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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12 (B) OR 12 (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
INDEPENDENT ENERGY HOLDINGS PLC
(Exact Name of Registrant as Specified in its Charter)
ENGLAND AND WALES 4911
(State of Incorporation (I.R.S. Employer
or Organization) Identification no.)
DOMINION COURT, 43 STATION ROAD,
SOLIHULL, WEST MIDLANDS, UNITED KINGDOM B91 3RT
(Address of Principal Executive Offices) (Zip Code)
If this form relates to the If this form relates to the
registration of a class of securities registration of a class of securities
pursuant to Section 12 (b) of the pursuant to Section 12 (g) of the
Exchange Act and is effective Exchange Act and is effective
pursuant to General Instruction pursuant to General Instruction
A. (c), please check the following A. (d), please check the following
box. [ ] box. [X]
Securities Act registration statement file number to which this form relates:
333-56223
Securities to be registered pursuant to Section 12 (g) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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AMERICAN DEPOSITARY SHARES,
EACH REPRESENTING ONE ORDINARY
SHARE, NOMINAL VALUE 1P PER SHARE NASDAQ NATIONAL MARKET
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
A description of the securities to be registered hereunder is
contained in the sections entitled "Description of Share Capital," "Description
of American Depositary Receipts" and "Taxation" of the Prospectus included in
the Registrant's Registration Statement on Form F-1 filed with the Securities
and Exchange Commission (the "Commission") on June 5, 1998 and is incorporated
herein by reference.
ITEM 2. EXHIBITS
Exhibit
Number DESCRIPTION
- ------- -----------
1.1 Copy of pages 44-58 of the above-referenced Preliminary Prospectus,
portions of which are being incorporated herein by reference,
pursuant to Rule 12b-23
4.1 Memorandum and Articles of Association of the Registrant(1)
4.2 Form of Deposit Agreement among the Registrant, the Bank of New
York, as Depositary, and holders from time to time of American
Depositary Receipts issued thereunder (including, as an exhibit, the
form of American Depositary Receipts)(2)
5.1 Form of Ordinary Share Certificate of the Registrant(3)
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(1) Incorporated herein by reference to Exhibit 3 of the Registrant's
Registration Statement on Form F-1 filed with the Commission on June 5,
1998.
(2) Incorporated herein by reference to Exhibit 4.1 of the Registrant's
Registration Statement on Form F-1 filed with the Commission on June 5,
1998.
(3) Incorporated herein by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form F-1 filed with the Commission on June 5,
1998.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
INDEPENDENT ENERGY HOLDINGS PLC
(Registrant)
Date: June 18, 1998 By: /s/ JERRY W. JARRELL
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Jerry W. Jarrell
Director
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EXHIBIT 1.1
DESCRIPTION OF SHARE CAPITAL
The following contains certain information concerning Independent Energy's
capital structure and related summary information concerning certain
provisions of Independent Energy's Memorandum and Articles of Association
(Charter) and applicable English law. Such summary information is not complete
and is qualified in its entirety by reference to the Memorandum and Articles
of Association of Independent Energy, a copy of which have been filed as an
exhibit to the Registration Statement of which this Prospectus is part and
which is available for inspection as part of that Registration Statement.
GENERAL
The Company's authorized share capital is (Pounds)280,000 divided into
28,000,000 Ordinary Shares of 1p nominal value each, of which 17,935,527
Ordinary Shares were issued and outstanding as of May 31, 1998.
The share capital of the Company may be increased, consolidated and divided
into shares of larger amounts than the Ordinary Shares, sub-divided into
shares of smaller amount than the Ordinary Shares, and unissued Ordinary
Shares may be canceled by an ordinary resolution of shareholders in a general
meeting of the Company. The share capital of the Company may be reduced by
special resolution of shareholders in a general meeting of the Company and
confirmation by the English courts. The Company may, with the prior approval
of an ordinary resolution of shareholders at a general meeting, purchase its
own shares.
DESCRIPTION OF ORDINARY SHARES
All of the issued and outstanding Ordinary Shares are duly authorized,
validly issued and fully paid.
DIVIDEND RIGHTS
Holders of Ordinary Shares are entitled to receive such dividends as may be
recommended by the Board of Directors of the Company and declared by the
Company in a general meeting (but no larger dividend may be declared than is
recommended by the Board of Directors of the Company, and the Company, in a
general meeting may declare a smaller dividend) and such interim dividends as
the Board of Directors of the Company may decide.
The Company or the Board of Directors may fix a date as the record date by
reference to which a dividend on the Ordinary Shares will be declared or paid,
whether or not it is before the date on which the declaration is made. Any
dividend on the Ordinary Shares unclaimed for a period of 12 years from its
date of payment shall be forfeited and shall revert to the Company. No
dividend on an Ordinary Share will bear interest.
RIGHTS IN LIQUIDATION
Subject to the rights attached to any shares issued on special terms and
conditions, upon any liquidation or winding up of the Company, after all debts
and liabilities of the Company and the expenses of the liquidation have been
discharged, any surplus assets will be divided among the holders of Ordinary
Shares in proportion to their holdings after deducting any amounts remaining
unpaid in respect of such shares.
NOTIFICATION OF INTEREST IN SHARES
Section 198 of the Companies Act of 1985 obliges any person (subject to
exception) who acquires an interest of 3% or more in the Ordinary Shares to
notify the Company of his interest within two business days following the day
on which the obligation to notify arises. After the 3% level is exceeded,
similar notification must be made in respect of whole percentage figure
increases or decreases, rounded down to the next whole number. For the
purposes of the notification obligation, the interest of a person in the
shares means any kind of interest in shares (subject to certain exceptions)
including any shares (i) in which his spouse or his child or stepchild, is
interested, (ii) in which a corporate body is interested where either (a) that
corporate body or its
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directors are accustomed to act in accordance with that person's directions or
instructions, or (b) that person controls one third or more of the voting
power of that corporation body, (or (iii) in which another party is interested
where the person and that other party are parties to a "concert party"
agreement under Section 204 of the Companies Act 1985 and any interest in
Shares is in fact acquired by any one of the parties pursuant to the
agreement. A "concert party" agreement is an agreement which provides for one
or more parties to it to acquire interests in shares of a particular company
and imposes obligations or restrictions on any one or more of the parties as
to the use, retention or disposal of such interests.
