InformatIon on the redemptIon of shares In sWeCo aB (puBl) 2006
Contents
TIME SCHEDULE ........................................................................................................................................................ 1 BACKGROUND AND REASONS ................................................................................................................................ 2 HOW THE REDEMPTION PROCEDURE FUNCTIONS .............................................................................................. 3 DETAILED DESCRIPTION OF THE REDEMPTION PROCEDURE ............................................................................ 4 TAX ISSUES IN SWEDEN ........................................................................................................................................... 5 QUESTIONS AND ANSWERS .................................................................................................................................... 7
REDEMPTION PROCEDURE IN BRIEF – Each SWECO-share (class A and B) is divided up (referred to as share split) into one share (class A or B) and one redemption share. The redemption share is redeemed automatically for a proceed of SEK 10 in cash – The redemption proceeds automatically, meaning that no action is required on the part of shareholders – The record date for the share split is May 8, 2006 and payment of proceeds will take place on or about June 2, 2006
TIME SCHEDULE
The SWECO share is listed ex rights to the redemption shares Last day for trading in the SWECO share with rights to receive the redemption sharer
First day of trading in the redemption shares
Redemption payment is paid to holders of redemption shares
Record date for SWECO share split
Final day for trading in the redemption shares
May 3
May 4
May 8
May 9 Trading in redemption shares
May 24
June 2 (approx.)
The terms “SWECO” or the “Company” refer to SWECO AB (publ) or the Group in which SWECO AB (publ) is the Parent Company, depending on the context. This document is not intended for persons whose participation in the redemption process requires additional information or the implementation of registration measures or other measures beyond those required by Swedish law. The document may not be distributed to countries requiring additional information or measures pursuant to the preceding sentence or to countries in which distribution would conflict with applicable regulations. It is the duty of each individual to observe the restrictions ensuing from foreign law. Disputes arising form the redemption process pursuant to this document shall be settled exclusively by Swedish law in a Swedish court.
1
BaCKGround and reasons
SWECO’s financial position is strong as a result of favourable earnings and cash flow in recent years. The sale of the shareholding in AB Ångpanneföreningen as of 25 January 2006 further consolidated the Company’s financial position. In view of this, the Board believes that SWECO’s financial position exceeds the level appropriate for the Company’s operations and capital structure and should thus be given a more effective structure. Consequently, the Board proposed a redemption procedure that was approved at the Annual General Meeting of SWECO on April 24, 2006. As a result of redemption, a maximum of SEK 170.8 million will be transferred to shareholders in SWECO. The share redemption will be conducted as follows: Each SWECO share (class A and B) will be split into one share (class A or B share) and one redemption share. Subsequently, the redemption share will automatically be redeemed for a proceed of SEK 10 per share in cash. However, payment shall not be made for redemption shares held by the Company. Based on the circumstances prevailing on April 25, 2006, when SWECO held a total of 192,600 repurchased shares, this entails a cash payment to SWECO’s shareholders of SEK 168.9 million. The redemption amount to shareholders largely corresponds to the sale proceeds for the shares in AB Ångpanneföreningen. Along with a dividend of SEK 5.50 per share, which is paid after the Annual General Meeting, this means that shareholders in SWECO receive a total of SEK 261.8 million. The redemption shares will be listed for trading on the Stockholm Stock Exchange during the period May 9–24, 2006, after which redemption shares will be automatically redeemed. Payment of the redemption proceed is expected to take place on or about June 2, 2006.
