REG - Investec PLC - Ninety One Distribution Update

InvestecAnnouncement

01/06/2022 18:15

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RNS Number : 6471N  Investec PLC  01 June 2022

 Investec plc                         Investec Limited

 (Incorporated in England and Wales   (Incorporated in South Africa

 With registered number 3633621)      with registered number 1925/002833/06)

 LSE share code: INVP                 JSE share code: INL

 JSE share code: INP                  NSX share code: IVD

 ISIN: GB00B17BBQ50                   BSE share code: INVESTEC

 LEI: 2138007Z3U5GWDN3MY22            ISIN: ZAE000081949

                                      LEI: 213800CU7SM6O4UWOZ70

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF THAT JURISDICTION.

 

As part of the dual listed company structure, Investec plc and Investec
Limited (jointly "Investec") notify both the London Stock Exchange (the "LSE")
and the Johannesburg Stock Exchange (the "JSE") of matters which are required
to be disclosed under the Disclosure Guidance and Transparency Rules and the
Listing Rules of the Financial Conduct Authority and/or the JSE Listings
Requirements.

 

Accordingly, we advise of the following:

 

INVESTEC PLC AND INVESTEC LIMITED

 

 

TAX COST AND APPORTIONMENT RATIO

 

 

Defined terms used but not otherwise defined in this announcement have the
meanings set out in the shareholder circular published by Investec on 18 March
2022 (the "Circular").

 

1.          INTRODUCTION

 

Shareholders are referred to the announcement released by Investec on 31 May
2022 confirming that, following the delivery of the Scheme Court Order to the
Registrar of Companies, the Distribution became effective as of 7.00 p.m.
(London time) / 8.00 p.m. (Johannesburg time) on Monday, 30 May 2022.

 

The purpose of this announcement is to advise Investec Shareholders of the
ratio in which the expenditure incurred (and/or the market value) of the
Investec shares must be apportioned pursuant to section 46(3)(a) of the South
African Income Tax Act (the "Act").

 

Shareholders are reminded that the unbundling was executed by Investec Limited
using a distribution ratio of:

(i)    1 : 0.13751 meaning that for every 1 Investec Limited Ordinary Share
held at the Distribution Record Time, an Investec Limited Ordinary Shareholder
is entitled to 0.13751 of a Ninety One Limited Share; and

(ii)   1 : 0.13751 meaning that for every 1 Investec plc Ordinary Share held
on the Investec plc SA Register at the Distribution Record Time, an Investec
plc Ordinary Shareholder on the Investec plc SA Register is entitled to
0.13751 of a Ninety One Limited Share.

 

As outlined in paragraphs 3.1 and 3.2 of Part VI of the Circular, an
entitlement to a fraction of a Ninety One Limited share will arise for all
Investec Limited Ordinary Shareholders and all Investec plc Ordinary
Shareholders on the Investec plc SA Register at the Distribution Record Time.
Shareholders will receive a cash payment equivalent to the fraction of a
Ninety One Share to which they otherwise would have been entitled. Further
detail with respect to cash proceeds in respect of fractional entitlements is
outlined in the announcement released by Investec on 27 May 2022.

 

 

2.          APPORTIONMENT TAX PRINCIPLES

 

Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares held on
the Investec plc SA Register held as trading stock

Any Investec Limited Ordinary Shareholder holding Investec Limited Ordinary
Shares as trading stock and/or any Investec plc Ordinary Shareholder on the
Investec plc SA Register holding Investec plc Ordinary Shares held on the
Investec plc SA Register as trading stock will be deemed to acquire the
unbundled Ninety One Limited Shares as trading stock or on revenue account, as
the case may be.

 

The combined expenditure of such Investec Limited Ordinary Shares and/or
Investec plc Ordinary Shares held on the Investec plc SA Register and
unbundled Ninety One Limited Shares will be the amount taken into account by
the Investec Limited Ordinary Shareholder and/or the Investec plc Ordinary
Shareholder on the Investec plc SA Register in respect of those shares, as
contemplated in section 11(a), section 22(1), or section 22(2) of the Act (tax
cost).