In addition, Section 212 of the Companies Act 1985 enables the Company, by
notice in writing, to require a person whom the Company knows or has
reasonable cause to believe to be, or to have been at any time during the
three years immediately preceding the date on which the notice is issued,
interest in shares to confirm that fact or (as the case may be) to indicate
whether or not that is the case, and where he holds or has during this
relevant time held an interest in the Shares, to give such further information
as may be required relating to his interest and any other interest in the
shares of which he is aware.
In addition to the restrictions on the rights attaching to shares imposed by
the Companies Act 1985 for noncompliance with Section 212 of that act, the
Company's Memorandum and Articles of Association apply additional
restrictions. The restrictions imposed or applied can potentially include
disenfranchisement, loss of entitlement to dividends and other payments and
restrictions on alienability.
VOTING RIGHTS AND SHAREHOLDERS MEETINGS
Under English law, there are two types of general meeting of shareholders,
annual general meetings and extraordinary general meetings. An annual general
meeting must be held at least once in each calendar year and not later than 15
months from the previous annual general meeting. At the annual general meeting
matters such as the election of directors, appointment of auditors and the
fixing of their remuneration, approval of the annual accounts and the
directors' report and declaration of dividends are dealt with. Any other
general meeting is known as an extraordinary general meeting.
The Directors may convene an extraordinary general meeting and must convene
one if demanded by holders of not less than 10% of the paid-up shares. An
annual general meeting and an extraordinary general meeting called to pass a
special resolution must be called by at least 21 clear days' notice specifying
the place, day and time of the meeting and the general nature of the business
to be transacted. No business may be transacted at any general meeting unless
a quorum of two persons entitled to vote on the business to be transacted is
present in person or by proxy.
At a general meeting, a simple majority of the votes cast is sufficient to
pass an ordinary resolution. A special resolution requires a majority of not
less than 75% of the votes of those shareholders as (being entitled to do so)
vote in person or by proxy on the resolution in question. A small number of
matters relating to variation of the rights attaching to different classes of
shares and proceedings in a winding-up require the authority of an
extraordinary resolution, which requires the same majority as a special
resolution.
Subject to the restrictions referred to in the following paragraph, at a
meeting of shareholders every holder of shares who (being an individual) is
present in person or (being a corporation) is present by a representative or
proxy not being himself a member shall have one vote on a show of hands, and
on a poll (which can be demanded by the Chairman of the meeting, not less than
three shareholders present in person or by proxy having the right to vote at
the meeting, a holder or holders of Shares or his or their proxy representing
not less than 10% of the total voting rights of all shareholders having the
right to attend and vote at the meeting or by a holder or holders of shares or
his or their proxy conferring a right to attend and vote at the meeting on
which an aggregate sum has been paid up equal to not less than one tenth of
the total sum paid up on all shares conferring that right), every holder of
Shares present in person or by proxy shall have one vote for every share held.
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A holder of shares shall not be entitled (save as a proxy for another
member) to be present or vote at any general meeting:
(a) in respect of any Shares held by him in relation to which he or any
other person appearing to be interested in those Shares has been served
with a notice under Section 212 of the Companies Act 1985, requiring him to
provide information in accordance with that section and containing a
statement that upon failure to supply such information before the
expiration period specified in the notice (which may not be less than 28
days) the registered holder of the Share is not entitled to vote in respect
of those Shares, and the person on whom such notice was served fails to
supply the information within the specified period; or
(b) unless all amounts presently payable by him in respect of such Shares
have been paid.
All or any of the rights or privileges attached to the shares may, subject
to certain provisions of the Companies Act 1985, be varied either with the
consent in writing of the holders of 75% in nominal value of the issued shares
or with the sanction of an extraordinary resolution passed at a separate
meeting of the holders of shares, but not otherwise.
TRANSFER OF SHARES
The instrument of transfer of a share may be in any usual form or in any
other form of which the Directors approve and shall be executed by or on
behalf of the transferor and, unless the share is fully paid, by or on behalf
of the transferee. The Directors may, in their absolute discretion without
giving any reason therefor, refuse to register the transfer of a share which
is not fully paid provided that any such refusal will not prevent dealings in
the shares from taking place on an open and proper basis. The Directors may
decline to register a transfer to person known to be a minor, bankrupt or
person who is mentally disordered at a patient for the purpose of any statute
relating to mental health. Subject thereto, the Articles of Association
contain no restrictions on the registration of transfers of fully paid shares
provided that all stamp duty payable thereon has been paid and the transfers
are accompanied by any certificate for the shares and such other evidence (if
any) as the Directors may require to prove the title of the intending
transferor or his right to transfer the shares and is the case of a transfer
to joint holders, and to no more than four such joint holders. The register of
members may be closed at such times and for such periods as the Directors may
determine not exceeding thirty days in each year. The Company has resolved
that title to any Shares may be transferred by means of CREST being a relevant
system for the purposes of the Uncertified Securities Regulations 1995.
ISSUE OF ADDITIONAL SHARES
Subject to the provisions of the Companies Act 1985, the authorized but
unissued shares are at the disposal of the Directors who may issue, grant
options over or otherwise dispose of them to such persons an on such terms as
they deem appropriate.
By virtue of Section 80 of the Companies Act 1985, the Directors may not,
subject to limited exceptions in respect of employee share schemes, exercise
any power to issue shares (or grant any right to subscribe for or convert
other securities into shares) unless they have been authorized to do so by an
ordinary resolution. Any such authority must state the maximum amount of
shares which may be issued under it and the date of which it will expire,
which must not be more than five years from the date the resolution is passed.
On October 21, 1997, an ordinary resolution was passed authorizing the
Directors pursuant to Section 80 of the Companies Act 1985 to exercise all the
powers of the Company to issue shares up to a nominal amount of
(Pounds)136,086, being the whole of the authorized but unissued share capital,
for its period of five years.
If Shares are to be issued for cash, Section 89 of the Companies Act 1985,
requires, subject to limited exceptions in respect of employee share schemes,
such shares first be offered to existing holders of shares in proportion to
their holdings. However, Section 95 of the Companies Act 1985 provides that in
certain circumstances the directors of a company may by special resolution be
given power to issue shares as if Section 89 did not apply. On October 21,
1997, a special resolution was passed disapplying the provisions of Section 89
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in respect of the issue of shares in connection with a rights issue and
otherwise in respect of the issue of shares up to an aggregate nominal amount
of (Pounds)65,000, such authority to expire at the conclusion of the next
annual general meeting of the Company or if earlier, fifteen months from the
passing of that resolution.