Stockholm, April 25, 2006 SWECO AB (publ) Board of Directors
2
hoW the redemptIon proCedure funCtIons
– Each SWECO share (class A and B) is divided up (referred to as a share split) into one share (class A and B) and one redemption share – The redemption share is subsequently automatically redeemed for a proceed of SEK 10 per share in cash
Before
after
100 shares in SWECO
100 shares in SWECO
100 shares in SWECO
100 redemption shares
SEK 1,000 in cash
Each share is divided up into one SWECO share and one redemption share
Each redemption share is subsequently redeemed automatically for SEK 10 in cash
EXAMPLE On the record date for the redemption procedure (share split), May 8, 2006, you are registered as the holder of 100 SWECO shares. The current share price in this example is assumed to be SEK 200. As of May , 2006 (the last day for trading with rights to redemption shares), your shares are worth: 100 SWECO shares x SEK 200 = SEK 20,000 When the redemption process commences, each SWECO share will be divided up into one share (class A and B) and one redemption share. SWECO will automatically redeem the redemption share for a proceed of SEK 10 per share in cash, and thus the share price after the split is assumed to be SEK 190, that is, the difference between the share price before the split (SEK 200) and the assumed value of the redemption share (SEK 10). Your shareholding looks as follows: 100 SWECO shares x SEK 190 = 100 redemption shares x SEK 10 = Total SEK 19,000 SEK 1,000 SEK 20,000
SWECO will then redeem your redemption shares for a proceed of SEK 10 per share in cash. This will be done without shareholders taking any action. After the completion of the redemption process, you will have: • 100 SWECO shares x SEK 190 = SEK 19,000 • Cash for 100 redemption shares x 10 SEK = SEK 1,000 Thus, you have as many SWECO shares remaining as you had before the redemption procedure and you have received SEK 10 in cash for each share you held on the redemption date.
This example does not take into account any tax effects arising in connection with redemption, refer also under “Tax Issues in Sweden” and “Questions and Answers.” If you are not resident or domiciled in Sweden for tax purposes it could prove beneficial – from the tax perspective– to sell your redemption shares instead of allowing them to be redeemed. Consequently, the redemption shares will be listed on the Stockholm Stock Exchange during the period May 9–24, 2006, providing you as a shareholder the opportunity to sell your shares.
detaIled desCrIptIon of the redemptIon proCedure
SHARE SPLIT AND REDEMPTION Those who on the record day for the share split (May 8, 2006) are registered as shareholders in SWECO will receive one (1) redemption share of class A or B for each class A share and class B share, respectively, held. Each redemption share of class A or B will be automatically redeemed for SEK 10 per share in cash. THE LAST DAY FOR TRADING WITH RIGHTS TO RECEIPT OF REDEMPTION SHARES The last day for trading in the SWECO share with rights to receipt of redemption shares is May , 2006. As of May 4, 2006, the SWECO share will be listed ex rights to redemption shares. RECORD DATE The record date at VPC for the SWECO share split is May 8, 2006. Subsequently, redemption shares will be booked out of the shareholder’s VP account (securities account). The shareholder will then receive a securities note showing the number of redemption shares received. TRADING IN REDEMPTION SHARES Trading in redemption shares on the Stockholm Stock Exchange will take place during the period beginning May 9 through May 24, 2006. All banks and other securities institutions with the requisite approval are available to assist in the purchase and sale of redemption shares. ACCOUNTING FOR REDEMPTION PROCEEDS In connection with the payment of redemption proceeds, the redemption shares registered in the shareholder’s securities account will be booked out. A securities note in this respect will not be sent. The redemption payment of SEK 10 in cash for each redemption share is expected to be paid on or about June 2, 2006. Payment will be made via VPC to the yield account linked to the securities account. A securities note will be sent as acknowledgement of payment. SHARES REGISTERED WITH A TRUSTEE Shareholders in SWECO whose holdings are registered in the name of a trustee, such as a bank or other trustee, also receive this information brochure. The shareholder will receive redemption shares in line with the information from each trustee. FOREIGN SHAREHOLDERS Shareholders, that are not resident or domiciled in Sweden for tax purposes, who participate in the redemption procedure and whose shares are redeemed are liable to pay Swedish withholding tax, refer also to “Tax Issues in Sweden”. Consequently, withholding tax will be withheld from such shareholders in connection with the payment of the redemption proceeds. Shareholders, that are not resident or domiciled in Sweden for tax purposes should note that part of the redemption proceeds may be retained to cover withholding tax. CONDITIONS FOR THE COMPLETION OF THE REDEMPTION PROCESS The decision of the Annual General Meeting covers decisions concerning changes in the Articles of Association, share split, reduction in share capital and bonus issue. The completion of the redemption procedure requires that the Annual General Meeting’s decisions are registered with the Swedish Companies Registation Office and implemented. QUESTIONS Questions regarding the redemption procedure will be handled by telephone: +46 (0)8-695 60 00, by the following contact persons: • Bo Jansson, CFO • Jenny Klefström, Legal Counsel • Lars Åkerblom, Controller. Refer also to “Questions and Answers” on page 7 of this brochure. SWECO AB (publ) Gjörwellsgatan 22, Box 4044 100 26 Stockholm Telephone +46 (0)8 695 60 00 Telefax +46 (0)8 695 60 10 E-mail: info@sweco.se www.sweco.se