 

The portion of the above combined expenditure to be allocated to the unbundled
Ninety One Limited Shares will be determined by applying the ratio that the
market value of the unbundled Ninety One Limited Shares bears to the sum of
the market value of the Investec Limited Ordinary Shares and/or Investec plc
Ordinary Shares held on the Investec plc SA Register and the unbundled Ninety
One Limited Shares as at the last day to trade plus one Business Day, being
Thursday, 26 May 2022. The expenditure so allocated to the unbundled Ninety
One Limited Shares will reduce the expenditure relating to the retained
Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares held on
the Investec plc SA Register, as applicable.

 

Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares held on
the Investec plc SA Register held as capital assets

Any Investec Limited Ordinary Shareholder holding Investec Limited Ordinary
Shares as capital assets and/or any Investec plc Ordinary Shareholder on the
Investec plc SA Register holding Investec plc Ordinary Shares held on the
Investec plc SA Register as capital assets will be deemed to acquire the
unbundled Ninety One Limited Shares as capital assets.

 

The combined expenditure of such Investec Limited Ordinary Shares and/or
Investec plc Ordinary Shares held on the Investec plc SA Register and
unbundled Ninety One Limited Shares will be the original expenditure incurred
in respect of the Investec Limited Ordinary Shares and/or Investec plc
Ordinary Shares held on the Investec plc SA Register, that is allowable in
terms of paragraph 20 of the Eighth Schedule to the Act, and where the
Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares held on
the Investec plc SA Register were acquired before 1 October 2001, the
expenditure and/or market value, as the case may be, adopted or determined as
contemplated in paragraph 29 of the Eighth Schedule to the Income Tax Act (tax
cost).

 

The portion of the above combined expenditure to be allocated to the Ninety
One Limited Shares will be determined by applying the ratio that the market
value of the Ninety One Limited Shares, bears to the sum of the market value
of the Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares
held on the Investec plc SA Register and the Ninety One Limited Shares as at
the last day to trade plus one Business Day, being Thursday, 26 May 2022,
taking the distribution ratio into account. The expenditure and/or market
value, as the case may be, so allocated to the Ninety One Limited Shares will
reduce the expenditure and/or market value, as the case may be, of the
retained Investec Limited Ordinary Shares and/or Investec plc Ordinary Shares
held on the Investec plc SA Register, as applicable.

 

Investec Limited Ordinary Shareholders

In terms of section 46(3)(a) of the Act, Investec Limited Ordinary
Shareholders must allocate a portion of the expenditure and market value (as
defined in section 46(3)(b)) attributable to the Investec Limited Ordinary
Shares to the Ninety One Limited Shares acquired and reduce the expenditure
and market value attributable to the Investec Limited Ordinary Shares by the
amount so allocated. The allocated portion of the tax cost of the Investec
Limited Ordinary Shares is an amount which bears to such tax cost the same
ratio that the market value of the Ninety One Limited Shares on the last day
to trade plus one Business Day bears to the sum of the market values of:

(i)    the closing share price of Ninety One Limited Shares on the last day
to trade plus one Business Day; and

(ii)   the closing share price of Investec Limited Ordinary Shares on the
last day to trade plus one Business Day.

 

Investec plc Ordinary Shareholders on the Investec plc SA Register

In terms of section 46(3)(a) of the Act, Investec plc Ordinary Shareholders on
the Investec plc SA Register must allocate a portion of the expenditure and
market value (as defined in section 46(3)(b)) attributable to the Investec plc
Ordinary Shares held on the Investec plc SA Register to the Ninety One Limited
Shares acquired and reduce the expenditure and market value attributable to
the Investec plc Ordinary Shares held on the Investec plc SA Register by the
amount so allocated. The allocated portion of the tax cost of the Investec plc
Ordinary Shares held on the Investec plc SA Register is an amount which bears
to such tax cost the same ratio that the market value of the Ninety One
Limited Shares on the last day to trade plus one Business Day bears to the sum
of the market values of:

(i)    the closing share price of Ninety One Limited Shares on the last day
to trade plus one Business Day; and

(ii)   the closing share price of Investec plc Ordinary Shares held on the
Investec plc SA Register on the last day to trade plus one Business Day.