The Company intends to convene an extraordinary general meeting at which
resolutions will be proposed to increase the authorized capital in order to
consummate the offering and waive certain preemptive rights.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Ordinary Shares is Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex BN99 6DA England, United
Kingdom.
There are no restrictions under the Company's Memorandum and Articles of
Association or under English Law that limit the rights of persons not resident
in the United Kingdom, as such, to hold or to vote shares.
DESCRIPTION OF AMERICAN DEPOSITORY RECEIPTS
The following is a summary of the material provisions of the Deposit
Agreement (including any exhibits thereto, the "Deposit Agreement") among the
Company, the Depositary and all persons in whose name an ADR is registered on
the books of the Depositary (the "Owners") and any person owning any
beneficial interest in the ADSs evidenced by any ADR, and who may or may not
be the Owner of such ADR (the "Beneficial Owners") from time to time of the
ADRs issued thereunder. A copy of the Deposit agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is part and
which is available for inspection as part of that Registration Statement. In
addition, copies of the Deposit agreement are available for inspection at the
principal office of the Depositary in New York (the "Principal New York
Office"), which is presently located at 101 Barclay Street, New York, New York
10286. Terms used herein and not otherwise defined shall have the respective
meanings set forth in the Deposit Agreement.
ADRs evidencing ADSs are issuable by the Depositary pursuant to the terms of
the Deposit Agreement. Each ADS represents, as of the date hereof, the right
to receive one Share deposited under the Deposit Agreement (together with any
additional Shares deposited thereunder and all other securities, property and
cash received and held thereunder at any time in respect of or in lieu of such
deposited Shares, the "Deposited Securities") with the Custodian, currently
the London office of The Bank of New York (together with any successor or
successors thereto, the "Custodian"). An ADR may evidence any number of ADSs.
Only persons in whose names ADRs are registered on the books of the Depositary
will be treated by the Depositary and the Company as Owners.
DEPOSIT, TRANSFER AND WITHDRAWAL
In connection with the deposit of Shares under the Deposit Agreement, the
Depositary or the Custodian may require the following in form satisfactory to
it: (i) a written order directing the Depositary to execute and deliver to, or
upon the written order of, the person or persons designated in such order an
ADR or ADRs evidencing the number of ADSs representing such deposited Shares
(a "Delivery Order"); (ii) proper endorsements or duly executed instruments of
transfer in respect of such deposited Shares; (iii) instruments assigning to
the Custodian or its nominee any distribution on or in respect of such
deposited Shares or indemnity therefor; and, (iv) proxies entitling the
Custodian to vote such deposited Shares until the shares are registered in the
name of the Custodian or its nominee. As soon as practicable after the
Custodian receives Deposited Securities pursuant to any such deposit or
pursuant to the form of ADR, the Custodian shall present such Deposited
Securities for registration of transfer into the name of the Depositary or its
nominee or the Custodian or its nominee, to the extent such registration is
practicable, at the cost and expense of the person making such deposit (or for
whose benefit such deposit is made) and shall obtain evidence satisfactory to
it of such registration. Deposited Securities shall be held by the Custodian
for the account and to the order of the
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Depositary at such place or places and in such manner as the Depositary shall
determine. Deposited Securities may be delivered by the Custodian to any
person only under the circumstances expressly contemplated in the Deposit
Agreement.
After any such deposit of Shares, the Custodian shall notify the Depositary
of such deposit and of the information contained in any related Delivery Order
by letter, first class airmail postage prepaid, or, at the request, risk and
expense of the person making the deposit, by cable, telex or facsimile
transmission. After receiving such notice from the Custodian, the Depositary,
subject to the terms and conditions of the Deposit Agreement, shall execute
and deliver at the Transfer Office which is presently located at the Principal
New York Office, to or upon the order of any person named in such notice, an
ADR or ADRs registered as requested and evidencing the aggregate ADSs to which
such person is entitled.
Subject to the terms and conditions of the Deposit Agreement, the Depositary
may so issue ADRs for delivery at the Transfer Office only against deposit
with the Custodian of (i) Shares in form satisfactory to the Custodian; (ii)
rights to receive Shares from the Company or any registrar, transfer agent,
clearing agent or other entity recording Share ownership or transactions: or,
(iii) other rights to receive Shares (until such Shares are actually deposited
pursuant to (i) or (ii) above, "Pre-released ADRs") only if (a) Pre-released
ADRs are fully collateralized (marked to market daily) with cash or U.S.
government securities held by the Depositary for the benefit of Owners (but
such collateral shall not constitute "Deposited Securities"), (b) each
recipient of Pre-released ADRs agrees in writing with the Depositary that such
recipient (1) owns such Shares, (2) assigns all beneficial right, title and
interest therein to the Depositary, (3) holds such Shares for the account of
the Depositary and (4) will deliver such Shares to the Custodian as soon as
practicable and promptly upon demand therefor and (c) all Pre-released ADRs
evidence not more than 30% of all such ADSs. The Depositary may retain for its
own account any earnings or collateral for Pre-released ADRs and its charges
for issuance thereof. At the request, risk and expense of the person
depositing Shares, the Depositary may accept deposits together with other
specified instruments for forwarding to the Custodian and may deliver ADRs at
a place other than its office. Every person depositing Shares under the
Deposit Agreement represents and warrants that such Shares are validly issued
and outstanding, fully paid, nonassessable and free of preemptive rights, that
the person making such deposit is duly authorized so to do and that such
Shares are not "restricted securities" as such term is defined in Rule 144
under the Securities Act. Such representations and warranties shall survive
the deposit of Shares and issuance of ADRs.
Subject to the terms and conditions of the Deposit Agreement, upon surrender
of an ADR in form satisfactory to the Depositary at the Transfer Office, the
Owner thereof is entitled to delivery at the Custodian's office of the
Deposited Securities at the time represented by the ADSs evidenced by such ADR
at the request, risk and expense of the Owner thereof, the Depositary may
deliver such Deposited Securities at such other place as may have been
requested by the Owner.