4
taX Issues In sWeden
The following is a summary of certain Swedish tax provisions that apply to private individuals and limited liability companies, fully resident in Sweden for tax purposes (unless otherwise stated) and holding shares in SWECO. The summary, which is based on existing tax legislation and precedents, is intended to provide general information only. The summary does not address the special rules regarding: tax-exempt capital gains on shares that are held for business purposes1), shares that are held as current assets in business operations or shares that are held by partnerships. Furthermore, special tax provisions apply to certain categories of corporate shareholders. The tax consequences for each shareholder depend to some extent on the shareholder’s particular circumstances. Each shareholder should therefore consult a tax advisor as regards the special tax consequences resulting from the redemption procedure. SWECO will apply to the Swedish Tax Agency for recommendations regarding the acquisition value for the SWECO shares and the redemption shares, in view of that each SWECO share will be split into one SWECO share and one redemption share. The recommendations of the Swedish Tax Agency will be published on the Swedish Tax Agency’s home page (www.skatteverket.se) and on SWECO’s home page (www.sweco.se).
RECEIPT OF REDEMPTION SHARES (SPLIT) The receipt of redemption shares (in view of that each SWECO share of class A and class B, respectively, will be split into one SWECO share and one redemption share of class A and class B, respectively) is not a taxable event for the shareholder. SALE OF REDEMPTION SHARES AND SHARE REDEMPTION A sale of redemption shares and the share redemption give rise to capital gains taxation. A capital gain or a capital loss will be computed as the difference between the proceeds received for the share disposed of/redeemed and the acquisition value. Below is described, among other things, how the acquisition value is computed on different taxable events. SHARE REDEMPTION When a capital gain or a capital loss is computed in connection with a share redemption the redemption amount, SEK 10, shall be recorded as income. A deduction is granted for
the acquisition value of the redemption share. The acquisition value for redemption shares received on the basis of shareholding in SWECO is computed in the following way. The basis is the individual shareholder’s average acquisition value for the shares of class A and class B in SWECO, respectively. The acquisition value is then allocated between the SWECO shares of class A and class B, respectively, and the redemption shares of class A and class B, respectively, in proportion to the respective market values of the shares and the redemption shares in connection with the split of each share into one SWECO share and one redemption share. For those who have acquired redemption shares in the market, the actual consideration paid for the redemption shares constitutes the acquisition value. When the acquisition value for the redemption shares is computed upon a share redemption the so-called average method (Sw. genomsnittsmetoden) shall be applied. This method implies that the average acquisition value for all redemption shares of the same class and type shall be used. In this connection it should be noted that on application of
EXAMPLE allocation of the acquisition value
Please note that the amounts in this example are assumed, (and that the example is applicable also to holders of shares of class A in SWECO). Assume that the average acquisition value for one share of class B in SWECO is SEK 150 that the shares of class B in SWECO are listed at SEK 200 before the split, and that the SWECO shares of class B after the split are listed at SEK 190. 5 per cent (10/200) of the average acquisition value for the shares of class B in SWECO is therewith transferred to the redemption shares. This means, in this example, that the acquisition value for each redemption share of class B will be SEK 7.50 (= 5% x SEK 150). The acquisition value for each SWECO share of class B, after the separation of redemption shares, will thus be SEK 142.50 (= SEK 150 – SEK 7.50). The taxable capital gain upon the share redemption will then be SEK 2.50 (= 10 – 7.50).
1)
Listed shares are deemed to be held for business purposes if, among other things, the shares are held as capital assets by the holder and the holding either represents at least 10 per cent of the votes or is connected to the owning company’s business (or to the business of an affiliated company).