 

In terms of section 46(7) of the Act, the relief provided for in terms of
section 46 would not apply for Investec Limited or the relevant shareholder
where shares are distributed to any shareholder that is: (i) a "disqualified
person"; and (ii) holds at least 5% of the equity shares in Investec Limited
immediately before the unbundling transaction.

 

In relation to non-South African tax resident Investec Limited Ordinary
Shareholders and Investec plc Ordinary Shareholders on the Investec plc SA
Register, the tax cost of the Ninety One Limited Shares will only be relevant
for shareholders who have a permanent establishment in South Africa.

 

TAX COST AND APPORTIONMENT RATIO CALCULATION

 

Investec Limited Ordinary Shareholders

For purposes of the tax cost apportionment calculation of the Ninety One
Limited Shares in the hands of the Investec Limited Ordinary Shareholders for
tax purposes, the closing price of one Ninety One Limited Share as at 26 May
2022 is ZAR44.64 and the closing price of one Investec Limited Ordinary Share
as at 26 May 2022 is ZAR89.20.

 

The expenditure to be allocated by each Investec Limited Ordinary Shareholder
to the Ninety One Limited shares must be determined as follows:

A =     (B × (C / (C+D))

Where:

A =     expenditure of a Ninety One Limited share;

B =      Investec Limited Ordinary Shareholder's expenditure, as defined
in section 46(3)(b)(i) and (ii) 1  (#_ftn1) plus the amount defined in section
46(3)(b)(iii) 2  (#_ftn2) , i.e. Investec Limited's tax liability, being
ZAR0.0347 per share;

C =      closing share price of an unbundled Ninety One Limited share on
the last day to trade plus one Business Day multiplied by the distribution
ratio, i.e. ZAR6.1384 (being ZAR44.64 x 0.13751); and

D =     the closing share price of an Investec Limited Ordinary share on
the last day to trade plus one Business Day, i.e. ZAR89.20.

 

The Apportionment Ratio in respect of the tax cost allocations have therefore
been calculated as follows:

(i)    Ninety One Limited Share:  6.4386%

(ii)   Investec Limited Ordinary Share: 93.5614%

 

Accordingly, Investec Limited Ordinary Shareholders are hereby advised that
the expenditure in respect of the Ninety One Limited Shares received is
determined as follows:

 

A =      B x Apportionment Ratio

Where:

A =     expenditure of Ninety One Limited share;

B =      Investec Limited Ordinary Shareholder's expenditure, as defined
in section 46(3)(b)(i) and (ii) plus ZAR0.0347per share;

Apportionment Ratio =     6.4386%

 

The remaining expenditure must therefore be allocated to the remaining
Investec Limited Ordinary Shares still held.

 

Ordinary Shareholders on the Investec plc SA Register

For purposes of the tax cost apportionment calculation of the Ninety One
Limited Shares in the hands of the Investec plc Ordinary Shareholders on the
Investec plc SA Register for tax purposes, the closing price of one Ninety One
Limited Share as at 26 May 2022 is ZAR44.64 and the closing price of one
Investec plc Ordinary Share on the Investec plc SA Register as at 26 May 2022
is ZAR88.25.

 

The expenditure to be allocated by each Investec plc Ordinary Shareholder on
the Investec plc SA Register to the Ninety One Limited shares must be
determined as follows:

A =     (B × (C / (C+D))

Where:

A =     expenditure of Ninety One Limited share;

B =      Investec plc Ordinary Shareholder on the Investec plc SA
Register's expenditure, as defined in section 46(3)(b)(i) and (ii) 3  (#_ftn3)
plus the amount defined in section 46(3)(b)(iii) 4  (#_ftn4) , i.e. Investec
Limited's tax liability, being ZAR0.0528 per share;

C =      closing share price of an unbundled Ninety One Limited share on
the last day to trade plus one Business Day multiplied by the distribution
ratio, i.e. ZAR6.1384 (being ZAR44.64 x 0.13751); and

D =     the closing share price of an Investec plc Ordinary share on the
SA Register on the last day to trade plus one Business Day, i.e. ZAR88.25.