DISTRIBUTIONS ON DEPOSITED SECURITIES
Subject to the terms and conditions of the Deposit Agreement, to the extent
practicable, the Depositary will distribute by mail to each Owner entitled
thereto on the record date set by the Depositary therefor at such Owner's
address shown on the ADR Register, in proportion to the number of Deposited
Securities (on which the following distributions on Deposited Securities are
received by the Custodian) represented by ADSs evidenced by such Owner's ADRs:
Cash. Any dollars available to the Depositary resulting from a cash dividend
or other cash Distribution or the net proceeds of sales of any other
distribution or portion thereof authorized in the Deposit Agreement ("Cash"),
on an averaged or other practicable basis, subject to (i) appropriate
adjustments for taxes withheld and (ii) deduction of the Depositary's expenses
in (1) converting any foreign currency to dollars by sale or in such other
manner as the Depositary may determine to the extent that it determines that
such conversion may be made on a reasonable basis, (2) transferring foreign
currency or dollars to the U.S. by such means as the Depositary may determine
to the extent that it determines that such transfer may be made on a
reasonable basis,
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(3) obtaining any approval or license of any governmental authority required
for such conversion or transfer, which is obtainable at a reasonable cost and
within a reasonable time and (4) making any sale by public or private means in
any commercially reasonable manner;
Shares. (i) Additional ADRs evidencing whole ADSs representing any Shares
available to the Depositary resulting from a dividend or free distribution on
Deposited Securities consisting of Shares (a "Share Distribution") and (ii)
dollars available to it resulting from the net proceeds of sales of Shares
received in a Share Distribution, which Shares would give rise to fractional
ADSs if additional ADRs were issued therefor, as in the case of Cash;
Rights. (i) Warrants or other instruments in the discretion of the
Depositary representing rights to acquire additional ADRs in respect of any
rights to subscribe for additional Shares or rights of any nature available to
the Depositary as a result of a distribution on Deposited Securities
("Rights"), to the extent that the Company timely furnishes to the Depositary
evidence satisfactory to the Depositary that the Depositary may lawfully
distribute same (the Company has no obligation to so furnish such evidence),
or (ii) to the extent the Company does not so furnish such evidence and sales
of Rights are practicable any dollars available to the Depositary from the net
proceeds of sales of Rights as in the case of Cash, or (iii) to the extent the
Company does not so furnish such evidence and such sales cannot practicably be
accomplished by reason of the nontransferability of the Rights, limited
markets therefor, their short duration or otherwise, nothing (and any Rights
may lapse); and
Other Distributions. (i) Securities or property available to the Depositary
resulting from any distribution on Deposited Securities other than Cash, Share
Distributions and Rights ("Other Distributions"), by any means that the
Depositary may deem equitable and practicable, or (ii) to the extent the
Depositary deems distribution of such securities or property not to be
equitable and practicable, any dollars available to the Depositary from the
net proceeds of sales of Other Distributions as in the case of Cash.
Such dollars available will be distributed by checks drawn on a bank in the
U.S. for whole dollars and round fractional amounts to the nearest whole cent
(any fractional cents being withheld without liability for interest and added
to future Cash distributions).
To the extent that the Depositary determines in its discretion that any
distribution is not practicable with respect to any Owner, the Depositary may
make such distribution as it so determines is practicable, including the
distribution of foreign currency, securities or property (or appropriate
documents evidencing the right to receive foreign currency, securities or
property) or the retention thereof as Deposited Securities with respect to
such Owner's ADRs (without liability for interest thereon or the investment
thereof).
There can be no assurance that the Depositary will be able to effect any
currency conversion or to sell or otherwise dispose of any distributed or
offered property, subscription or other rights, Shares or other securities in
a timely manner or at a specified rate or price, as the case may be.
DISCLOSURE OF INTERESTS
To the extent that the provisions of or governing any Disposed Securities
may require disclosure of or impose limits on beneficial or other ownership of
Deposited Securities, other Shares and other securities and may provide for
blocking transfer, voting or other rights to enforce such disclosure or
limits, Owners and all persons holding ADRs agree to comply with all such
disclosure requirements and ownership limitations and to cooperate with the
Depositary in the Depositary's compliance with any Company instructions in
respect thereof, and, in the Deposit Agreement, the Depositary has agreed to
use reasonable efforts to comply with such Company instructions.
Notwithstanding any provision of the Deposit Agreement, by being a Owner of
an ADR, each such Owner agrees to provide such information as the Company may
request in a disclosure notice (a "Disclosure Notice") given pursuant to the
United Kingdom Companies Act 1985 (as amended from time to time and including
any
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statutory modification or reenactment thereof, the "Companies Act") or the
Articles of Association of the Company. In the Deposit Agreement each Owner
acknowledges that it understands that failure to comply with a Disclosure
Notice may result in the imposition of sanctions against the Owner of the
Shares in respect of which the non-complying person is or was, or appears to
be or has been, interested as provided in the Companies Act and the Articles
of association which currently include, the withdrawal of the voting rights of
such Shares and the imposition of restrictions on the rights to receive
dividends on and to transfer such Shares. In addition, in the Deposit
Agreement each Owner agrees to comply with the provisions of the Companies Act
with regard to the notification to the Company of interests in Shares, which
currently provide, inter alia, that any Owner who is or becomes directly or
indirectly interested (within the meaning of the Companies Act) in 3% or more
of the outstanding Shares, or is aware that another person for whom is holds
such ADRs is so interested, must within two business days after becoming so
interested or so aware (and thereafter in certain circumstances upon any
change to the particulars previously notified) notify the Company as required
by the Companies Act.
RECORD DATES
The Depositary may fix a record date which shall be as near as practicable
to any corresponding record date set by the Company for the determination of
the Owners who shall be entitled to receive any distribution on or in respect
of Deposited Securities, to give instructions for the exercise of any voting
rights, to receive any notice or to act in respect of other matters and only
such Owners shall be so entitled.
VOTING OF DEPOSITED SECURITIES
As soon as practicable after receipt from the Company of notice of any
meeting or solicitation of consents or proxies of Owners of Shares or other
Deposited Securities, the Depositary shall mail to Owners a notice stating (i)
such information as is contained in such notice and any solicitation
materials, (ii) that each Owner on the record date set by the Depositary
therefor will be entitled to instruct the Depositary as to the exercise of the
voting rights, if any, pertaining to the Deposited Securities represented by
the ADSs evidenced by such Owner's ADRs and (iii) the manner in which such
instruction may be given, including instructions to give a discretionary proxy
to a person designated by the Company. Upon receipt of instructions of a Owner
on such record date in the manner and on or before the date established by the
Depositary for such purpose, the Depositary shall endeavor insofar as
practicable and permitted under the provisions of or governing Deposited
Securities to vote or cause to be voted (or to grant a discretionary proxy to
a person designated by the Company to vote in accordance with (iii) above) the
Deposited Securities represented by the ADSs evidenced by such Owner's ADRs in
accordance with such instructions. The Depository will not itself exercise any
voting discretion in respect of any Deposited Securities.
