive | ||||
|
Peter Voser
|
46 | Chief Financial Officer | ||||
|
Malcolm Brinded
|
52 | Executive Director, Exploration and Production | ||||
|
Linda Cook
|
46 | Executive Director, Gas & Power | ||||
|
Rob Routs
|
58 | Executive Director, Oil Products and Chemicals | ||||
|
Maarten van den Bergh
|
63 | Non-Executive Director(2) | ||||
|
Sir Peter Burt
|
61 | Non-Executive Director(4) | ||||
|
Mary (Nina) Henderson
|
54 | Non-Executive Director(2)(4) | ||||
|
Sir Peter Job
|
63 | Non-Executive Director(1) | ||||
|
Wim Kok
|
66 | Non-Executive Director and Chairman of the Social Responsibility Committee(2) | ||||
|
Jonkheer Aarnout Loudon
|
68 | Non-Executive Director and Chairman of the Remuneration Committee(1)(3) | ||||
|
Christine Morin-Postel
|
58 | Non-Executive Director(4) | ||||
|
Lawrence Ricciardi
|
64 | Non-Executive Director and Chairman of the Audit Committee(4) | ||||
| (1) | Member of Remuneration Committee |
| (2) | Member of Social Responsibility Committee |
| (3) | Member of Nomination and Succession Committee |
| (4) | Member of Audit Committee |
83
Table of Contents
Aad Jacobs
Born May 28, 1936 and is a Dutch national. He is Chairman of the Royal Dutch Shell board of directors and Chairman of the Nomination and Succession Committee. He was appointed a member of the Royal Dutch supervisory board in 1998 and Chairman of the Royal Dutch supervisory board in 2002. He was previously Chairman of the Board of Management of ING Groep N.V. from 1992 to 1998. He is currently also Chairman of the supervisory boards of Joh. Enschedé B.V., Imtech N.V. and VNU N.V.; Vice-Chairman of the supervisory boards of Buhrmann N.V. and IHC Caland N.V., and a member of the supervisory board of ING Groep N.V.
Lord Kerr of Kinlochard
Born February 22, 1942 and is a British national. He is Deputy Chairman (and senior independent Non-Executive Director) of the Royal Dutch Shell Board of directors. He was appointed a director of Shell Transport in 2002. Previously he was UK Permanent Representative to the European Union, British Ambassador to the U.S.A, Foreign Office Permanent Under Secretary of State and Head of the UK Diplomatic Service. On leaving government service he was Secretary-General of the European Convention (2002 to 2003). A member of the House of Lords since 2004, he is now Chairman of the Court and Council of Imperial College, London and a trustee of the National Gallery and the Rhodes Trust. Currently he is also a non-executive Director of Rio Tinto plc, Rio Tinto Limited and Scottish American Investment Company plc.
Jeroen van der Veer
Born October 27, 1947 and is a Dutch national. He is the Chief Executive of Royal Dutch Shell. He joined the Royal Dutch/ Shell Group in 1971 in refinery process design and has held a number of senior management positions around the world. He was appointed President of Royal Dutch in 2000, having been a Managing Director since 1997. He was appointed Chairman of the Committee of Managing Directors of the Royal Dutch/ Shell Group in March 2004 and Royal Dutch/ Shell Group Chief Executive in October 2004. He is also a non-executive Director of Unilever (which includes Unilever N.V., Unilever plc and Unilever Holdings Ltd). He was a member of the supervisory board of De Nederlandsche Bank N.V. until September 2004.
Peter Voser
Born August 29, 1958 and is a Swiss national. He is Chief Financial Officer of Royal Dutch Shell. He was employed from 1982 to March 2002 by the Royal Dutch/ Shell Group in a variety of finance and business roles in Switzerland, the UK, Argentina and Chile, including Group Chief Internal Auditor of the Royal Dutch/ Shell Group, Chief Financial Officer of Shell Europe Oil Products and Chief Financial Officer of Shell International Oil Products. In March 2002, he was appointed Chief Finance Officer and Member of the Group executive committee of the Asea Brown Boveri group of companies, based in Switzerland, until September 2004. He was appointed Managing Director of Shell Transport, a Group Managing Director and Chief Financial Officer with effect from October 2004. He is a member of the supervisory board of Aegon N.V. and UBS AG.
Malcolm Brinded
Born March 18, 1953 and is a British national. He is Executive Director, Exploration and Production of Royal Dutch Shell. He joined the Royal Dutch/ Shell Group in 1974 and has held various positions around the world. He was Country Chair for the Royal Dutch/ Shell Group in the UK from 1999 to 2002 and Director of Planning, Environment and External Affairs at Shell International Ltd. from 2001 to 2002. He became a Managing Director of Royal Dutch in 2002. In March 2004, he was appointed a Director and Managing Director of Shell Transport and became Vice-Chairman of the Committee of Managing Directors. He has participated in
84
Table of Contents
Linda Cook
Born June 4, 1958 and is a U.S. national. She is Executive Director, Gas & Power of Royal Dutch Shell. She joined Shell Oil Company in Houston in 1980, having graduated from the University of Kansas with a degree in Petroleum Engineering. She worked for Shell Oil Company in Houston and California in a variety of technical and managerial positions until 1998 when she moved to The Hague and was appointed Director, Strategy & Business Development of the Shell Exploration and Production Global executive committee. She became Chief Executive Officer for Shell Gas & Power in January 2000. In 2003, she became President and Chief Executive Officer and a member of the Board of Directors of Shell Canada Limited. In August 2004, she was appointed a Managing Director of Royal Dutch and became a Group Managing Director and Chief Executive Officer of Shell Gas & Power. She is a member of the Society of Petroleum Engineers and a non-executive Director of The Boeing Company.
Rob Routs
Born September 10, 1946 and is a Dutch national. He is Executive Director, Oil Products and Chemicals of Royal Dutch Shell. He joined the Royal Dutch/ Shell Group in 1971. He has held various positions in The Netherlands, Canada and the U.S.A and was previously President and Chief Executive Officer of Shell Oil Products U.S.A and President of Shell Oil Company and Country Chair for the Royal Dutch/ Shell Group in the U.S.A. He was appointed a Managing Director of Royal Dutch and became a Group Managing Director with effect from July 2003. He is a director of INSEAD.
Maarten van den Bergh
Born April 19, 1942 and is a Dutch national. He was President of Royal Dutch from 1998 to 2000 having been a Managing Director of Royal Dutch since 1992. He was appointed a member of the Royal Dutch supervisory board in 2000. He is also Chairman of the Board of Directors of Lloyds TSB Group plc and a Non-Executive director of BT Group plc and British Airways plc and a member of the supervisory board of Akzo Nobel N.V.
Sir Peter Burt MA MBA LLD FRSE FCIBS
Born March 6, 1944 and is a British national. He is a member of the Audit Committee. He was appointed a non-executive Director of Shell Transport in 2002. He was Group Chief Executive of the Bank of Scotland and in 2001 became Executive Deputy Chairman of HBOS plc and was Governor of the Bank of Scotland until 2003. He is Chairman of ITV plc, a director of a number of charitable organizations and non-executive director of Templeton Emerging Markets Trust plc.
Mary (Nina) Henderson
Born July 6, 1950 and is a U.S. national. She is a member of the Social Responsibility Committee and the Audit Committee. She was appointed a non-executive Director of Shell Transport in 2001. She was previously President of a major division and Corporate Vice President of Bestfoods, a U.S. foods company, and was responsible for worldwide core business development. She is a non-executive Director of Pactiv Corporation, AXA Financial Inc., Del Monte Foods Company and Visiting Nurse Service of New York.
