Iberdrola, S.A. Scrip Dividend Scheme Information Booklet July June 2015

Transcription

1 Iberdrola, S.A. Scrip Dividend Scheme Information Booklet July 2015 June 2015

2 Dear shareholder, The 2015 Annual General Shareholders Meeting of Iberdrola, S.A. ( Iberdrola ) approved the continued offer of a scrip dividend scheme to be implemented through two share capital increases. The Board of Directors of Iberdrola has approved on 28 April 2015 to carry out the implementation of the first capital increase, which is expected to be closed in July This booklet explains the implications for shareholders of Iberdrola of receiving shares through a corporate nominee service. Shares, when referred to in this booklet, means CREST Depository Interests (CDIs), which represent an entitlement to Iberdrola shares held through a nominee service, and shareholders, when referred to in this booklet, means the holders of those CDIs through that service. Please refer to the Glossary below for other terms used in this booklet. The scheme offers shareholders the opportunity to choose whether to continue to receive a cash amount or whether to receive newly issued Iberdrola shares. Therefore, this initiative offers flexibility and enables shareholders to choose according to their personal situation. Please note that an election by UK shareholders in respect of the July 2015 scrip dividend shall be applied in respect of future scrip dividend schemes unless shareholders make an express contrary election at the relevant time. Under this scheme, each shareholder will, on the record date, receive one right for every share held. As a shareholder you will have the three options described below: Option 1: Continue to receive cash (the default option) Shareholders can sell their rights off market to Iberdrola at a fixed price. This option has the same Spanish withholding tax treatment as a normal dividend paid in cash (tax withheld currently at 20%, although a refund may apply in certain circumstances). See further information on page 2. Option 2: Sell your rights on market Shareholders can sell their rights on market (the Spanish Stock Exchanges). The proceeds you will receive from such sale will fluctuate depending on market prices and the currency exchange rate between Euros and Sterling and, accordingly, there can be no guarantee of the price received. This option has no Spanish withholding tax liability. See further information on page 3. Option 3: Receive new Iberdrola shares Shareholders can elect to receive, for free, a number of newly issued Iberdrola shares to which they are entitled depending on the rights they hold. The number of shares received will depend on the Iberdrola share price on the stock trading days within 24 and 30 June (both inclusive). This option has no Spanish withholding tax liability. See further information on page 3. 1

3 Default option Unless you have chosen a different option in the latest scrip dividend, option 1 is the default option, therefore, you don t need to do anything else if this option is your preferred choice and, if you do not return a valid form, you will automatically be assumed to have selected option 1. If you wish to choose option 2 or option 3 or to change previous elections, you should complete, sign and return to your nominee the form enclosed, or you can apply online at Whichever option you choose, should you wish to make a different choice for future scrip dividends, you can do so by electing online or by providing a new instruction to Equiniti, who can be contacted as shown below. Where to find help At the end of this booklet there are some questions and answers in respect of the new scrip dividend scheme. If you have further questions, please telephone the Shareholder Helpline on the numbers set out below. The Shareholder Helpline is available from 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except bank and other public holidays in England and Wales). Calls to the number from inside the United Kingdom are charged at 8 pence per minute (including VAT) from a BT landline. Other service providers charges may vary. Calls to the number from outside the United Kingdom are charged at applicable international rates. Different charges may apply to calls made from mobile telephones and calls may be recorded and monitored for security and training purposes. Shareholder Helpline (from inside the United Kingdom) or (from outside the United Kingdom) Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in this document and information relating to the Company s share register and is unable to give advice on the merits of the scrip dividend scheme or to provide legal, financial, tax or investment advice. Finally, please be advised that the July 2015 scrip dividend scheme is cumulative to the distribution, with a charge to the results for the fiscal year ended on 31 December 2014, of a gross dividend of 0.03 per share, which has been approved by the General Shareholders Meeting of Iberdrola held on 27 March 2015 Option 1- Sell the rights off market to Iberdrola and receive a fixed amount of cash Unless you have chosen a different option in the latest scrip dividend, this is the default option and implies you receiving a fixed amount of cash. Under option 1, your rights will be sold off market to Iberdrola at a fixed price (the Purchase Price). The Purchase Price at which Iberdrola will repurchase each right off market is expected to be at least gross. The final value of the Purchase Price will be announced on 1 July 2015 and published at Please note that, when the final Purchase Price is announced, there will be no direct communication with shareholders. Spanish withholding tax applies in the same way as it does in relation to a normal cash dividend. For more information in relation to taxation please see page 8 of this information booklet. Following settlement of the off market sale of your rights, Iberdrola will pay you the Purchase Price in respect of each right. This amount less Spanish withholding tax will be paid to you in Sterling in accordance with your usual instructions which apply to the payment of your dividends. If you do not return a valid scrip dividend mandate form nor apply online at you will be deemed to have chosen option 1. 2