 

The Apportionment Ratio in respect of the tax cost allocations have therefore
been calculated as follows:

(i)    Ninety One Limited Share: 6.5034%

(ii)   Investec Ordinary plc Share on the Investec plc SA Register: 93.4966%

 

Accordingly, Investec plc Ordinary Shareholders on the Investec plc SA
Register are hereby advised that the expenditure in respect of the Ninety One
Limited Shares received is determine as follows:

 

A =      B x Apportionment Ratio

Where:

A =     expenditure of Ninety One Limited share;

B =      Investec plc Ordinary Shareholders on the Investec plc SA
Register's expenditure, as defined in section 46(3)(b)(i) and (ii) plus
ZAR0.0538 per share;

Apportionment Ratio =     6.5034%

 

The remaining expenditure must therefore be allocated to the remaining
Investec plc Ordinary Shares on the Investec plc SA Register still held.

 

 

 

 

 

For simplicity and illustrative purposes, please see the below example of the
application of Apportionment Ratio calculation:

 

 Application of Apportionment Ratio calculation                                  Amount
 Number of Investec Limited Ordinary Shares held                                 1
 Base cost per share in hands of Investec Limited Ordinary Shareholder in terms  ZAR35.00
 of part (i) and (ii) of the definition of "expenditure" in section 46(3)(b)
 Amount to be added to base cost per share in terms of part (iii) of the         ZAR0.0347
 definition of "expenditure" in section 46(3)(b)
 New base cost per Investec Limited Ordinary Share before section 46 unbundling  ZAR35.03

 

 

 Value attributable to Investec Limited Ordinary Shares following section 46  Ratio     Allocation
 unbundling
 Ninety One Limited Allocation (*)                                            6.4386%   ZAR2.26
 Investec Limited Allocation                                                  93.5614%  ZAR32.78
                                                                              100.00%   ZAR35.03

 

* Considering the distribution ratio and the facts contained in the simplistic
example above, the Investec Limited Ordinary Shareholder would allocate
ZAR2.26 to 0.13751 of a Ninety One Limited share received. Stated differently
the Investec Limited Ordinary Shareholder would need to allocate ZAR16.40418
to a Ninety One Limited share received

 

Johannesburg and London

Date: 2 June 2022

 

Financial Advisor and Transaction sponsor

Investec Bank Limited

 

 

Legal/ Tax advisors

ENS Africa and Linklaters LLP

 

Enquiries:

Mr David Miller

Investec plc

Company Secretary

Tel: + 44 (0)20 7597 4000

 

 

 1  (#_ftnref1) "expenditure" means in relation to unbundled shares acquired
as-

(i) trading stock, the amount taken into account prior to the unbundling
transaction in respect of the unbundling shares for the purposes of section 11
(a) or 22 (1) or (2);

(ii) capital assets, the expenditure incurred prior to the unbundling
transaction in respect of the unbundling shares that is allowable in terms of
paragraph 20 of the Eighth Schedule; and

 2  (#_ftnref2) "expenditure" means in relation to unbundled shares acquired
as-

(iii) the amount which bears to the tax paid by the unbundling company of any
equity share in respect of which this section does not apply as contemplated
in subsection (7) the same ratio as the number of equity shares held by a
shareholder that acquires unbundled shares in terms of an unbundling
transaction in an unbundling company bears to the number of all the issued
equity shares in that unbundling company immediately before that unbundling
transaction;

 3  (#_ftnref3) Refer to footnote
1

 4  (#_ftnref4) Refer to footnote 2

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