85
Table of Contents
Sir Peter Job
Born July 13, 1941 and is a British national. He is a member of the Remuneration Committee. He was appointed as a non-executive Director of Shell Transport in 2001. He was previously Chief Executive of Reuters plc. He is a non-executive director of Schroders plc, TIBCO Software Inc, Instinet Group Inc, and a member of the supervisory board of Deutsche Bank AG.
Wim Kok
Born September 29, 1938 and is a Dutch national. He is Chairman of the Social Responsibility Committee. He was appointed a member of the Royal Dutch supervisory board with effect from July 1, 2003. He chaired the Confederation of Dutch trade unions (FNV) before becoming a member of the Dutch Lower House of Parliament and parliamentary leader of the Partij van de Arbeid (Labour Party). He was appointed Dutch Minister of Finance in 1989 and Dutch Prime Minister in 1994, serving for two periods of government up to July 2002. He is currently a member of the supervisory boards of ING Groep N.V., KLM N.V. and TPG N.V.
Jonkheer Aarnout Loudon
Born December 10, 1936 and is a Dutch national. He is Chairman of the Remuneration Committee and a member of the Nomination and Succession Committee. He was appointed a member of the Royal Dutch supervisory board in 1997. He was a member of the Board of Management of Akzo from 1977 to 1994 (Akzo Nobel as from 1994) and served as its Chairman from 1982-1994. He is currently also Chairman of the supervisory boards of ABN AMRO Holding N.V. and Akzo Nobel N.V., a member of the International Advisory Board of Allianz AG and a member of the supervisory board of Het Concertgebouw N.V.
Christine Morin-Postel
Born October 6, 1946 and is a French national. She is a member of the Audit Committee. She was appointed a member of the Royal Dutch supervisory board in 2004. She was Chairman and CEO of Credisuez from 1993 to 1996. In February 1998, she became Chief Executive and Chairman of the Management Committee of Societe Generale de Belgique, which she remained until March 2001. She was Executive Vice-president of Suez from September 2000 through March 2003. She is currently a non-executive director of Alcan Inc., Pilkington plc and 3i Group plc.
Lawrence Ricciardi
Born August 14, 1940 and is a U.S. national. He is Chairman of the Audit Committee. He was appointed a member of the Royal Dutch supervisory board in 2001. He was previously President of RJR Nabisco, Inc. and subsequently Senior Vice President and General Counsel of IBM. He is Senior Advisor to the law firm Jones Day and to Lazard Freres & Co. and a trustee of the Pierpoint Morgan Library, the Andrew W. Mellon Foundation and Ithaka Harbors, Inc. He is also a member of the Board of Directors of The Reader’s Digest Association, Inc.
Board Committees
Committees of Non-Executive Directors
There are four Royal Dutch Shell Board Committees made up of Non-Executive Directors. These are the Nomination and Succession Committee, the Audit Committee, the Remuneration Committee and the Social Responsibility Committee.
Nomination and Succession Committee. The Nomination and Succession Committee makes recommendations to the Royal Dutch Shell Board on all board appointments and re-appointments.
86
Table of Contents
The Nomination and Succession Committee regularly reviews the structure, size and composition (including the required skills, knowledge and experience) of the Royal Dutch Shell Board and makes recommendations with regard to any adjustment deemed necessary. It evaluates, prior to an appointment being made, the skills, knowledge and experience on the Royal Dutch Shell Board and defines the role and the capabilities required for a particular appointment. It is responsible for identifying and nominating suitable candidates for the approval of the Royal Dutch Shell Board to fill vacancies as and when they arise. The Nomination and Succession Committee keeps under review the leadership needs of Royal Dutch Shell.
The Nomination and Succession Committee also makes recommendations to the Royal Dutch Shell Board concerning the succession plans for both Executive Directors and Non-Executive Directors, on the re-appointment of any Non-Executive Director at the conclusion of the specified term of office and on any matters relating to the continuation in office of any director. The Nomination and Succession Committee also makes recommendations on the appointment of the chairman of each of the Audit Committee, the Remuneration Committee and the Social Responsibility Committee and, in consultation with the chairman of the relevant committee, the membership of those committees. It also makes recommendations in respect of corporate governance guidelines for Royal Dutch Shell and monitors compliance with corporate governance requirements and makes recommendations in respect of disclosures relating to corporate governance and its appointment processes.
The members of the Nomination and Succession Committee are Aad Jacobs (Chairman), Lord Kerr of Kinlochard and Jonkheer Aarnout Loudon.
Audit Committee. The Audit Committee assists the Royal Dutch Shell Board in fulfilling its responsibilities in relation to internal control and financial reporting, and carries out certain oversight functions on behalf of the Royal Dutch Shell Board.
It is charged with monitoring the effectiveness of the Royal Dutch/Shell Group’s risk based internal control system. It monitors compliance with applicable external legal and regulatory requirements, the Shell General Business Principles and Code of Ethics.
It has a duty to discuss with the Royal Dutch/Shell Group Chief Financial Officer, the Royal Dutch/Shell Group controller and the external auditors issues regarding accounting policies and practices. It reviews and discusses the integrity of the financial statements with management and the external auditors. It reviews, in conjunction with management, the policies of Royal Dutch Shell with respect to earnings releases, financial performance information and earnings guidance, reserves accounting and reporting and significant financial reporting issues. It establishes and monitors the implementation of procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing or other matters, including mechanisms for the confidential or anonymous submission of related concerns by employees, ensuring that these procedures provide for proportionate and independent investigation of such matters and appropriate follow up action. It monitors the effectiveness of the procedures of Royal Dutch Shell for internal control over financial reporting.
The Audit Committee reviews and assesses the internal audit function’s remit, the appropriateness of internal audit strategies and the annual internal audit plan. It monitors the execution and results of the audit plan. It reviews and assesses management’s response to audit findings and recommendations. It discusses the adequacy of the risk management and internal control system of Royal Dutch Shell and any significant matters arising from the internal audit with the chief internal auditor, management and the external auditors. It monitors the qualifications, expertise, resources and work structure of the internal audit function. It considers the standards employed by the internal audit function, quality assurance procedures and auditor competence. It assesses annually the performance of the chief internal auditor, including the role and effectiveness of internal audit in the overall context of the risk management and internal control system of the Royal Dutch/ Shell Group.
The Audit Committee makes recommendations to the Royal Dutch Shell Board for it to put to the Royal Dutch Shell shareholders for approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditors. It investigates the issues giving rise to any resignation of the external auditors and considers whether any action is required. It reviews and approves the engagement letter for the external
87
Table of Contents
The Audit Committee updates the Royal Dutch Shell Board about its activities after each Audit Committee meeting. Where the Audit Committee is not satisfied with any aspect of risk management and internal control, financial reporting or audit related activities, it reports to the Royal Dutch Shell Board. The Audit Committee is also responsible for bringing to the attention of the Royal Dutch Shell Board material issues regarding accounting, internal accounting controls or auditing. It is responsible for describing in the annual report how it has discharged its responsibilities and how auditor objectivity and independence has been safeguarded.
The members of the Audit Committee are Lawrence Ricciardi (Chairman), Sir Peter Burt, Mary (Nina) Henderson and Christine Morin-Postel.