4 Example option 1 3 I hold 500 shares. 3 I receive 500 rights. 3 Those rights are sold to Iberdrola for each (this price is indicative only). I still hold 500 shares and I receive the Sterling equivalent of (500 rights x 0.113) in cash less Spanish withholding tax of (20% x ) = Option 2 - Sell the rights on market and receive cash The rights will be admitted to trading on the Spanish Stock Exchanges on the next trading day after they are issued to you, which is expected to be on 3 July If you choose this option, your rights (along with those of the other shareholders who have chosen this option) will be delivered to a broker in one aggregated amount and sold on the Spanish Stock Exchanges by 17 July The amount you receive per right will depend on the market prices on the Spanish Stock Exchanges and the currency exchange rate between Euros and Sterling. This amount may be greater, lesser or equal to the amount you would have received under option 1. There is no guarantee of the price you will receive for such rights. In addition, you will be charged with brokerage fees of 0.3%. Following settlement of the on market sale of your rights, you will receive the equivalent in Sterling of the proceeds of the sale of your rights on the market less brokerage fees. This amount will be paid to you in Sterling by cheque or in accordance with your usual instructions which apply to the payment of your dividends. Spanish withholding tax does not apply to this option. For more information in relation to taxation please see page 8 of this information booklet. You must complete, sign and return your scrip dividend mandate form to the address shown on the form by 5.00 p.m. on 8 July 2015 or apply online at by no later than 5.00 p.m. on 8 July 2015 to select this option. Example Option 2 3 I hold 500 shares. 3 I receive 500 rights 3 These rights are sold on the Spanish Stock Exchanges at a price which will depend on the market price on the Spanish Stock Exchanges (for illustrative purposes only, we assume that such price is 0.113). No Spanish withholding tax is deducted. I still hold 500 shares and I receive the Sterling equivalent of (500 rights x 0.113) in cash less brokerage fees of 0.3% ( 0.169) =

5 Option 3 - Hold the rights and receive shares If you choose this option, your nominee will continue to hold your rights (along with those of the other participants who have chosen this option) throughout the trading period (except for those rights which represent a fractional entitlement). At the end of the trading period your rights will automatically convert into a number of new shares that is calculated as follows: Number of rights / Conversion Ratio The Conversion Ratio will be calculated by reference to the number of shares of Iberdrola in issue on 1 July 2015 divided by the maximum potential number of shares to be issued pursuant to the scheme. If you hold a number of rights that would result in an entitlement to a fraction of a share, the rights representing that fractional entitlement will be aggregated with the fractions of other shareholders and sold on the Spanish Stock Exchanges. Any cash amounts in respect of fractions will be paid to you less brokerage fees in Sterling by cheque or in accordance with your usual instructions which apply to the payment of your dividends. Subject to necessary approvals, new shares are expected to be added to your holding by 29 July Spanish withholding tax does not apply to this option. For more information in relation to taxation please see page 8 of this information booklet. You must complete, sign and return your scrip dividend mandate form to the address shown on the form by 5.00 p.m. on 8 July 2015 or apply online at by no later than 5.00 p.m. on 8 July 2015 to select this option. Example Option 3 3 I hold 500 shares. 3 I receive 500 rights. 3 The Conversion Ratio for the purposes of this example only is The number of new shares I will receive is 9 (being 500 / 52 rounded down to the nearest whole number). 3 I receive 9 new Iberdrola shares which accounts for 468 of my rights (being 9 multiplied by the Conversion Ratio). My remaining 32 rights are sold on the Spanish Stock Exchanges for 0.113* each. I now hold 509 shares and I receive the Sterling equivalent of (32 rights x 0.113) in cash less brokerage fees of 0.3% ( 0.011) = * This price is for illustrative purposes only. 4