INSPECTION OF TRANSFER BOOKS
The Deposit Agreement provides that the Depositary will keep books at its
Transfer Office for the registration, registration of transfer, combination
and split-up of ADRs, which at all reasonable times will be open for
inspection by the Owners and the Company for the purpose of communication with
Owners in the interest of the business of the Company or a matter related to
the Deposit Agreement.
REPORTS AND OTHER COMMUNICATIONS
The Depositary shall make available for inspection by Owners at the Transfer
Office and reports and communications received from the Company which are both
(i) received by the Depositary as the Holder of the Deposited Securities and
(ii) made generally available to the holders of such Deposited Securities by
the Company. The Depositary shall also send to the Owners copies of such
reports when furnished by the Company. Any such reports and communications
furnished to the Depositary by the Company shall be furnished in English.
On or before the first date on which the Company makes any communication
available to holders of Deposited Securities or any securities regulatory
authority or stock exchange, by publication or otherwise, the
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Company shall transmit to the Depositary and the Custodian a copy of the
notice thereof (in English) in the form given or to be given to holders of
Shares or other Deposited Securities. The Depositary will, at the Company's
expense, arrange for the prompt mailing of copies thereof to all Owners. In
connection with any registration statement under the Securities Act relating
to the ADRs or with any undertaking contained therein, the Company and the
Depositary shall each furnish to the other and to the Commission or any
successor governmental agency such information as shall be required to make
such filings or comply with such undertakings. The Company has delivered to
the Depositary, the Custodian and any Transfer Office, a copy of all
provisions of or governing the Shares and any other Deposited Securities
issued by the Company or any affiliate of the Company and, promptly upon any
change thereto, the Company shall deliver to the Depositary, the Custodian and
any Transfer Office, copy of such provisions as so changed. The Depositary and
its agents may rely upon the Company's delivery thereof for all purposes of
the Deposit Agreement.
CHANGES AFFECTING DEPOSITED SECURITIES
Subject to the terms and conditions of the Deposit Agreement, the Depositary
may, in its discretion, amend the form of ADR or distribute additional or
amended ADRs (with or without calling the ADRs for exchange or cash,
securities or property on the record date set by the Depositary therefor to
reflect any change in par value, split-up, consolidation, cancellation or
other reclassification of Deposited Securities, any Share Distribution or
Other Distribution not distributed to Owners or any cash, securities or
property available to the Depositary in respect of Deposited Securities from
(and, in the Deposit Agreement, the Depositary is authorized to surrender any
Deposited Securities to any person and to sell by public or private sale any
property received in connect on with) any recapitalization, reorganization,
merger, consolidation, liquidation, receivership, bankruptcy or sale of all or
substantially all the assets of the Company, and to the extent the Depositary
does not so amend the ADR or make a distribution to Owners to reflect any of
the foregoing, or the net proceeds thereof, whatever cash, securities or
property results from any of the foregoing shall constitute Deposited
Securities and each ADS shall automatically represent its pro-rata interest in
the Deposited Securities as then constituted.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The ADRs and the Deposit agreement may be amended by the Company and the
Depositary, provided that any amendment that imposes or increases any fees or
charges (other than stock transfer or other takes and other governmental
charges, transfer or registration fees, cable, telex or facsimile transmission
costs, delivery costs or other such expenses), or that shall otherwise
prejudice any substantial existing right of Owners, shall become effective 30
days after notice of such amendment shall have been given to the Owners. Every
Owner of an ADR at the time any amendment to the Deposit Agreement so becomes
effective shall be deemed, by continuing to hold such ADR, to consent and
agree to such amendment and to be bound by the Deposit Agreement as amended
thereby. In no event shall any amendment impair the right of the Owner of any
ADR to surrender such ADR and receive the Deposited securities represented
thereby, except in order to comply with mandatory provisions of applicable
law.
The Depositary may, and shall at the written direction of the Company,
terminate the Deposit Agreement and the ADRs by mailing notice of such
termination to the Owners at least 90 days prior to the date fixed in such
notice for such termination. After the date so fixed for termination, the
Depositary and its agents will perform no further acts under the Deposit
Agreement and the ADRs, except to advise Owners of such termination, receive
and hold (or sell) distributions on Deposited Securities and deliver Deposited
Securities as soon as practicable after the expiration of one year from the
date so fixed for termination, the depositary shall sell the Deposited
Securities and shall thereafter (as long as it may lawfully do so) hold in a
segregated account the net proceeds of such sales, together with any other
cash then held by it under the Deposit Agreement, without liability for
interest, in trust for the pro rata benefit of the Owners not theretofore
surrendered. After making such sale, the Depositary shall be discharged from
all obligations in respect of the Deposit Agreement and the ADRs, except to
account for such net proceeds and other cash. After the date so fixed for
termination, the Company shall be discharged from all obligations under the
Deposit Agreement except for its obligations to the Depositary and its agents.
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CHANGES OF DEPOSITARY
The Depositary may charge each person to whom ADRs are issued against
deposits of Shares including deposits in respect of Share Distributions,
Rights and Other Distributions and each person surrendering ADRs for
withdrawal of Deposited Securities, $5.00 for each 100 ADSs (or portion
thereof) evidenced by the ADRs delivered or surrendered, fee of $.02 or less
per American Depositary Share (or portion thereof) for any cash distribution
made pursuant to the Deposit Agreement. The Company will pay all other charges
and expenses of the Depositary and any agent of the Depositary (except the
Custodian) pursuant to agreements from time to time between the Company and
the Depositary, except (i) stock transfer or other taxes and other
governmental charges (which are payable by Owners or persons depositing
Shares), (ii) cable, telex and facsimile transmission and delivery charges
incurred at the request of persons depositing, or Owners delivering Shares,
ADRs or Deposited Securities (which are payable by such persons or Owners),
(iii) transfer or registration fees for the registration of transfer of
Deposited Securities on any applicable register in connection with the deposit
or withdrawal of Deposited Securities (which are payable by persons depositing
Shares or Owners withdrawing Deposited securities; there are no such fees in
respect of the Shares as of the date of the Deposit Agreement) and (iv)
expenses of the Depositary in connection with the conversion of foreign
currency into dollars (which are paid out of such foreign currency).