Remuneration Committee. The Remuneration Committee determines and agrees with the Royal Dutch Shell Board the remuneration policy and individual remuneration packages for the Chairman, the Chief Executive and the Executive Directors. It monitors the remuneration for other senior executives and makes recommendations if appropriate.
The Remuneration Committee determines and agrees with the Royal Dutch Shell Board the framework remuneration policy for the Chairman, the Chief Executive and the other Executive Directors, ensuring that remuneration is adequate to attract, retain and motivate high calibre individuals. Within the terms of the agreed framework remuneration policy, it determines individual remuneration packages for the Chairman and the Chief Executive, and, in consultation with them, for other Executive Directors. It monitors the structures and levels of remuneration for other senior executives and makes recommendations if appropriate. It determines and agrees with the Royal Dutch Shell Board a performance framework and endorses its application in setting performance targets for the remuneration of the Chief Executive and other Executive Directors and, assessing their performance against such targets, determines resultant annual remuneration levels. The Remuneration Committee also approves employee share plans and other incentive plans for Executive Directors. It considers and advises on the terms of any contract to be offered to a director. It approves pension arrangements for Executive Directors and any major changes to employee benefit arrangements applicable to them. It reviews and endorses the policy for authorising claims for expenses from the Chief Executive and the Chairman.
The Remuneration Committee prepares an annual remuneration report and ensures that all necessary disclosures within its remit are properly made.
The members of the Remuneration Committee are Jonkheer Aarnout Loudon (Chairman), Lord Kerr of Kinlochard and Sir Peter Job.
Social Responsibility Committee. Under its terms of reference, the Social Responsibility Committee reviews the policies and conduct of Royal Dutch Shell with respect to the Royal Dutch Shell Group’s statement of general business principles as well as the Royal Dutch Shell Group’s health, safety and environment policy, other relevant Royal Dutch Shell Group policies and standards and for major issues of public concern, making recommendations to the Royal Dutch Shell Board accordingly. It also oversees the design of internal control procedures relating to the Royal Dutch Shell Group’s general business principles and health, safety and environment policy, and makes recommendations to the Royal Dutch Shell Board accordingly.
The members of the Social Responsibility Committee are Wim Kok (Chairman), Maarten van den Bergh and Mary (Nina) Henderson.
88
Table of Contents
The Executive Committee
The Executive Committee comprises the Chief Executive, the Chief Financial Officer and the other Executive Directors. The Executive Committee is responsible for Royal Dutch Shell’s overall business and affairs and has final authority in all matters of management that are not within the duties and authorities of the Royal Dutch Shell Board or of the general meeting of Royal Dutch Shell. It implements all Board resolutions and supervises all management levels in Royal Dutch Shell.
The Chief Executive is Jeroen van der Veer. The Chief Financial Officer is Peter Voser and the other Executive Directors are Malcolm Brinded, Executive Director of Exploration and Production; Linda Cook, Executive Director of Gas & Power and Rob Routs, Executive Director of Oil Products and Chemicals.
Compensation
We have not yet paid any compensation to our Chairman of the board, Chief Executive, Executive Directors or Chief Financial Officer. The form and amount of the compensation to be paid to each of our executive officers in any future period will be determined by our Remuneration Committee.
The Chairman of our board will be paid an annual fee of £150,000.
All other non-executive directors of Royal Dutch Shell will be paid an annual fee of £70,000 with an additional fee of:
| £30,000 per annum for acting in the role of Senior Independent Director and | |
| Deputy Chairman; | |
| £25,000 per annum for acting as Chairman of the Audit Committee; | |
| £20,000 per annum for acting as Chairman of the Remuneration Committee; | |
| £15,000 per annum for acting as Chairman of any other committee of the Board(1); | |
| £15,000 per annum for membership of the Audit Committee(2); | |
| £11,500 per annum for membership of the Remuneration Committee(2); and | |
| £8,000 per annum for membership of any other committee of the Board(2). |
| (1) | Aad Jacobs has capped his annual fee for 2005 at £150,000 and so he will not receive any additional fee for acting as Chairman of the Nomination Committee. | |
| (2) | The Chairman of a committee of the Board does not receive an additional fee for membership of that committee. |
An additional fee of £3,000 per meeting is payable to non-executive directors who undertake intercontinental travel to attend a meeting, although there will be no payment for one meeting per year requiring intercontinental travel, held in a location other than The Hague or London.
For information concerning the remuneration paid to or accrued for members of the Royal Dutch supervisory board, the managing directors of Royal Dutch and officers by Royal Dutch and companies of the Royal Dutch/ Shell Group, see the Form 20-F, which is incorporated by reference in this prospectus. For information concerning the remuneration paid to or accrued for members of the Shell Transport board, the managing directors of Shell Transport and officers by Shell Transport and companies of the Royal Dutch/ Shell Group, see the Form 20-F, which is incorporated by reference in this prospectus.
Letters of appointment of non-executive directors of Royal Dutch Shell
Non-executive directors of Royal Dutch Shell are appointed for specified terms of office. The term of office of each of the non-executive directors of Royal Dutch Shell will end, subject to the provisions of the Royal Dutch Shell Articles and to re-appointment for further terms, at the close of business of the annual general meeting in 2007 (except in the case of Mr. Jacobs, which, subject to such provisions, will end at the close of business of the annual general meeting in 2006.)
The letters of appointment of the non-executive directors of Royal Dutch Shell provide for a notice period of three months and there are no compensation provisions upon early termination. It is a term of each appointment that Royal Dutch Shell and the relevant director agree to be bound by the provisions in the Royal Dutch Shell
89
Table of Contents
We propose to enter into a deed of indemnity with each of the Royal Dutch Shell Directors. The terms of each of these deeds will be identical and will reflect the new statutory provisions on indemnities introduced by the Companies (Audit, Investigations and Community Enterprise) Act 2004. Under the terms of each deed, Royal Dutch Shell will undertake to indemnify the relevant Royal Dutch Shell Director, to the widest extent permitted by law, against any and all liability, howsoever caused (including by that director’s own negligence), suffered or incurred by that director in the course of that director acting as a director or employee of Royal Dutch Shell, any member of the Royal Dutch/Shell Group or certain other entities. It will be a term of each indemnity that Royal Dutch Shell and the relevant director agree to be bound by the provisions in the Royal Dutch Shell Articles relating to arbitration and exclusive jurisdiction.
Share Ownership
None of our directors or senior management hold any of our ordinary shares. For information concerning the share ownership of our directors and senior management in Royal Dutch, see the Form 20-F, which is incorporated in this prospectus by reference.
Articles of Association
Under our articles of association:
| (1) | a director may not vote or be counted in the quorum in respect of any matter in which he is materially interested including any matter related to his own compensation; | |
| (2) | the directors may exercise Royal Dutch Shell’s power to borrow money provided that the borrowings of the RDS Group shall not, without the consent of an ordinary resolution of shareholders of Royal Dutch Shell, exceed two times Royal Dutch Shell’s adjusted capital and reserves (these powers relating to borrowing may only be varied by special resolution of shareholders); | |
| (3) | Directors over age 70 must retire at each Annual General Meeting, but are eligible for re-election; and | |
| (4) | Directors are not required to hold shares of Royal Dutch Shell to be qualified to be a director. |
90
Table of Contents
DESCRIPTION OF SHARE CAPITAL OF ROYAL DUTCH SHELL
The following is a summary of the material terms of our ordinary shares, including brief descriptions of the provisions contained in our memorandum of association and articles of association and applicable laws of England in effect on the date of this document. This summary does not purport to include complete statements of these provisions. References to the provisions of our memorandum of association and articles of association are qualified in their entirety by reference to our full memorandum of association and articles of association which are filed as an exhibit to the registration statement on Form F-4 of which this prospectus is a part. Many of the rights and restrictions affecting our shares are discussed in the “Comparison of Rights of Royal Dutch Shell Shareholders and Royal Dutch Shareholders” section of this document on page 107. See “Description of Class A American Depositary Receipts” section of this document on page 101 for more information about the rights of holders of our ADRs.