6 Timetable for July 2015 scrip dividend scheme 1 July Conversion Ratio and Purchase Price announced. 2 July (11:59 p.m. Record date for rights; rights are issued. Madrid time) 3 July Commencement of trading period for rights. 8 July Latest date to make or revoke your choice of option (5:00 p.m.). 14 July Date up to which Iberdrola shall arrange for the purchase of rights from shareholders to be sold off market for cash. 17 July On market sales completed. 17 July End of trading period. By 22 July By 24 July By 29 July By 29 July By 5 August By 5 August Cash received by the UK corporate sponsored nominees for those rights sold both off and on market. New shares added to existing shareholdings. Despatch of sale advice and cheque to shareholders for rights sold on market. BACS payments made to shareholders for rights sold on and off market. Despatch of sale advice and cheque to shareholders for rights sold off market. Statements despatched for those choosing to hold shares including cheques in relation to fractional amounts. 5

7 Questions and answers This section contains the answers to many of the questions that you may have. If once you ve read through this section you have any further questions, please see the FAQs at or contact the Shareholder Helpline. 1. What is a scrip dividend? Through a scrip dividend a shareholder is entitled to receive new shares free of charge issued by a company instead of a fixed cash amount. It is a Spanish process requirement that rights be issued before shares. Iberdrola offered shareholders the option to choose to receive new shares or a cash amount on ten previous occasions. 2. I just want to continue to receive a fixed amount of cash what do I do? The default option, option 1, is a fixed amount of cash so you don t need to do anything (unless you have chosen a different option in the latest scrip dividend). Your rights will then be purchased by Iberdrola and you will receive your cash payment as before. 3. How do I change my choice? You can change your choice by completing a new scrip dividend mandate form or revoking your existing choice online at or by calling the Shareholder Helpline to request that a new scrip dividend mandate form be sent to you. Any new choice that you make must reach your nominee no later than 5.00 p.m. on 8 July 2015 or in accordance with published dates for future dividend payments. 4. How will the Conversion Ratio and Purchase Price be calculated? The Conversion Ratio will be calculated by reference to the number of shares of Iberdrola in issue on 1 July 2015 divided by the maximum potential number of shares to be issued pursuant to the scheme. For further details on the calculation of the Conversion Ratio and the Purchase Price, please refer to the report submitted by the Board of Directors of the Company on 17 February 2015 in respect of item 6 on the Agenda for the General Shareholders Meeting of Iberdrola held on 27 March 2015 available at 5. Can I change my mind once Iberdrola publishes the Conversion Ratio and Purchase Price? Yes, you can change your mind by completing a new scrip dividend mandate form or revoking your existing choice online at or by calling the Shareholder Helpline to request that a new form be sent to you. Any new choice you make must reach your nominee by no later than 5.00 p.m. on 8 July 2015 or in accordance with published dates for future dividends. 6. Do my new shares have the same rights as my existing shares? Yes. 7. Are there any circumstances in which I won t be issued shares under the scrip dividend scheme? Yes, (i) if you don t return a valid form or apply online and choose to receive shares you will receive cash; (ii) if you return a scrip dividend mandate form choosing that your rights are sold either on the Spanish Stock Exchanges or off market by Iberdrola you will also receive cash; or (iii) if you have insufficient rights to receive a new share you will receive cash. 6

