ANNUAL REPORT 2017
EXPLORE OUR PERSPECTIVES

NOTE 7. EQUITY

The changes in equity are as follows:

Legal reserves
(EUR thousand)Common sharesCapital in excess of par valueTreasury sharesAccumulated net earningsNet earnings current yearTranslation reserveOther legal reservesTotal equity
Balance as of January 1, 20162,552221,868(84,000)220,700157,277190,7631,228,6891,937,849
Appropriation of net earnings157,277(157,277)
Components of comprehensive income
Net earnings135,471135,471
Other comprehensive income38,72538,725
Total comprehensive income (loss)135,47138,725174,196
Compensation expense share-based payments8,3878,387
Exercise stock options out of treasury shares(2,591)27,836(10,536)14,709
Vesting restricted shares out of treasury shares(1,827)1,827
Purchase of common shares(97,140)(97,140)
Dividend paid to common shareholders(42,673)(42,673)
Increased retained earnings subsidiaries(51,323)51,323
Fair value accounting investments2,015(2,015)
Capitalized development expenses subsidiaries(13,448)13,448
Other movements in investments in associates:
Dilution2,8142,814
Balance as of December 31, 20162,552225,837(151,477)264,826135,471229,4881,291,4451,998,142
Appropriation of net earnings135,471(135,471)
Components of comprehensive income
Net earnings452,402452,402
Other comprehensive income-(175,734)(175,734)
Total comprehensive income (loss)452,402(175,734)276,668
Compensation expense share-based payments7,8017,801
Exercise stock options out of treasury shares(10,612)23,90413,292
Vesting restricted shares out of treasury shares(4,501)4,501
Purchase of common shares(243,527)(243,527)
Cancellation of common shares out of treasury shares(60)61,945(61,885)
Dividend paid to common shareholders(41,470)(41,470)
Increased retained earnings subsidiaries121,741(121,741)
Fair value accounting investments404,092(404,092)
Capitalized development expenses subsidiaries(12,996)12,996
Other movements in investments in associates:
Dilution606606
Balance as of December 31, 20172,492218,525(304,654)810,385452,40253,754778,6082,011,512

COMMON SHARES, PREFERRED AND FINANCING PREFERRED SHARES

The authorized capital of the Company amounts to 110,000,000 common shares of €0.04 par value, 118,000 preferred shares of €40 par value and 8,000 financing preferred shares of €40 par value.

During the Annual General Meeting of Shareholders of May 22, 2017, the Board got approval to cancel 1.5 million treasury shares. This became effective as per August 1, 2017.

As at December 31, 2017, 62,297,394 ordinary shares with a nominal value of €0.04 each were issued and fully paid up, of which 6,157,241 ordinary shares are held by us in treasury. All shares have one vote per €0.04 par value. Treasury shares held by the Company cannot be voted on.

As at December 31, 2017 no preferred shares are issued.

TREASURY SHARES

With respect to treasury shares, reference is made to Note 11 to the Consolidated financial statements.

OTHER LEGAL RESERVES

Legal reserves include reserves regarding participating interests, capitalized development expenses and the cumulative foreign currency translation effect on translation of foreign operations, and is included in the accumulated other comprehensive income (loss).

The legal reserve for participating interests regarding retained earnings, which amounts to €679,686 (2016: €1,205,519), pertains to participating interests that are accounted for according to the equity accounting method. The reserve represents the difference between the participating interest' retained profit and direct changes in equity, as determined on the basis of the Company's accounting policies, and the share thereof that the Company may distribute. As to the latter share, this takes into account any profits that may not be distributable by participating interests that are Dutch limited companies based on the distribution tests to be performed by the management of those companies. The legal reserve is determined on an individual basis.

In accordance with applicable legal provisions, a legal reserve for the carrying amount of €98,922 (2016: €85,926) has been recognized for capitalized development and start-up costs.

Changes in legal reserves in 2016 and 2017 were as follows:

Reserve for participating interests, regarding retained earningsReserve for participating interests, regarding capitalized development expensesOther legal reserves
Balance as of January 1, 20161,156,21172,4781,228,689
Retained earnings subsidiaries and investments51,32351,323
Fair value accounting investments(2,015)(2,015)
Development expenditures13,44813,448
Balance as of December 31, 20161,205,51985,9261,291,445
Retained earnings subsidiaries and investments(121,741)(121,741)
Fair value accounting investments(404,092)(404,092)
Development expenditures12,99612,996
Balance as of December 31, 2017679,68698,922778,608

For more detailed information, reference is made to Note 11 to the Consolidated financial statements.

EMPLOYEE STOCK PLAN, OPTION PLAN AND EMPLOYEE RESTRICTED SHARES PLAN

The Company has adopted various stock option plans and restricted share plans and has entered into related agreements with various employees. For detailed information, reference is made to Note 12 to the Consolidated financial statements.