LIABILITY OF OWNERS FOR TAXES
If any tax or other governmental charge shall become payable by or on behalf
of the Custodian or the Depositary with respect to the ADRs, any Deposited
Securities represented by the ADSs evidenced thereby or any distribution
thereon, such tax or other governmental charge shall be paid by the Owner
thereof to the Depositary. The Depositary may refuse to effect any
registration, registration of transfer, split-up or combination thereof or,
subject to the terms and conditions of the Deposit Agreement, any withdrawal
of such Deposited Securities until such payment is made. The Depositary may
also deduct from any distributions on or in respect of Deposited Securities,
or may sell by public or private sale for the account of the Owner thereof any
party or all of such Deposited Securities (after attempting by reasonable
means to notify the Owner thereof prior to such sale), and may apply such
deduction or the proceeds of any such sale in payment of such tax or other
governmental charge, the Owner thereof remaining liable for any deficiency,
and shall reduce the number of ADSs evidenced thereby to reflect any such
sales of Deposited Securities. In connection with any distribution to Owners,
the Company will remit to the appropriate governmental authority or agency all
amounts (if any) required to be withheld and owing to such author to or agency
by the Company; and the Depositary and the Custodian will remit to the
appropriate governmental authority or agency all amounts (if any) required to
be withheld and owing to such authority or agency by the Depositary or the
Custodian. If the Depositary determines that any distribution in property
other than cash (including Shares or rights) on Deposited Securities is
subject to any tax that the Depositary or the Custodian is obligated to
withhold, the Depositary may dispose of all or a portion of such property in
such amounts and in such manner as the depositary deems necessary and
practicable to pay such taxes, by public or private sale, and the Depositary
shall distribute the net proceeds of any such sale or the balance of any such
property after deduction of such taxes to the Owners entitled thereto.
GENERAL LIMITATIONS
The ADRs provide that the Depositary, the Company, their agents and each of
them shall: (i) incur no liability (a) if any present or future law,
regulation or any country or of any governmental or regulatory authority or
stock exchange, the provisions of or governing any Deposited Security, act of
God, war or other circumstance beyond its control shall prevent, delay or
subject to any civil or criminal penalty any act which the Deposit Agreement
or the ADRs provides shall be done or performed by it, or (b) by reason of any
exercise or failure to exercise any discretion given it in the Deposit
Agreement or the ADRs; (ii) assume no liability except to perform its
obligations to the extent they are specifically set forth in the ADRs and the
Deposit Agreement without gross negligence or bad faith; (iii) be under no
obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or the ADR; or (iv) not be
liable for any action or inaction by it in reliance upon the advice of or
information from legal counsel, accountants, any person presenting Shares
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for deposit, any Owner, or any other person believed by it to be competent to
give such advice or information. The Depositary, its agents and the Company
may rely and shall be protected in acting upon any written notice, request,
direction or other document believed by them to be genuine and to have been
signed or presented by the proper party or parties. The Depositary and its
agents will not be responsible for any failure to carry out any instructions
to vote any of the Deposited Securities, for the manner in which any such vote
is cast or for the effect of any such vote. The Depositary and its agents may
own and deal in any class of securities of the Company and its affiliates and
in ADRs. The Company has agreed to indemnify the Depositary and its agents
under certain circumstances and the Depositary has agreed to indemnify the
Company against losses incurred by the Company to the extent such losses are
due to the negligence or bad faith of the Depositary. Notwithstanding the
foregoing, no disclaimer of liability under the Securities Act is intended by
any provision of the ADRs.
Prior to the issue, registration, registration or transfer, split-up or
combination of any ADR, the delivery of any distribution in respect thereof,
or, subject to the terms and conditions of the Deposit Agreement, the
withdrawal of any Deposited Securities, the Company, the Depositary or the
Custodian may require: (i) payment with respect thereto of (a) any stock
transfer or other tax or other governmental charge, (b) any stock transfer or
registration fees in effect for the registration of transfers of Shares or
other Deposited Securities upon any applicable register, and (c) any
applicable charges as provided in the Deposit Agreement; (ii) the product on
of proof satisfactory to it of (a) the identity and genuineness of any
signature and (b) such other information, including without limitation,
information as to citizenship, residence, exchange control approval,
beneficial ownership of any securities, compliance with applicable law,
regulations, provisions of or governing Deposited Securities and terms of the
Deposit Agreement and the ADRs, as it may deem necessary or proper; and (iii)
compliance with such regulations as the Depositary may establish consistent
with the Deposit Agreement. The issuance of ADRs, the acceptance of deposits
of Shares, the registration, registration of transfer, split-up or combination
of ADRs or, subject to the terms of the Deposit Agreement, the withdrawal of
Deposited Securities may be suspended, generally or in particular instances,
when the ADR register for Deposited Securities is closed or when any such
action is deemed advisable by the Depositary or the Company.
GOVERNING LAW
The Deposit Agreement is governed by and shall be construed in accordance
with the laws of the State of New York.
THE DEPOSITARY
The Depositary is The Bank of New York, a New York banking corporation,
which has its principal office located in New York, New York. The Bank of New
York is a commercial bank offering a wide range of banking and trust services
to its customers in the New York metropolitan area, throughout the United
States and around the world.
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TAXATION
U.S. FEDERAL INCOME TAX AND U.K. TAX CONSEQUENCES TO OWNERS OF ADSS AND SHARES
The following generally summarizes the principal U.S. federal and U.K. tax
consequences of the purchase, ownership and disposition of ADSs evidenced by
ADRs and, except as provided explicitly below, Shares, to beneficial owners
that, for U.S. federal income tax purposes, are citizens or residents of the
U.S. (who are not also resident or, in the case of the individuals, ordinarily
resident in the U.K. for U.K. tax purposes), corporations or partnerships
created or organized under the laws of the United States or any state thereof,
estates the income of which is subject to U.S. federal income taxation
regardless of its source or a trust if a court within the United States is
able to exercise primary supervision over the administration and control of
the trust and one or more of the United States persons that have the authority
to control all substantial decisions of the trust (collectively "U.S.
Holders"); provided, however, to the extent and in accordance with the
procedures provided in Notice 98-25 (released by the Service on April 14,
1998) and future Treasury Regulations which will incorporate Notice 98-25,
certain trusts in existence on August 20, 1996, and treated as U.S. persons
prior to such date, which elect to continue to be treated as U.S. persons will
also be considered U.S. Holders. The discussion of U.S. tax consequences is
based on the advice of Akin, Gump, Strauss, Hauer & Feld L.L.P. and the
discussion of U.K. tax consequences is based on the advice of Masons.