8 8. What are the benefits of the scheme? The scheme offers flexibility and enables you to choose what to receive depending upon your personal circumstances. A benefit for those who receive shares or sell their rights on the Spanish Stock Exchanges will be that they will not be subject to the general 20% Spanish withholding tax which currently applies to cash dividends. Shareholders who opt to receive cash by selling their rights back to Iberdrola will incur a deduction to account for Spanish withholding tax. 9. I want to receive cash. Is it better for me to sell on market or to sell off market to Iberdrola? This is a decision you need to make for yourself. If you have any doubts as to what to do please seek independent financial advice from your stockbroker, bank manager, accountant or other appropriately authorised financial adviser. However, as a general matter: If you sell off market to Iberdrola, you will receive a fixed price (the Purchase Price per right). This price will be subject to the same Spanish withholding tax that applies to cash dividends. You will receive the same amount which you would have received from a dividend paid in cash as normal. If you sell on market, there will be no Spanish withholding tax, but the price depends on the market price for the rights on the Spanish Stock Exchanges and is not guaranteed by Iberdrola. Brokerage fees will be deducted from the gross sale proceeds. In this case, you may receive a greater, lesser or equal cash amount to the amount you would receive if you decide to sell directly to Iberdrola. 10. Can I participate even if I am resident outside the UK? You may treat this booklet as an invitation to receive new shares if such an invitation could lawfully be made to you in the jurisdiction in which you reside without compliance with any registration, tax or other legal requirements. If it could not, you should do nothing and continue to receive cash (less Spanish withholding tax) under the default option (option 1). 11. Will I receive shares for every dividend if I choose to receive shares under the Iberdrola scrip dividend scheme? No. If you choose to receive shares under the Iberdrola scrip dividend scheme, you will only receive shares whenever a scrip dividend scheme is put in place by Iberdrola. 12. Will Iberdrola offer a scrip dividend alternative in the future? The scrip dividend program approved by the General Shareholders Meeting of Iberdrola on 27 March 2015 will also be implemented by means of a second share capital increase, expected to be executed in January 2016 Iberdrola will indicate when announcing future dividends whether the scrip dividend alternative will be offered. 13. How do I make my choice online? If you wish to choose any option, or change your mind about your choice at any point up to 8 July 2015, or in accordance with published dates for future dividends, you can do so online at and follow the online instructions. Please note that only the last choice received by your nominee will be honoured and that all previously submitted choices received by your nominee will be ignored. 7

9 Taxation The implementation of the scrip dividend scheme will not alter the UK tax treatment of future cash dividends received by holders of Iberdrola shares. This section of the booklet summarises certain tax consequences of the scrip dividend scheme for holders of Iberdrola shares. It is based on current law and on what is understood to be current HM Revenue & Customs practice. It is not advice. It applies only to holders of Iberdrola shares who are resident (and, in the case of individuals, ordinarily resident and domiciled) for tax purposes in the UK, who hold their Iberdrola shares as an investment and not through a permanent establishment located in Spain, and who are the absolute beneficial owners of their Iberdrola shares. Special rules may apply to certain classes of shareholder, including insurance companies, collective investment schemes, individuals who are resident but not domiciled in the UK, partnerships and shareholders who have acquired (or are deemed for tax purposes to have acquired) their Iberdrola shares by reason of an office or employment. Shareholders who are in any doubt as to their tax position or who are resident or domiciled in, or subject to tax in, a jurisdiction other than the UK should consult their own professional advisers immediately. Remember that your position depends on your own particular circumstances and may be subject to change in the future. Option 1 sell off market to Iberdrola and receive cash Spanish company law treats this scrip dividend scheme as an increase in Iberdrola s share capital, rather than as a dividend paid by Iberdrola. As a result of the Spanish company law treatment, the cash payment you receive should generally be treated for UK tax purposes as a capital distribution rather than as dividend income. The amount of the capital distribution will be equal to the sum of the cash payment you receive and the applicable Spanish withholding tax deducted from the payment. The capital distribution may give rise to a liability to UK capital gains tax or (for companies) corporation tax: whether you are liable to tax will depend on your particular circumstances (including what you paid for your Iberdrola shares), and on whether any exemptions or reliefs are available. For example, individuals are entitled to an annual exempt amount of up to (currently) 11,100 of chargeable gains in any tax year before becoming liable to pay capital gains tax If you purchased your Iberdrola shares and the capital distribution is small for UK tax purposes, the capital distribution will not give rise to a chargeable gain or allowable loss, but will be deducted from the base cost of your Iberdrola shares. HM Revenue & Customs treats a capital distribution as small if it amounts to 3,000 or less, or if it represents five per cent or less of the market value of your Iberdrola shares at the time the capital distribution was made. Spanish withholding tax will be deducted from the cash payment at the corresponding rate (currently, 20%). If you are liable to pay UK capital gains tax or corporation tax on the cash receipt, you should generally be able to credit a proportion of the Spanish withholding tax (fifteen nineteenths) against your UK tax liability. However, the credit cannot reduce your UK tax liability on the payment below zero. Depending on your circumstances, you may be able to claim a full or partial refund of the Spanish withholding tax from the Spanish tax authorities, either under the new UK Spain double tax treaty (which entered into force on 12 June 2014) or under the Spanish Non Resident Income Tax Law. For further details as to this refund, you should consult your tax advisors. 8

