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| Proposed Return of Cash to Shareholders |
The following document answers 'Frequently Asked Questions' about Kelda's proposed return of cash to shareholders.
For full information, please read the Circular recently issued to all shareholders, and if you are in any doubt you should consult your professional adviser.
Q. What is Kelda doing?
A. Kelda is proposing to return to its shareholders part of their investment in the form of cash by way of a 'B share scheme' accompanied by a share consolidation.
If you are a Kelda shareholder at 5.00 pm on 15th June 2007 you will receive 210p for every Kelda ordinary share that you own in the form of a 'B share'. At the same time, Kelda is also proposing to reduce the number of ordinary shares that you own by giving you 10 new shares for every 13 of your old ones.
The B share scheme gives shareholders a choice as to when and how you receive your proceeds. A general guide as to UK taxation in relation to the return of cash is set out in Part 9 of the Circular. If you are in any doubt as to your tax position or are subject to tax in a jurisdiction other than the United Kingdom, you should consult with an appropriate professional adviser.
Q. Why is Kelda returning cash to shareholders?
A. Following the sale of our Aquarion business and a review of the capital structure of the group, subject to shareholder approval, Kelda plans to return approximately £750 million to shareholders by way of a B share scheme and share consolidation. The effect of the return will be to make Yorkshire Water’s balance sheet more efficient.
Q. Why is Kelda using a B share scheme to return cash to shareholders?
A. This is a commonly used method by companies when returning large sums of capital. The B share scheme gives most shareholders choice as to how and when to receive their cash.
For example, it has been used recently by companies such as Smiths Group, Whitbread, Vodafone, the London Stock Exchange and Pennon (owner of South West Water) and is considered in line with 'best market practice'.
Q. Why is the return of cash accompanied by a share consolidation?
A. A share consolidation is used in combination with the majority of large returns of cash and has been used with all the recent B share schemes listed above. The intention of the share consolidation is to make the share price and other Company data such as earnings and dividends per share comparable before and after the return of cash.
Q. Does the share consolidation impact value?
A. Subject to normal market movements, the total value of your new shares in Kelda, plus the value of the B shares you receive and the fractional entitlements immediately following the listing of the B shares (expected on 18 June 2007) will be equivalent in value to your holding of existing Kelda shares immediately beforehand.
The share consolidation itself has no impact on the value of the Company and shareholders will own the same proportion of Kelda as they did previously, subject to fractional entitlements.
Q. What is a 'fractional entitlement'?
A. Any fractions of new ordinary shares arising from the share consolidation will be combined and sold in the market on your behalf. The value of any shareholder’s factional entitlement will not exceed the value of one ordinary share and you will not be entitled to any such sale proceeds if your fractional entitlement is less than £3. These sale proceeds will be donated to charity by Kelda.
Q. What happens to dividends?
A. Dividends in respect of the year ending 31st March 2008 will be adjusted to take account of the return of cash. For the current regulatory period to March 2010, Kelda plans to retain its general policy of growing dividends by two per cent per annum in real terms, in line with regulatory expectations.
Q. What do I have to do?
A. The B share scheme provides most shareholders with choice as to how and when they receive the 210p per ordinary share. The choices are set out in the Circular recently issued to all shareholders.
If you do not validly complete and return the Election Form accompanying the Circular you will be deemed to have elected for Alternative 1 (Single B Share Dividend) on all of your B shares.
Q. What if I have further questions?
A. You can call our Shareholder helpline on 0870 162 3121 which is available between 9.00 am and 5.00 pm on any working day. Please note, however, that the Helpline cannot recommend any course of action or give you any personal, legal or tax advice.
The return of cash is subject to shareholder approval at an Extraordinary General Meeting (EGM) to be held at 11.00 am on 1st June at the Marriott Hotel, 4 Trevelyan Square, Boar Lane, Leeds LS1 6ET.
The Board recommends you vote in favour of the resolutions at the EGM as they intend to do in respect of their own shares.
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