General
Assuming full acceptance of the offer during the offer period, our authorised, issued and fully paid share capital upon completion of the Transaction will be as follows:
| Authorised | Authorised | Issued | Issued | |||||||||||||
| (number) | (amount) | (number) | (amount) | |||||||||||||
|
Class A Shares of
€0.07 each
|
4,139,640,000 | €289,774,800 | 4,139,040,000 | €289,732,800 | ||||||||||||
|
Class B Shares of
€0.07 each
|
2,759,360,000 | €193,155,200 | 2,759,360,000 | €193,155,200 | ||||||||||||
|
Sterling Deferred Shares of £1 each
|
50,000 | £50,000 | 50,000 | £50,000 | ||||||||||||
|
Unclassified shares of
€0.07 each
|
3,101,600,000 | €217,112,000 | Nil | Nil | ||||||||||||
The unclassified shares can be issued as Class A Shares or Class B Shares at the discretion of our board of directors. Any future issue of Class B Shares will only be made after prior consultation with the Dutch Revenue Service.
All Class A Shares and Class B Shares will be fully paid and free from all liens, equities, charges, encumbrances and other interest and not subject to calls of any kind. All Class A Shares and Class B Shares will rank equally for all dividends and distributions on our ordinary share capital declared, made or paid after the consummation of the Transaction. Applications have been made for Class A Shares and Class B Shares to be admitted to the Official List of the UK Listing Authority and to trading on the market for listed securities of the London Stock Exchange. Application has been made, subject to the offer being declared unconditional (gestanddoening), for Class A Shares and Class B Shares to be listed on Euronext Amsterdam.
Our current authorised share capital consists of (i) £50,000 divided into 20,000 ordinary shares of £1 each and 30,000 sterling deferred shares of £1 each and (ii) €700,000,000 divided into 4,139,040,000 euro deferred shares of €0.07 each, 600,000 Class A Shares, 2,759,360,000 Class B Shares and 3,101,000,000 unclassified shares of €0.07 each to be classified as Class A Shares or Class B Shares upon issue at the discretion of our directors. As of March 31, 2005, our issued share capital consisted of 20,000 ordinary shares of £1 each, 30,000 sterling deferred shares of £1 each and 4,148,800,000 euro deferred shares of €0.07 each. All ordinary shares, sterling deferred shares and euro deferred shares are fully paid and not subject to calls for additional payments of any kind.
Shareholders Meetings
Under English law, we are required in each year to hold an annual general meeting of shareholders in addition to any other meeting of shareholders that may be held. Not more than 15 months may elapse between the date of one annual general meeting of shareholders and that of the next.
Our directors have the power to convene a general meeting of shareholders at any time. In addition, our directors must convene a meeting upon the request of shareholders holding not less than 10 percent of our paid-up capital carrying voting rights at general meetings of shareholders. A request for a general meeting of shareholders must state the objects of the meeting, and must be signed by the requesting shareholders and deposited at our registered office. If our directors fail to give notice of such meeting to shareholders with 21 days from receipt of
91
Table of Contents
We are required to provide a least 21 clear days’ notice of any annual general meeting, any general meeting where a special resolution is to be voted upon, or to pass a resolution of which special notice under the Companies Act has been given. “Special resolutions” generally involve proposals to:
| • | change the name of a company; | |
| • | alter a company’s capital structure; | |
| • | change or amend the rights of shareholders; | |
| • | permit a company to issue new shares for cash without applying shareholders’ pre-emptive rights; | |
| • | amend a company’s objects clause in its memorandum of association; | |
| • | amend a company’s articles of association; and | |
| • | carry out other matters for which a company’s articles of association or the Companies Act prescribe that a “special resolution” is required. |
At least 14 clear days’ notice is required for all other general meetings.
Our articles of association require that any notice of general meetings must be in writing and must specify where the meeting is to be held, the date and time of the meeting and the general nature of the business of the meeting. The listing rules of the UKLA require us to inform holders of our securities of the holding of meetings which they are entitled to attend.
A shareholder is entitled to appoint a proxy (which is not required to be another shareholder) to represent and vote on behalf of the shareholder at any general meeting of shareholders, including the annual general meeting.
Business may not be transacted at any general meeting, including the annual general meeting, unless a quorum is present. A quorum is two people who are entitled to vote at that general meeting. They can be shareholders who are personally present or proxies for shareholders entitled to vote at that general meeting or a combination of both.
If a quorum is not present within five minutes of the time fixed for a general meeting to start or within any longer period not exceeding one hour (as decided by the Chairman of the meeting), (i) if the meeting was called by shareholders it will be canceled and (ii) any other meeting will be adjourned to any day (being not less than three nor more than 28 days later), time and place stated in the notice of the meeting. If the notice does not provide for this, the meeting shall be adjourned to a day, time and place decided upon by the Chairman of the meeting. One shareholder present in person or by proxy and entitled to vote will constitute a quorum at any adjourned general meeting.
Record dates
In relation to shares in uncertificated form, the holders of those shares that are on the register of members on the record date will have the right to attend and vote at meetings. In relation to shares in certificated form, holders of those shares that are on the register of members at the time of a meeting of shareholders will be entitled to attend and vote at meetings.
Voting rights
The Class A Shares and Class B Shares will have identical voting rights and will vote together as a single class on all matters including the election of directors unless a matter affects the rights of one class as a separate class. If a resolution affects the rights attached to either class of shares as a separate class, it must be approved
92
Table of Contents
“Extraordinary resolutions” are confined to matters out of the ordinary course of business, such as a proposal to wind up the affairs of a company.
It is the intention that all voting at our general meetings will take place as on a poll. On a poll, every holder of Class A Shares or Class B Shares present in person or by proxy will have one vote for every share he holds.
This is subject to any rights or restrictions which are given to any class of shares. No shareholder is entitled to vote if he has been served with a restriction notice after failure to provide us with information concerning interests in his or her shares required to be provided under the Companies Act.
A “poll” is voting by means of a ballot where the number of shares held by each voting shareholder is counted, as opposed to voting by way of a show of hands where the actual number of shares held by voting shareholders is not taken into account.
Dividends
Under English law, dividends are payable on Class A Shares and Class B Shares only out of profits available for distribution, as determined in accordance with the Companies Act and under International Financial Reporting Standards.
Subject to the Companies Act, if our directors consider that our financial position justifies the declaration of a dividend, we can pay an interim dividend.
Our shareholders can declare dividends by passing an ordinary resolution. Dividends cannot exceed the amount recommended by our directors.
It is the intention that dividends will be declared and paid on a quarterly basis. Dividends are payable to persons registered as shareholders on the record date relating to the relevant dividend.
All dividends will be divided and paid in proportions based on the amounts paid upon our shares during any period for which that dividend is paid.