5
the average method, redemption shares of class A and class B are not likely to constitute redemption shares of the same class and type. The so-called standard method (Sw. schablonmetoden) for determining the acquisition value may be applied. This means that the acquisition value may be determined as 20 per cent of the redemption amount after the deduction of any costs, in connection with the share redemption. SALE OF REDEMPTION SHARES (PRIOR TO SHARE REDEMPTION) When a capital gain or a capital loss is computed the proceeds received for the redemption shares disposed shall be recorded as income. A deduction is granted for the acquisition value of the redemption shares (after the transfer of part of the acquisition value to the redemption shares, see above in the section “Share redemption”). The acquisition values are computed in accordance with the average method. Alternatively, when computing the acquisition value of the redemption shares the so-called standard method may be applied (see above). TAX RATES ETC. For individuals and estates, capital gains will be taxed in the capital income category. The tax rate is 0 per cent. Capital losses are deductible in the capital income category. Capital losses on listed shares (for example redemption shares) may be fully deducted the same year from taxable capital gains on shares and other securities that are taxed as shares.1) A capital loss not deducted in accordance with the abovementioned set-off possibility is deductible in the capital income category at 70 per cent of the loss. Should a net loss arise in the capital income category in a given year, a reduction is granted from the tax on income from employment and business operations, as well as property tax. The tax reduction is granted at 0 per cent of the net loss that does not exceed SEK 100,000 and at 21 per cent of the net loss that exceeds SEK 100,000. The net loss cannot be carried forward to future income years. For limited liability companies and other legal entities except for estates, capital gains will be taxed as income from business activities. The tax rate is 28 per cent. Capital losses on shares (for example redemption shares) may be set off only against capital gains upon disposal of shares and other securities that are taxed as shares. If a capital loss cannot be deducted by the company that has suffered the loss, it may be deducted the same year from another legal entity’s capital gains on shares and other securities that are taxed as shares, provided that these companies are entitled to tax consolidation (through group contributions). A net capital loss that cannot be utilised during the year of the loss is treated as a new loss the following year etc.
FOREIGN SHAREHOLDERS For shareholders that are not resident or domiciled in Sweden for tax purposes, Swedish withholding tax will, upon share redemption, be payable on the redemption amount. The liability to withholding tax occurs when the redemption amount is paid. No withholding tax is thus payable upon receipt of redemption shares and neither upon a sale of redemption shares (prior to the time of share redemption). For shareholders that are resident or domiciled outside Sweden for tax purposes, the following applies with respect to taxation in Sweden. A reduction of the share capital by share redemption is, with respect to withholding tax, regarded as a dividend distribution. This means that Swedish withholding tax at a rate of 0 per cent is payable on the redemption amount, SEK 10. The withholding tax rate is generally reduced in accordance with tax treaties for the avoidance of double taxation. Withholding tax deductions are normally carried out by VPC or, for nominee-registered shares, by the nominee. A liability to withholding tax occurs in connection with the payment of the redemption amount. Please note that withholding tax will thus be payable only if the foreign shareholder lets the redemption shares be redeemed and that no withholding tax is payable upon a sale of redemption shares (prior to the time of share redemption). Foreign shareholders are entitled to a refund of withholding tax to the extent the tax relates to the shareholder’s acquisition value for the shares. SWECO will apply to the Swedish Tax Agency for an answer to the question how foreign shareholders’ acquisition value for the shares shall be computed in this connection. The answer of the Swedish Tax Agency will be published on SWECO’s homepage or in another way that SWECO deems appropriate. The excess of withholding tax may be refunded upon application to the Swedish Tax Agency, provided that the application is made to the Swedish Tax Agency at the end of the fifth calendar year after the time of share redemption at the latest. Shareholders that are not resident in Sweden for tax purposes will normally not be liable to taxation in Sweden upon a sale of redemption shares. However, in accordance with a special provision, individuals who reside outside Sweden for tax purposes may be liable to capital gains taxation in Sweden upon a sale of Swedish securities (for example Swedish redemption shares), if they have been resident in Sweden or have lived permanently in Sweden at any time during the year of the sale or the ten calendar years preceding the year of the sale. The Swedish right to tax may in this situation be limited to a shorter period than ten years under tax treaties for the avoidance of double taxation.
1)
These new extended set-off rules came into force on 1 January 2006. In the bill 2005/06:125 is, however, proposed that the rules should be changed again. The proposed changes would mean that capital losses on listed shares, as a general rule, are deductible at 70 per cent of the loss, but fully deductible from taxable capital gains on shares and listed securities that are taxed as shares (however not investment funds containing only Swedish receivables). The new rules are proposed to come into force on 1 July 2006.
