7817 Annual Report 2009.qxd - Shire

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34 Shire plc Annual Report and Accounts 2009Directors’ reportThe Directors present their report on the affairs of the Group together with the audited consolidated financial statements for the year endedDecember 31, 2009.Principal activityShire plc (the ‘Company’) and its subsidiaries (collectively referred to as the ‘Group’ or ‘Shire’) is a leading specialty biopharmaceutical company thatfocuses on meeting the needs of the specialist physician.Shire focuses its business on attention deficit hyperactivity disorder, human genetic therapies and gastrointestinal therapeutic areas.The subsidiaries and equity-method investees principally affecting the profits and/or net assets of Shire in the year are listed in Note 34 to theconsolidated financial statements, including their country of incorporation.Business reviewShire is required to set out in this report a fair review of the business of the Group during the financial year to December 31, 2009, the position ofthe Group at the end of that financial year, and a description of the principal risks and uncertainties facing the Group. The information that fulfils therequirements of the Business Review can be found in the Chairman’s review on pages 2 and 3, the Chief Executive Officer’s review on pages 4 to 7,the Financial review on pages 8 to 31 and the corporate governance statement on pages 39 to 44 which are incorporated in this report by reference.The Financial review and Note 22 to the consolidated financial statements also provide a description of the principal risks and uncertainties facing theGroup as well as risk management objectives and policies.There were no significant events subsequent to the balance sheet date.There are no material differences between market and balance sheet values of land, the accounting policy of which is set out in Note 2 to theconsolidated financial statements.Results and dividendsThe income from continuing operations before income taxes, and equity in (losses)/earnings of equity-method investees for the year to December31, 2009 was $643.0 million (2008: $265.6 million). The net assets of Shire at December 31, 2009 were $1,912.5 million (December 31, 2008:$1,327.5 million).In respect of the six months to December 31, 2009 the Board resolved to pay a second interim dividend of 9.250 US cents (2008: 7.761 US cents)per Ordinary Share. Together with the first interim payment of 2.147 US cents (2008: 2.147 US cents) per Ordinary Share, this represents totaldividends for 2009 of 11.397 US cents (2008: 9.908 US cents) per Ordinary Share.ExcellerateHRO (Guernsey) Limited, trustee of the Shire Employee Benefit Trust (the ‘Trust’), has waived its entitlement to any dividends, whichbecome due and payable in respect of shares or other securities, which are registered in the name of the trustee or its nominee(s), from time to time,except the right to receive 0.0001 pence per share.Liquidity, cash flow and going concernThe Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’sreview, Chief Executive Officer’s review and Financial review on pages 2 to 31. The financial position of the Group, its cash flows, liquidity position andborrowing facilities are described in the Liquidity and capital resources section of the Financial review. The Financial review also includes information inrespect of the Group’s objectives, policies and processes for managing capital; its financial risk management objectives; details of its hedging activity;and its exposures to credit risk and liquidity risk. Details of the Group’s financial instruments are disclosed in Note 22 to the consolidated financialstatements.Shire’s balance sheet includes $498.9 million of cash and cash equivalents at December 31, 2009. Shire has no debt maturing in the next two yearsand substantially all of Shire’s debt relates to its $1,100 million 2.75% convertible bond which matures in 2014, although these bonds include a putoption which could require repayment of the bonds in 2012. In addition, Shire has a committed facility until 2012 of $1,200 million, which is currentlyundrawn. The current financial situation affecting the banking system and financial markets, together with the current uncertainty in global economicconditions, has resulted in tighter credit markets and a lower level of liquidity in many financial markets. As a result, the Group may not be able toaccess new equity or debt finance at the same level or cost as it has done previously.The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.Corporate governanceThe Directors are committed to business integrity and professionalism and as an essential part of this commitment the Board supports high standardsof corporate governance. Details relating to corporate governance and Shire’s compliance with the Combined Code on Corporate Governance publishedby the UK Financial Reporting Council in June 2008 for the 2009 financial year are given on pages 39 to 44 and in the remuneration policy contained inthe Directors’ remuneration report which is detailed on pages 48 to 61. The Directors’ remuneration report contains details of Directors’ service contracts,whilst the Corporate governance statement includes further details on the appointment of Directors and the responsibilities of the Board.Share capitalAt December 31, 2009 the Company’s issued share capital comprised 561,477,011 Ordinary Shares and 2 Subscriber Ordinary Shares. Further detailsof the authorized and called up share capital of the Company as at December 31, 2009 and the changes during the year are set out in Note 25 to theconsolidated financial statements.