Any dividend payable in cash relating to a share can be paid by sending a cheque, warrant or similar financial instrument payable to the shareholder entitled to the dividend by post addressed to the shareholder’s registered address or it can be made payable to someone else named in a written instruction from the shareholder and sent by post to the address specified in that instruction. A dividend can also be paid by inter-bank transfer or by other electronic means directly to an account with a bank or other financial institution named in a written instruction from the person entitled to receive the payment. Such bank or other financial institution must be in the United Kingdom other than in respect of our ordinary shares which are held within Euroclear Nederland and to which the Securities Giro Act (Wet giraal effectenverkeer) applies. Alternatively, a dividend can be paid in some other way requested in writing by a shareholder and agreed to by us. We will not be responsible for a payment which is lost or delayed.
Where any dividends or other amounts payable on a share have not been claimed, the directors can invest them or use them in any other way for our benefit until they are claimed. We will not be a trustee of the money and will not be liable to pay interest on it. If a dividend has not been claimed for 12 years after being declared or becoming due for payment, it will be forfeited and go back to us, unless the directors decide otherwise.
Our articles of association provide that if any amount is paid by the issuer of the dividend access share by way of dividend on the dividend access share and paid by the dividend access trustee to any holder of Class B Shares, the dividend that we would otherwise pay to such holder of Class B Shares will be reduced by an amount equal to the amount paid to such holder of Class B Shares by the dividend access trustee.
93
Table of Contents
Issuance of additional shares; other changes in share capital
Our articles provide that, subject to applicable law, Royal Dutch Shell can issue shares with any rights or restrictions attached to them as long as this is not restricted by any rights attached to existing shares. These rights or restrictions can be decided either by an ordinary resolution passed by the shareholders or by the directors as long as there is no conflict with any resolution passed by the shareholders. Accordingly, without further shareholder approval but subject to the limitations described above, including pre-emption rights, the directors could issue one or more series of preferred shares and establish the rights, preferences, redemption terms and other provisions of those shares.(1)
Subject to the provisions of applicable law and the provisions of our articles of association, shareholders can increase our share capital by passing an ordinary resolution. This resolution will fix the amount of the increase and the amount of new shares.
Subject to applicable law and the provisions of our articles of association, shareholders can pass an ordinary resolution to do any of the following:
| (i) | consolidate, or consolidate and then divide, all or any of our share capital into shares of a larger amount than the existing shares; | |
| (ii) | divide some or all of our shares into shares of a smaller amount than the existing shares. The resolution can provide that holders of the divided shares will have different rights and restrictions if those rights or restrictions are of a kind which we can apply to new shares; and | |
| (iii) | cancel any shares which have not been taken, or agreed to be taken, by anyone at the date of the resolution and reduce the amount of our share capital by the amount of the canceled shares. |
Subject to applicable law and the provisions of our articles, shareholders can pass a special resolution to reduce our share capital, any capital redemption reserve, any share premium account or any other undistributable reserve in any way.
We may, subject to applicable law and existing shareholder rights, and to any requirements imposed by any relevant listing authority in respect of securities admitted to listing, purchase our own shares including redeemable shares.
Liquidation rights
If we are wound up (whether the liquidation is voluntary, under supervision of the court or by the court), the liquidator can, with the authority of an extraordinary resolution passed by our shareholders and any other sanction required by legislation, divide among the shareholders (excluding any shareholder holding shares as treasury shares) the whole or any part of our assets. For this purpose, the liquidator can set the value that the liquidator considers fair upon any property and decide how such division is carried out as between shareholders or different groups of shareholders.
Transfer of shares
Unless our articles provide otherwise, a shareholder may transfer some or all of his shares in certificated form to another person. A transfer of certificated shares must be either in the usual standard form or in any other form approved by the directors. The share transfer form for certificated shares must be signed or made effective in some other way by or on behalf of the person making the transfer.
In the case of a transfer of a certificated share, where the share is not fully paid, the share transfer form must also be signed or made effective in some other way by or on behalf of the person to whom the share is being transferred.
94
Table of Contents
Unless our articles provide otherwise, a shareholder may transfer some or all of his shares in uncertificated form through CREST (the computerised settlement system to facilitate the transfer of title to shares in uncertificated form operated by CRESTCo Limited). Provisions of our articles do not apply to any uncertificated shares to the extent that those provisions are inconsistent with the holding of shares in uncertificated form or with the transfer of shares through CREST.
The person making a transfer will continue to be treated as a shareholder until the name of the person to whom the share is being transferred is put on the register for that share.
Our directors may, without giving any reasons, refuse to register the transfer of any shares which are not fully paid. Our directors may also refuse to register the transfer of any shares in the following circumstances:
Certificated shares
| (i) | A share transfer form cannot be used to transfer more than one class of shares. Each class needs a separate form; | |
| (ii) | Transfers may not be in favour of more than four joint holders; | |
| (iii) | The share transfer form must be properly stamped or certified or otherwise shown to our directors to be exempt from stamp duty and must be accompanied by the relevant share certificate and such other evidence of the right to transfer as our directors may reasonably require. |
Uncertificated shares
| (i) | Registration of a transfer of uncertificated shares can be refused in the circumstances set out in the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time; | |
| (ii) | Transfers may not be in favour of more than four joint holders. |
Title to certificated shares will be evidenced by entry in the register of our members and title to uncertificated shares will be evidenced by entry in the operator register maintained by CRESTCo (which forms part of the register of our members).
No share certificates will be issued in respect of our shares in uncertificated form. Since our shares will initially all be in uncertificated form, neither share certificates nor any temporary documents of title will initially be issued in respect of them. If any of our shares are converted to be held in certificated form, share certificates will be issued in respect of those shares in accordance with applicable legislation.
Our directors may refuse to register a transfer of any certificated shares by a person with a 0.25 per cent. or greater holding of the existing capital (calculated excluding any shares held as Treasury shares) if such a person has received a restriction notice (as defined in our articles of association) after failure to provide us with information concerning interests in these shares required to be provided under the legislation unless our directors are satisfied that they have been sold outright to an independent third party.
Manner of holding shares
Holdings through Euroclear Nederland
We expect that the Admitted Institution or, if applicable, other bank or financial institution where a person who holds interests in our shares through Euroclear Nederland maintains a relevant securities account will send such person a statement detailing the interests in our shares such person holds through Euroclear Nederland. However, whether and, if so, how they do so, will depend on the individual arrangements between such Admitted Institution or other bank or financial institution and that person.
Euroclear Nederland has indicated that each person who holds interests in our shares through it will be able to exercise rights relating to those shares such that he will (subject to the individual arrangements between that
95
Table of Contents
| • | be able to attend and speak at, all of our general meetings; | |
| • | be able to give directions as to voting at all of our general meetings; and | |
| • | be able to receive dividends via Euroclear Nederland and participate in capital events, |
in each case, so far as is possible in accordance with the Securities Giro Act, other applicable law and the Euroclear Nederland rules and regulations issued pursuant to the Securities Giro Act and further subject to compliance by all concerned with any applicable policies and procedures.
Holdings through the Corporate Nominee Service
Each person who holds our shares through the Corporate Nominee Service will be sent a statement of entitlement within 14 days of the date the Transaction is consummated detailing the number of our shares that person holds through the Corporate Nominee.