6
QuestIons and ansWers
Why is sWeCo redeeming shares? SWECO currently has a financial position that exceeds what is deemed necessary to enable the Group to implement its strategy and attain its financial targets. The redemption of shares is a favorable way for SWECO to distribute the surplus to shareholders in a manner that is beneficial for tax purposes. What does automatic share redemption entail? Automatic redemption of shares means that newly created shares – referred to as redemption shares – are redeemed from shareholders for a predetermined cash payment, without the shareholders having to do anything. as a shareholder, do I need to do anything? As a shareholder, you do not need to be active. SWECO will automatically redeem your redemption shares and you will receive SEK 10 per share in cash per redemption share. If you are not resident or domiciled in Sweden for tax purposes, it may prove beneficial from the tax perspective to sell the redemption shares on the Stockholm Stock Exchange. Trading in redemption shares on the Stockholm Stock Exchange will take place from May 9 through May 24, 2006. All banks and other securities institutions with the requisite approval are available to assist in the purchase and sale of redemption shares. how and when will the sWeCo share price be affected? It is impossible to forecast exactly how the share price will be affected by the split into SWECO shares and redemption shares. Theoretically, the price of the SWECO share should essentially decline by the redemption amount paid for the redemption share, that is, SEK 10. This change in share price occurs two days prior to the record date for the split of the SWECO share. how many shares will I receive? You will have the same number of shares in SWECO both before and after the completion of the redemption procedure (assuming that you do not buy or sell any SWECO shares during the period). The redemption shares will be automatically redeemed. Why is the redemption procedure obligatory? It is less costly and simpler for SWECO to conduct a redemption procedure on a mandatory rather than voluntary basis. Also, the procedure ensures that all shareholders are treated equally. What is the record date for the receipt of redemption shares? The record day is May 8, 2006. Those who are registered shareholders on that date will receive redemption shares. When will I receive payment? Redemption shares will be automatically redeemed on or about May 0, 2006, which means that the proceeds will be available on or about June 2, 2006. as a shareholder, what choices do I have? You may observe the redemption procedure without doing anything. The redemption shares you receive will automatically be redeemed for a proceed of SEK 10 per share in cash. Alternatively, you may sell your redemption shares should you prefer to do so before the redemption procedure is completed. Why will it be possible to trade in redemption shares? Offering trading in redemption shares means that shareholders that are not resident or domiciled in Sweden for tax purposes – by selling their redemption shares on the market – may attain a more beneficial tax situation compared with participating in the redemption procedure. What will be the tax implications of the redemption procedure? The tax implications for you as a shareholder may depend on your specific situation. In cases in which you feel that you need to know more about the specific tax implications in your case, you should permit a tax advisor to assess the potential tax implications and how you should handle them. Swedish shareholders When the SWECO share is split into a SWECO share and a redemption share, part of the original acquisition value of the share will be distributed between the SWECO share and the redemption share. The redemption share is deemed to have been sold in conjunction with its redemption. In cases in which a capital gain arises, tax is paid on the capital gain, that is, that portion of the redemption amount (SEK 10 per share) that exceeds the acquisition value for the redemption share. Foreign shareholders Normally, shareholders that are not resident or domiciled in Sweden for tax purposes must pay withholding tax in Sweden at a rate of 0 percent of the proceeds paid. However, on the basis of treaties for the avoidance of double taxation, the tax rate is generally reduced. Shareholders that are not resident or domiciled in Sweden for tax purposes may receive a repayment of withholding tax to the extent the tax is charged on the shareholder’s acquisition cost for the shares, following application to the Swedish Tax Agency. Shareholders that are not resident or domiciled in Sweden for tax purposes (with the exception of certain individuals who have relocated from Sweden) who sell redemption shares are normally not taxed in Sweden. Consequently, it may prove more effective from the tax perspective to sell redemption shares on the Stockholm Stock Exchange. how large is the withholding tax? The size of the withholding tax for shareholders that are not resident or domiciled in Sweden for tax purposes varies depending on the country in which the shareholder is resident. For more information on withholding tax, refer to the Swedish Tax Agency, www.skatteverket.se.
7