Shire plc Annual Report and Accounts 200935Powers in relation to the Company issuing or buying back its own sharesThe Directors were granted authority at the 2009 Annual General Meeting (‘AGM’) to: (i) allot relevant securities up to a nominal amount of £9,337,043;and (ii) allot equity securities up to an aggregate nominal amount equal to £18,674,086 (after deducting from such limit any shares or rights allottedor granted under (i)), in connection with an offer by way of a rights issue. That authority will apply until the conclusion of the 2010 AGM.The Company was given authority at the 2009 AGM to make market purchases of up to 56,022,258 of its own Ordinary Shares. That authority willapply until the conclusion of the 2010 AGM.Details of the new authorities being requested are contained in the Notice of the 2010 AGM, which accompanies this Annual Report and is alsoavailable on Shire’s website at www.shire.com.Rights and obligations attaching to sharesSubject to applicable statutes and subject to any rights attached to existing shares, shares may be issued with such rights and restrictions as theCompany may by special resolution decide or, if no such resolution has been passed or so far as the resolution does not make specific provision,as the Board may decide. Subject to the Company’s Articles of Association (the ‘Articles’), the Companies (Jersey) Law 1991, as amended (the‘Companies Act’) and other shareholders’ rights, unissued shares are at the disposal of the Board.VotingEvery member and every duly appointed proxy present at a general meeting or class meeting has, upon a show of hands, one vote and every memberpresent in person or by proxy has, upon a poll, one vote for every share held by him. In the case of joint holders of a share the vote of the senior whotenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniorityshall be determined by the order in which the names stand in the register of members in respect of the joint holding. It is the Company’s practice tohold a poll on every resolution at annual and extraordinary general meetings.The Trust holds 3.2% of the issued share capital as at December 31, 2009 on trust for the benefit of participants of the Company’s executive shareplans. The voting rights in relation to these shares are exercised by the trustee. The Trustee may vote or abstain from voting in any way it thinks fit andin doing so may take into account both financial and non financial interests of the beneficiaries of the Trust or their dependants. Historically the Trusthas not exercised this right.Restriction on votingNo member shall, unless the Board otherwise decides, be entitled to attend or vote at any general or class meeting in respect of any shares heldby him if any call or other sum payable by him remains unpaid. Also, a member may not be entitled to attend or vote if served with a restriction notice(as defined in the Articles).The Company is not aware of any agreements between holders of securities that may result in restrictions on voting rights.The holders of the 2 Subscriber Ordinary Shares have no right to receive notice of or attend or vote at any general meeting of the Company, unlessa resolution is proposed to wind up the Company or to vary the rights attaching to those Subscriber Ordinary Shares.The Company maintains an American Depositary Receipt (‘ADR’) program in the US. Each American Depositary Share (‘ADS’) represents three OrdinaryShares. An ADS is evidenced by an ADR issued by JP Morgan Chase Bank, N.A. as depositary, and is listed on the NASDAQ Global Select Market.Each ADS holder is entitled to the financial rights attaching to such shares although the ADR depositary is the registered holder of the shares.Dividends and other distributionsSubject to the provisions of the Companies Act, the Company may by ordinary resolution from time to time, declare dividends not exceeding theamount recommended by the Board. Subject to the Companies Act, the Board may pay interim dividends, and also any fixed rate dividend, wheneverthe financial position of the Company, in the opinion of the Board, justifies its payment. If the Board acts in good faith, it is not liable to the holdersof shares with preferred or pari passu rights for loss arising from the payment of an interim or fixed dividend on other shares.The Board may withhold payment of all or any part of any dividends or other monies payable in respect of the shares from a person with a 0.25%interest (as defined in the Articles) if such person has been served with a restriction notice (as defined in the Articles) after failure to provide theCompany with information concerning interests in those shares required to be provided under the Articles.Shire has put in place income access share arrangements which enable shareholders to elect to receive their dividends from a Shire group companyresident for tax purposes in the UK. A shareholder who holds 25,000 or fewer shares at the first dividend record date after he first becomes ashareholder will be deemed to have made an IAS Election (as defined in the Articles) such that he will receive his dividends under these arrangements,unless he notifies the Company in writing to the contrary. Pursuant to the Articles, where any dividend is paid on the income access share to theIAS Trustee (as defined in the Articles) such amount is paid by the IAS Trustee to shareholders who have made or are deemed to have made anIAS Election. The dividend which would otherwise be payable by Shire to such shareholders will be reduced by an amount equal to the amount paidto such shareholders by the IAS Trustee. If the dividend paid on the income access share and on-paid by the IAS Trustee to shareholders is less thanthe total amount of the dividend announced or declared by Shire on the its Ordinary Shares, Shire will be obliged to pay a dividend on the its OrdinaryShares equivalent to the amount of the shortfall. The income access share arrangements may be suspended or terminated at any time and for anyreason by the Company, without financial recompense.Holders of the 2 Subscriber Ordinary Shares are not entitled to receive dividends or distributions in respect of such shares. On a winding up, theholders of the 2 Subscriber Ordinary Shares are entitled only to the nominal value of each Subscriber Ordinary Share after the holders of all otherclasses of share have received the nominal value of those shares.
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