The statements regarding the U.S. and U.K. tax laws set out below (i) are
based on the laws in force and as interpreted by the relevant taxation
authorities as of the date of this Registration Statement and are subject to
any changes in the U.S. or the U.K. law, or on the interpretation thereof by
the relevant taxation authorities or in the double taxation conventions
between the United States and the United Kingdom (the "convention"), occurring
after such date, (ii) are based in part, on representations of the Depositary,
and (iii) assume that each obligation in the Deposit Agreement and any related
Agreement will be performed in accordance with its terms.
The summary is of a general nature only and does not discuss all aspects of
U.S. and U.K. taxation that may be relevant to a particular investor. For
example, this summary deals only with ADRs held as capital assets and does not
address special classes of purchasers, such as dealers in securities; U.S.
Holders whose functional currency is not the U.S. dollar and certain U.S.
Holders (including, but not limited to, insurance companies, tax exempt
organizations, financial institutions and persons subject to the alternative
minimum tax) may be subject to special rules are not discussed below. Neither
does the following summary address the tax treatment of U.S. Holders who own,
directly or by attribution, 10% or more of the Company's outstanding voting
share capital. Except as otherwise expressly provided herein, the summary does
not discuss foreign, state, local, estate or gift tax consequences to owners
of ADSs and Shares. Since its purpose is limited to brief consideration of the
more commonly relevant provisions, in no case should this summary be taken as
constituting advice to an investor as to how he will or will not be taxed in
any jurisdiction and in no circumstances is it to substitute for professional
advice.
PROSPECTIVE PURCHASERS OF ADSS ARE STRONGLY ADVISED TO CONSULT WITH THEIR
OWN TAX ADVISORS WITH RESPECT TO THE CONTENTS OF THIS SUMMARY AND THE U.S.
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES AS WELL AS WITH RESPECT TO THE U.K.
TAX CONSEQUENCES AND TAX CONSEQUENCES IN OTHER JURISDICTIONS, OF THE OWNERSHIP
OF ADSS AND THE SHARES REPRESENTED THEREBY APPLICABLE IN THEIR PARTICULAR TAX
SITUATIONS.
For purposes of the conventions and the United States Internal Revenue Code
of 1986, as amended (the "Code"), U.S. Holders will be treated as the owners
of the Shares represented by ADSs evidenced by ADRs.
TAXATION OF DIVIDENDS
Under current U.K. law, the Company will be required when paying a dividend
in respect of the Shares to account to the U.K. Inland Revenue for a payment
known as advance corporation tax ("ACT"). At present, the
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rate of ACT is equal to one-quarter of the amount of the dividend. Dividends
carry a tax credit equal to one-quarter of the cash dividend, amounting to 20%
of the sum of the cash dividend paid and the associated tax credit. The tax
credit will be available to offset a U.K. resident individual's liability to
U.K. income tax in respect of the dividend, and may if the U.K. resident is a
non-taxpayer, be reclaimed from the U.K. Inland Revenue in cash. A basic rate
taxpayer will have no further liability to tax on the dividend, but a higher
rate tax payer will be subject to an additional tax liability on the
difference between the higher rate tax liability and the value of the tax
credit. U.K. resident trustees of discretionary trusts liable to account for
income tax at 34% on the trust's income may also be required to account for
additional tax. A U.K. resident corporate shareholder will not normally be
liable to U.K. corporation tax on any dividend received from the Company and
will be entitled to offset the related ACT on the dividend against ACT due on
its own qualifying distributions. From April 6, 1999, the treatment of tax
credits will change. Dividends will carry a tax credit of one-ninth of a cash
dividend. Although the credit will be available to offset a U.K. resident
individual's liability to U.K. income tax in respect of the dividend, such tax
credit will not be refundable.
An Eligible U.S. Holder (as defined below) is entitled under the Convention
relating to income taxes (the "Income Tax Convention") and current U.K. law to
claim from the U.K. Inland Revenue a refund (a "Treaty Payment") for an amount
equal to the amount of the tax credit to which an individual resident in the
U.K. for U.K. tax purposes would have been entitled had he received the
dividend (the "Tax Credit Amount"), subject to a U.K. withholding tax of 15%
of the sum of the dividend paid and the related Tax Credit Amount. For
example, assuming continuance of the Tax Credit Amount at the rate of 20/80ths
of the amount of the dividend, a dividend payment of 80p to such an eligible
U.S. Holder would generally entitle the Eligible U.S. Holder to a Treaty
Payment of 5p (a Tax Credit Amount of 20p, reduced by 15% of the sum of the
dividend and the Tax Credit Amount, or 15p) from the U.K. Inland Revenue
giving a total realization of 85p (before applicable U.S. taxes). After April
5, 1999 because of the reduction of tax credits in the U.K., as outlined
above, there will be no effective refund of tax (i.e., Treaty Payment) to
Eligible U.S. Holders.
For purposes of this Registration Statement, the term "Eligible U.S. Holder"
means a U.S. Holder that is a beneficial owner of an ADS and of the cash
dividend paid thereon and that satisfies the following conditions: the U.S.
Holder (i) is an individual or a corporation resident in the U.S. for the
purposes of the Income Tax Convention (and, in the case of a corporation, is
not also resident in the U.K. for U.K. tax purposes), (ii) holds the ADSs in a
manner which is not effectively connected with a permanent establishment in
the U.K. through which such U.S. Holder carries on business or with a fixed
base in the U.K. from which such U.S. Holder performs independent personal
services, (iii) under certain circumstances, is not an investment or holding
company 25% or more of the capital of which is owned, directly or indirectly,
by persons that are not individuals resident in, and are not nationals of the
U.S., and (iv) under certain circumstances, is not exempt from federal income
tax on dividend income in the U.S. Special rules apply to a corporation which
owns or, alone or together with one or more associated corporations, controls,
directly or indirectly, 10% or more of the voting shares of the Company.
A U.S. Holder that is a U.S. partnership, trust or estate, may be entitled
under the Income Tax Convention to receive a Treaty Payment in respect of a
dividend paid by the Company, but only to the extent that the income tax
derived by such partnership, trust or estate is subject to U.S. Tax as the
income of a U.S. resident either in its hands or in the hands of its partners
or beneficiaries, as the case may be.
For U.S. federal income tax purposes, the gross amount of a dividend plus
the Tax Credit Amount (i) will be included in gross income by an Eligible U.S.