10 Option 2 sell the rights on market and receive cash The cash payment you receive should be treated for UK tax purposes as a capital distribution rather than as dividend income. The amount of the capital distribution will be equal to the cash payment you receive. For more information on capital distributions, please refer to paragraphs 2 and 3 of the tax summary for option 1 above. Spanish tax law treats option 2 as a disposal by you of rights to subscribe for Iberdrola shares and therefore Spanish withholding tax will not be deducted from your cash payment; the amount obtained in the market will reduce the base cost of your Iberdrola shares from which the rights to subscribe sold derive; if the amount obtained exceeds the base cost of your Iberdrola shares for Spanish tax purposes, then the excess will be treated for Spanish tax purposes as a capital gain derived from a disposal of your Iberdrola shares. In the last scenario, you are required to file a tax return with the Spanish tax authorities in order to claim, if applicable, an exemption under the new UK Spain double tax treaty, or under the Spanish Non Resident Income Tax Law, as the case may be, from Spanish tax on the disposal. Option 3 hold the rights and receive shares For UK tax purposes, your receipt of additional Iberdrola shares should not give rise to taxable income or to a disposal for the purposes of taxation of chargeable gains. Spanish withholding tax will also not be deducted if you choose option 3. Your new shares should be treated as part of the same asset as your existing holding of Iberdrola shares for the purposes of taxation of chargeable gains, with any base cost in your corresponding existing Iberdrola shares being apportioned between your existing shares (from which they derive from) and your new Iberdrola shares for Spanish tax purposes. If you receive any cash in respect of the sale of an entitlement to a fraction of a share, this will be treated as a disposal by you of rights to subscribe for Iberdrola shares for Spanish tax purposes, with the implications described in the tax summary for option 2 above, which may give rise to the reporting obligations discussed in that tax summary 9

11 Glossary of terms used in this booklet Conversion Ratio means the calculation used to establish the number of rights needed to receive a new Iberdrola share on conversion of the rights which is calculated as described on page 6. The Conversion Ratio will be announced to shareholders on 1 July 2015 and published at Purchase Price means the fixed off market cash amount at which Iberdrola will repurchase each right. The Purchase Price will be announced to shareholders on 1 July 2015 and published at The Purchase Price is expected to be at least Please note, whilst the Conversion Ratio and the final Purchase Price will be announced, there will be no direct communication with shareholders. Record date for rights means the final date upon which you are eligible to receive rights in connection with the scrip dividend scheme, being 2 July 2015 (11:59 p.m. Madrid time). Rights means the rights issued to you in connection with the scrip dividend scheme which will convert automatically into new Iberdrola shares unless they are sold before the end of the trading period on 17 July Rights, when used in this booklet, also include the rights issued to the shares underlying the CDIs which will convert automatically into new Iberdrola CDIs. Scrip dividend scheme means Iberdrola s scrip dividend scheme approved at Iberdrola s Annual General Meeting on 27 March 2015 and summarised in this document. Shares when used in this booklet means CREST Depository Interests ("CDIs") which represent an entitlement to Iberdrola shares held through a nominee service and corresponding references to shareholders means the holders of those CDIs through that service. 10

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