In order to allow the persons who hold our shares through the Corporate Nominee Service to exercise rights relating to those shares, we have entered into an agreement with the Corporate Nominee requiring it to ensure that, from the date the Transaction is consummated, persons holding our shares through the Corporate Nominee Service will:
| • | receive notices of, and be able to attend and speak at, all of our general meetings; | |
| • | be able to give directions as to voting at all of our general meetings; | |
| • | have made available to them and be sent, on request, copies of our annual report and accounts and all the other documents issued to shareholders by us; | |
| • | be able to receive dividends via the Corporate Nominee Service; | |
| • | be able to participate in capital events in the same manner as registered holders of the same class of our shares; and | |
| • | be treated in the same manner as registered holders of the same class of our shares in respect of all other rights attaching to those shares, |
in each case, so far as is possible in accordance with the Uncertificated Securities Regulations 2001 and other applicable law. In particular, residents in, or citizens of, jurisdictions outside the United Kingdom should be aware that they will not be able to participate in capital events as registered holders of our shares unless the Corporate Nominee is satisfied that such participation or treatment would not breach any applicable laws or regulations in those jurisdictions.
It is the responsibility of persons resident in, or citizens of jurisdiction outside the United Kingdom to inform themselves of, and to satisfy themselves as to the full observance of, the laws of the relevant jurisdiction in connection with any applicable legal requirements in respect of holding our shares through the Corporate Nominee Service, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with other necessary formalities that are required to be observed. If, due to applicable legal requirements, it is not permissible or practical to hold our shares through the Corporate Nominee Service, persons resident in, or citizen of, that jurisdiction should request that they be sent a share certificate for the Royal Dutch Shell Shares to which they are entitled.
For so long as a person holds our shares through the Corporate Nominee Service, we will ensure that the Corporate Nominee sends each such person a statement of his holding of our shares at least once a year.
Change in the manner of holding our shares
After consummation of the Transaction, holders of our shares may, subject as set out below, change the manner in which they hold such shares so that they are held through Euroclear Nederland, through the Corporate
96
Table of Contents
Holders of our shares who wish to change the manner in which they hold such shares are urged to consult their own legal, tax and financial advisers with respect to the legal, tax and cost consequences of any such change.
Repurchase of shares
Subject to applicable law and our articles of association, we may purchase our own shares if (a) in the case of an open-market purchase, authority to make the market purchase has been given by an ordinary resolution of our shareholders or; (b) in the case of an off-market purchase, authority has been given by a special resolution. However, we intend to comply with the guidance of the Association of British Insurers that authority to repurchase shares should be given by special resolution. We can only repurchase our own shares out of distributable reserves or the proceeds of a new issuance of shares made for the purposes of funding the repurchase. Moreover, in light of the possible withholding tax consequences to repurchases of Class B shares, Royal Dutch Shell expects, whenever it has decided to repurchase shares, to buy back Class A Shares in preference to Class B Shares, unless and until exemption from or other mitigation of withholding tax on buy backs of Class B Shares is agreed with the Dutch Revenue Service. See “Material Tax Consequences — Dutch Tax Considerations — Withholding tax on dividend payments.”
On February 3, 2005, it was announced that, given the strong cash and debt position of the Royal Dutch/ Shell Group at the end of 2004, the Royal Dutch and Shell Transport share buy back programme would be relaunched with a projected return of surplus cash to shareholders for the year 2005 in the range of US$3 billion to US$5 billion, subject to continued high of oil prices. We intend to adopt the Royal Dutch and Shell Transport share buy back programme on this basis and have shareholder authority in place to make market purchases of up to 5% of all issued share capital (based on full acceptance of the offer). This authority will expire at our 2006 annual general meeting.
Shareholders’ preemptive rights
Subject to applicable law and our articles of association, any equity shares issued by us for cash must first be offered to existing shareholders in proportion to their existing holdings (the shareholders pre-emption rights). Both the Companies Act and the listing rules of the UKLA allow for the disapplication of the shareholders’ pre-emption rights. The pre-emption rights may be waived by a special resolution of the shareholders, either generally or specifically, for a maximum period not exceeding five years.
Ability to pay commission on shares and to issue shares at a discount
In connection with any share issued, we can use all the powers given by applicable law to pay commission or brokerage. Subject to the provisions of the Companies Act, we can pay the commissions in cash or by allotting shares or by a combination of both.
Subject to applicable law and our articles of association, we may also issue further shares of a class already issued at a discount to the market price. The listing rules of the UKLA limit the maximum discount under which shares may be issued in an open offer to 10 percent of the middle market price of those shares at the time of announcing the terms of the open offer. Furthermore, shares may not be allotted at less than their par value.
Disputes between a shareholder or ADR holder and Royal Dutch Shell, any subsidiary, director or professional service provider
All disputes between a shareholder in its capacity as such and us or any of our subsidiaries or any of our or our subsidiaries’ directors or former directors arising out of or in connection with our articles of association or otherwise and disputes between us or our subsidiaries and any of our or our subsidiaries’ directors or former directors, including all claims made by us or any of our subsidiaries or on our behalf or on behalf of any of our
97
Table of Contents
The tribunal shall consist of three arbitrators to be appointed in accordance with the rules of the ICC. The chairman must have at least 20 years experience as a lawyer qualified to practice in a common law jurisdiction which is within the Commonwealth and each other arbitrator must have at least 20 years experience as a qualified lawyer.
If a court or other competent authority in any jurisdiction determines that the arbitration requirement described above is invalid or unenforceable in any particular dispute in that jurisdiction, that dispute may only be brought in the courts of England and Wales.
The governing law of our articles of association is the substantive law of England.
We also plan to incorporate arbitration clauses into all indemnities granted by us to our directors and into all service contracts between directors and our subsidiaries. We have incorporated an arbitration clause into the deposit agreements relating to the Class A ADRs and Class B ADRs which applies as between us and holders of the Class A ADRs and Class B ADRs (but not the depositories).
Disputes relating to our failure or alleged failure to pay all or part of a dividend which has been declared and which has fallen due for payment will not be the subject of the arbitration and exclusive jurisdiction provisions of our articles of association.
We believe that the arbitration provision contained in our articles of association provides a predictable framework in which Royal Dutch Shell can run its affairs and assess risk, which is in the interest of Royal Dutch Shell and its shareholders as a whole. We also believe that the arbitration provision can provide the benefits of swiftness and economy, when compared with litigation as a dispute resolution mechanism. As a company based in Europe, most of whose shareholders are expected to be located in Europe, we consider it appropriate that the proceedings for resolving disputes among Royal Dutch Shell, its subsidiaries, its directors, its professional service providers (to the extent they have agreed to do so), and its shareholders and ADR holders, in their capacities as such, should be settled in Europe.
History of our share capital
Our current authorised share capital consists of (i) £50,000 divided into 20,000 ordinary shares of £1 each and 30,000 sterling deferred shares of £1 each and (ii) €700,000,000 divided into 4,139,040,000 euro deferred shares of €0.07 each, 600,000 Class A Shares, 2,759,360,000 Class B Shares and 3,101,000,000 unclassified shares of €0.07 each to be classified as Class A Shares or Class B Shares upon issue at the discretion of our directors. As of March 31, 2005, our issued share capital consisted of 20,000 ordinary shares of £1 each, 30,000 sterling deferred shares of £1 each and 4,414,800,000 euro deferred shares of €0.07 each. All ordinary shares, sterling deferred shares and euro deferred shares are fully paid and not subject to calls for additional payments of any kind. As of the date of this prospectus, Shell RDS Holding B.V., a company owned equally by Royal Dutch and Shell Transport, beneficially owned 100% of our share capital.
We were incorporated with an authorised share capital of £1000, divided into 1000 ordinary shares of £1 each, one of which was issued to Instant Companies Limited.
98
Table of Contents
The following alterations to our authorised and issued share capital have taken place since our incorporation:
| (i) | On March 21, 2002, 300 ordinary shares were allotted and issued; | |
| (ii) | On February 25, 2003, the authorised share capital was increased to £20,000 by the creation of 19,000 ordinary shares of £1 each ranking pari passu for all purposes with the existing ordinary shares. The directors were authorised to allot these shares pursuant to section 80 of the Companies Act; | |
| (iii) | Subsequently on that date, 13,000 ordinary shares were allotted and issued, fully paid up in cash at par; | |
| (iv) | On October 21, 2004, the authorised share capital was increased to £50,000 and €315,000,000 by the creation of: |
| (a) | 30,000 sterling deferred shares of £1 each; and | |
| (b) | 4,500,000,000 euro deferred shares of €0.07 each. |
| The directors were authorised to allot these shares pursuant to section 80 of the Companies Act; and |
| (v) | Subsequently on that date, 4,148,800,000 euro deferred shares, 30,000 sterling deferred shares and 6,699 sterling ordinary shares were allotted and issued, fully paid up in cash at par. | |
| (vi) | On April 27, 2005 the Royal Dutch Shell directors resolved, with immediate effect, to redeem 9,760,000 Euro Deferred Shares for €0.01 in total, in accordance with the rights attaching to those shares due to there being more euro deferred shares on issue than were necessary to meet a full acceptance of the offer. | |
| (vii) | On May 12, 2005, our authorised share capital was increased to £50,000 and €700,000,000 by the creation of: |
| • | 600,000 Class A Shares of €0.07 each; | |
| • | 2,759,360,000 Class B Shares of €0.07 each; and | |
| • | 2,740,040,000 unclassified shares of €0.07 each (to be classified as Class A Shares or Class B Shares upon allotment at the discretion of our directors(1)); |
| and our directors were authorised to allot relevant securities (as defined in the Companies Act) up to an aggregate nominal amount of €193,155,200 in connection with the Scheme of Arrangement; |
| (viii) | on May 12, 2005, the 360,960,000 unissued euro deferred shares were re-classified as unclassified shares (to be classified as Class A Shares or Class B Shares upon allotment at the discretion of our directors); | |
| (ix) | on May 13, 2005, our directors resolved to allot, conditional upon the Scheme becoming effective, Class B Shares up to an aggregate nominal value of €193,155,200 to Relevant Holders (as that term is defined in the Scheme) in accordance with the terms of the Scheme; | |
| (x) | on May 13, 2005, a special resolution was passed conditional on the offer becoming unconditional (gestand wordt gedaan) in all respects: |
| (A) | re-classifying as Class A Shares, immediately upon the offer being declared unconditional (gestand wordt gedaan) in all respects, such number of issued euro deferred shares as is equal to the number of Royal Dutch Shares validly tendered in the offer acceptance period multiplied by two; | |
| (B) | re-classifying as Class A Shares, on each occasion that Royal Dutch Shares are validly tendered to the offer in the subsequent acceptance period (if any), such number of issued euro deferred shares as is equal to that number of Royal Dutch Shares so tendered multiplied by two; and |
99
Table of Contents
| (C) | re-classifying as Class A Shares, on each occasion that Royal Dutch Shares are offered to Royal Dutch Shell for exchange into Class A Shares after the later of the expiry of the offer acceptance period and the expiry of the subsequent acceptance period (if any) but at the absolute discretion of the Royal Dutch Shell directors (and subject to applicable law), such number of issued euro deferred shares as is equal to that number of Royal Dutch Shares so offered multiplied by two; and |
| (xi) | on May 13, 2005, a special resolution was passed, conditional upon the Scheme becoming effective, reclassifying our sterling ordinary shares as sterling deferred shares. |
| (1) | However, any future issue of Class B Shares will only be made after prior consultation with the Dutch Revenue Service. |
Objects
Our memorandum of association provides that our primary object is to carry on the business of a holding company.
Headquarters
We will, as required by our articles of association, have a single corporate headquarters in The Netherlands. The meaning of “headquarters” under our articles of association is established by our board of directors and can only be amended by a resolution of our board of directors in respect of which two-thirds of those Royal Dutch Shell directors who are present and voting vote in favour.
Our board of directors has resolved that “headquarters” shall mean the place of our effective management where:
| • | substantially all members of our executive committee will have their main offices and carry out their managerial activities; | |
| • | a majority of the heads of the key functions will have their main office and carry out a substantial majority of their activities; | |
| • | a corporate secretariat will be located, which will provide all secretarial services to our executive committee, to our board of directors and to the committees of our board of directors; | |
| • | in principle, all meetings of our board of directors, our executive committee and the committees of our board of directors will be held; and | |
| • | the majority of the main business units will have their effective place of management. |
A substantial presence will also be maintained in the UK where the global downstream (Oil Products and Chemicals) businesses and trading operations will continue to be based. Certain corporate functions will also continue to be based in London, including Treasury and Investor Relations. The new Royal Dutch Shell group will continue to have substantial operating activities and investments located in both The Netherlands and the UK in upstream and downstream businesses.
100
Table of Contents
DESCRIPTION OF CLASS A AMERICAN DEPOSITARY RECEIPTS
American Depositary Receipts
JPMorgan Chase Bank N.A., as depositary, will execute and deliver the Class A ADRs. Each Class A ADR is a certificate evidencing a specific number of ADSs. Each ADS will represent two shares (or a right to receive two shares) deposited with the custodian of JPMorgan Chase Bank, N.A. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary’s office at which the Class A ADRs will be administered is located at 4 New York Plaza, New York, New York 10004.
You may hold Class A ADSs either directly (by having a Class A ADR registered in your name) or indirectly through your broker or other financial institution. If you hold Class A ADSs directly, you are a Class A ADR holder. This description assumes you hold your Class A ADSs directly. If you hold the Class A ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of Class A ADR holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
As a Class A ADR holder, we will not treat you as one of our shareholders and you will not have shareholder rights. English law generally governs shareholder rights. The depositary or its nominee will be the holder of the Class A Shares underlying your Class A ADSs. As a holder of Class A ADRs, you will have Class A ADR holder rights. A deposit agreement among us, the depositary and you, as a Class A ADR holder, and the beneficial owners of Class A ADRs sets out Class A ADR holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the Class A ADRs except that the arbitration and exclusive jurisdiction provisions are governed by English law.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR which are attached hereto as Exhibit 4.1 and 4.2, respectively. See “Material Tax Consequences — Material U.S. Federal Income Tax Consequences of the Offer — Ownership and Disposition of our Ordinary Shares or ADRs” for a description of the material tax consequences to U.S. holders of holding our Class A ADRs.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of shares your Class A ADSs represent.
| • | Cash. While the Depositary may receive cash dividends and other distributions from us in U.S. dollars (in which case no conversion will be required) to the extent the depositary receives a cash dividend or other cash distribution in a currency other than U.S. dollars, the depositary will convert such dividend or other distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those Class A ADR holders to whom it is possible to do so. It will hold the foreign currency it cannot distribute for the account of the Class A ADR holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest. |
| Before making a distribution, the depositary will deduct any withholding taxes that must be paid. It will distribute only whole U.S. dollars and cents and will round down fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution. |
| • | Shares. The depositary may distribute additional Class A ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole Class A ADSs. It will use its reasonable efforts to sell shares which would require it to deliver a fractional Class A ADS and distribute |
101
Table of Contents
| the net proceeds in the same way as it does with cash. If the depositary does not distribute additional Class A ADRs, the outstanding Class A ADSs will also represent the new shares. | ||
| • | Rights to purchase additional shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to you. If the depositary decides, after consultation with us, it is not legal or feasible to make the rights available but that it is practical to sell the rights, the depositary may sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them. |
| If the depositary makes rights available to you, and you elect to exercise such rights, it will exercise the rights and purchase the shares on your behalf. The depositary will then deposit the shares and deliver Class A ADSs to you. It will only exercise rights if you pay it the exercise price and any other charges the rights require you to pay. | |
| U.S. securities laws may restrict transfers and cancellation of the Class A ADSs represented by shares purchased upon exercise of rights. For example, you may not be able to trade these Class A ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the Class A ADSs described in this section except for changes needed to put the necessary restrictions in place. |
| • | Other Distributions. The depositary will send to you anything else we distribute on deposited securities by any means it thinks is equitable and practical. If it cannot make the distribution in that way, the depositary has a choice, after consulting with us to the extent practical. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. However, the depositary is not required to distribute any securities (other than Class A ADSs) to you unless it receives satisfactory assurance from us that it is legal to make that distribution. |
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any Class A ADR holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of Class A ADRs, shares, rights or anything else to Class A ADR holders. This means that you may not receive the distributions we make on our shares or any value for them if it is deemed illegal or impractical for us to make them available to you.
Deposit and Withdrawal
How are ADSs issued?
The depositary will deliver Class A ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of Class A ADSs in the names you request and will deliver the Class A ADRs at its office to the persons you request.
How do ADS holders cancel an ADR and obtain shares?
You may surrender your Class A ADRs at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver (i) to the extent applicable, the shares, (ii) shares to an account designated by such Owner with the Euroclear Nederland or an Admitted Institution and (iii) any other deposited securities underlying the Class A ADR to you or a person you designate at the office of the custodian. Or, in the case of certificated shares at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible.
102
Table of Contents
Voting Rights
How do you vote?
In the deposit agreement, upon the written request of a registered holder of Class A ADSs, the depositary will endeavor to cause the appointment of such holder as proxy with power to vote the number of shares its Class A ADSs represent. This means that, subject to the procedures described below, if you are a registered holder of Class A ADSs, you will have a right to attend and vote directly at shareholders’ meetings. You also have a right to appoint the depositary your substitute and instruct it how to vote the number of shares your Class A ADSs represent. The depositary will notify you of shareholders’ meetings and arrange to deliver our voting materials to you if we ask it to. Those materials will describe the matters to be voted on and explain how you may vote directly or instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. In order for you to vote, the Depositary must receive your request to be a proxy prior to the date specified for each meeting.
The depositary will try, as far as practical, subject to English law and the provisions of our articles of association, to vote the number of shares or other deposited securities represented by your Class A ADSs as you instruct. The depositary will only vote or attempt to vote as you instruct.
We cannot ensure that you will receive voting materials or otherwise learn of an upcoming shareholders’ meeting in time to ensure that you can instruct the depositary to vote your shares.
The depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to vote and there may be nothing you can do if your shares are not voted as you requested.
Fees and Expenses
| Persons depositing shares | ||
| or ADR holders must pay: | For: | |
| $5.00 (or less) per 100 Class A ADSs (or portion of 100 Class A ADSs) | • Issuance of Class A ADSs, including issuances resulting from a distribution of shares or rights or other property | |
| • Cancellation of Class A ADSs for the purpose of withdrawal, including if the deposit agreement terminates | ||
| A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of Class A ADSs | • Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to Class A ADR holders | |
| Registration or transfer fees | • Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | |
| Expenses of the depositary in converting foreign currency to U.S. dollars | ||
| Expenses of the depositary | • Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) | |
| Taxes and other governmental charges payable on any Class A ADR or share underlying a Class A ADR, for example, stock transfer taxes, stamp duty or withholding taxes | ||
Payment of Taxes
The depositary may deduct the amount of any taxes owed from any payments to you. It may also sell deposited securities, by public or private sale, to pay any taxes owed. You will remain liable if the proceeds of the sale are not enough to pay the taxes. If the depositary sells deposited securities, it will, if appropriate, reduce the
103
Table of Contents
Reclassifications, Recapitalizations and Mergers
| If we: | Then: | |
|
• Change the nominal or par value of
our shares • Reclassify, split up or consolidate any of the deposited securities • Distribute securities on the shares that are not distributed to you • Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action |
The cash, shares or other securities received for
the account of the depositary will become deposited securities.
Each Class A ADS will automatically represent its equal
share of the new deposited securities. The depositary may distribute some or all of the securities it received. It may also deliver new Class A ADRs or ask you to surrender your outstanding Class A ADRs in exchange for new Class A ADRs identifying the new deposited securities. |
|
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the Class A ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of Class A ADR holders, it will not become effective for outstanding Class A ADRs until 30 days after the depositary notifies Class A ADR holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your Class A ADR, to agree to the amendment and to be bound by the Class A ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign and we have not appointed a new depositary bank within 60 days. In either case, the depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: (1) advise you that the deposit agreement is terminated, (2) collect distributions on the deposited securities (3) sell rights and other property, and (4) deliver shares and other deposited securities upon surrender of Class A ADRs. Six months or more after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the Class A ADR holders that have not surrendered their Class A ADRs. It will invest the money in direct obligations of the federal government of the United States and has no liability for interest. The depositary’s only obligations will be to account for the money and other cash. After termination our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of Class A ADRs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
| • | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith; |
104
Table of Contents
| • | are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing our obligations under the deposit agreement; | |
| • | are not liable if either of us exercises discretion permitted under the deposit agreement; | |
| • | have no obligation to become involved in a lawsuit or other proceeding related to the Class A ADRs or the deposit agreement on your behalf or on behalf of any other person; | |
| • | may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party; | |
| • | are not liable for the Depositary’s or any of its agents’ reliance upon the authority of any information in, or for the Depositary’s or any of its agents’ compliance with directions from, any DTC participants in connection with the Direct Registration System. |
By holding an ADR or an interest therein you will be agreeing that the depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf to the extent such information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators.
Neither we nor the depositary nor any of our or their respective agents shall be liable to registered or other holders of Class A ADSs or any other third party or parties for any indirect, special, punitive or consequential damages.
In the deposit agreement, we agree to indemnify the depositary for acting as depositary, except for losses caused by the depositary’s own negligence or bad faith, and the depositary agrees to indemnify us for losses resulting from its negligence or bad faith and in connection with pre-released Class A ADRs.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of a Class A ADR, make a distribution on a Class A ADR, or permit withdrawal of shares or other property, the depositary may require:
| • | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; | |
| • | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and | |
| • | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
The depositary may refuse to deliver Class A ADRs or register transfers of Class A ADRs generally when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
Your Right to Receive the Shares Underlying your Class A ADRs
You have the right to cancel your Class A ADRs and withdraw the underlying shares or have shares credited to an account with Euroclear Nederland or an Admitted Institution at any time except:
| • | When temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares. | |
| • | When you or other ADR holders seeking to withdraw shares owe money to pay fees, taxes and similar charges. | |
| • | When it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to Class A ADRs or to the withdrawal of shares or other deposited securities. |
105
Table of Contents
This right of withdrawal may not be limited by any other provision of the deposit agreement.