Holder (at the dollar value of the dividend payment, on the date of the
receipt by the Depositary, regardless of whether the dividend is converted
into dollars) and (ii) will be treated as foreign source dividend income to
the extent paid out of current or accumulated earnings and profits as
determined for U.S. federal income tax purposes. Subject to certain
limitations, the 15% U.K. withholding tax will be treated as a foreign income
tax eligible for direct credit against such Eligible U.S. Holder's federal
income taxes. For purposes of the foreign tax credit limitations, dividends
distributed by the Company will generally constitute "passive income" or, in
the case of certain U.S. Holders, "financial services income." The
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consequences of these limitations will depend on the nature and sources of
each U.S. Holder's income and the deduction appropriately allocated or
apportioned thereto. No dividends received deduction will be allowed with
respect to dividends paid by the Company. If dividends paid by the Company
were to exceed its current and accumulated earnings and profits as determined
for federal income tax purposes, such excess would be treated as a non-taxable
return of capital to the extent of the U.S. Holder's adjusted basis in the
ADSs, and any excess would be treated as capital gain.
The Company may make arrangements with the U.K. Inland Revenue (the "H
Arrangements") which will permit the applicable Treaty Payments to be paid to
certain Eligible U.S. Holders at the same time as, and together with, cash
dividends paid by the Company in respect of ADSs. The H Arrangements, which
operate in respect of dividends paid on shares of U.K. companies that are
represented by ADSs evidenced by ADRs, are implemented at the discretion of
the U.K. Inland Revenue and may be amended or revoked. The H Arrangements
generally apply to Eligible U.S. Holders other than (i) estates or trusts any
of the beneficiaries of which are not resident in the U.S., (ii) investment or
holding companies 25% or more of the capital of which is owned, directly or
indirectly, by persons who are not individuals resident in, or nationals of,
the U.S., (iii) persons (other than certain pension funds) exempt from U.S.
federal income tax with respect to cash dividends paid on the Shares, (iv)
persons owning 10% of more of the Shares, and (v) certain business and
investment trusts. To claim the benefit of the H Arrangements, (i) the
registered holder must complete the declaration on the reverse of the dividend
check confirming the Eligible U.S. Holder's entitlement to the Treaty Payment
and present the check for payment within three months from the date of issue
of the check or (ii) in the case of ADRs held through The Depository Trust
Company ("DTC"), the broker-dealer or bank-member of DTC which holds the ADRs
on behalf of the Eligible U.S. Holder must complete a declaration as to the
conditions entitling the Eligible U.S. Holder to the Treaty Payment.
If the H Arrangements are not made with the U.K. Inland Revenue at the time
an Eligible U.S. Holder receives a distribution from the Company, or if the H
Arrangements are made at such time but an Eligible U.S. Holder does not
qualify for the benefits of such arrangements, such Eligible U.S. Holder must,
in order to obtain a Treaty Payment, file a claim for the Treaty Payment in
the manner described in U.S. Internal Revenue Service Revenue Procedure 80-18,
1980-1 C.B. 623 and Revenue Procedure 81-58, 1981-2 C.B. 678, as amended.
Claims for such payments must be made within five years from the January 31
following the end of the year of assessment to which it relates. The first
claim for a tax credit under these procedures is made by sending the
appropriate U.K. form in duplicate to the Internal Revenue Service Center with
which the Eligible Holder's last U.S. income tax return was filed. Forms may
be obtained from the Internal Revenue Service, Assistant Commissioner
(International), 950 L'Enfrant Plaza South, S.W., Washington, D.C. 20219;
Attention: Taxpayer's Service Division. Because a claim is not considered made
until the U.K. tax authorities receive the appropriate form from the Internal
Revenue Service, forms should be sent to the Internal Revenue Service well
before the end of the applicable limitation period. Any claim by a claimant
after the first claim should be filed directly with the Financial
Intermediaries and Claims Office, Fitz Roy House, P.O. Box 40, Nottingham,
England, NG2 IBD.
TAXATION OF CAPITAL GAINS
A U.S. Holder who is not resident or ordinarily resident in the U.K. for
U.K. tax purposes will not be liable for U.K. tax on capital gains realized on
the disposal of ADSs unless, at the time of disposal, the U.S. Holder is
carrying on a trade, profession or vocation in the U.K. through a branch or
agency which constitutes a permanent establishment or fixed base, and the ADSs
are or have been used, held or acquired for the purposes of such trade,
profession or vocation of such branch or agency.
Upon the sale or other disposition of an ADS, a U.S. Holder will generally
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realized on such sale or disposition and
the U.S. Holder's adjusted tax basis in the ADS. Such gain or loss will be
capital gain or loss if the U.S. Holder holds its ADS as a capital asset.
Prospective investors should consult their tax advisors regarding the U.S.
federal income tax treatment of capital gains (which may be taxed at lower
rates than ordinary income for certain taxpayers who are individuals) and
losses (the deductibility of which is subject to limitations).
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A U.S. Holder that is liable for both U.K. and U.S. tax on a gain on the
disposal of the ADSs will generally be entitled, subject to certain
limitations and pursuant to the Income Tax Convention, to credit the amount of
U.K. capital gains or corporation tax, as the case may be, paid in respect of
such gain against such U.S. Holder's U.S. federal income tax liability in
respect of such gain. U.S. Holders should seek professional tax advice to
determine their entitlement to credit U.K. tax against their U.S. federal
income tax liability.
PASSIVE FOREIGN INVESTMENT COMPANY STATUS
PFIC CLASSIFICATION
Special U.S. taxation rules are applicable to U.S. persons owning shares in
a "passive foreign investment company" ("PFIC"). Investors that are not
subject to U.S. taxation in respect of income on the ADSs or that are not U.S.
persons generally will not be affected by the PFIC rules. A foreign
corporation will be classified as a PFIC for any taxable year during which
either 75% or more of its gross income (including the pro rata share of the
gross income of any corporation (U.S. or foreign) in which the Company is
considered to own 25% or more of the shares by value) for the taxable year is
passive income or 50% or more of the average quarterly value of all of its
assets (including the pro rata share of the assets of any corporation in which
the Company is considered to own 25% or more of the shares by value) produce,
or are held for the production of, passive income. For this purpose, passive
income generally includes dividends, interest, royalties, rents (other than
rents and royalties derived in the active conduct of a trade or business),
annuities and gains from assets that produce passive income. Because the
Company will have a relatively large amount of passive assets, such as cash
and marketable securities (including cash derived from the issuance of ADSs in
the offering), pending investment of such assets in the Company's business, it
is possible that the Company may be or could become a PFIC in any year.
Although the Company will attempt to conduct its business so as to avoid PFIC
status, the Company can provide no assurances that it will not be a PFIC in
respect of its current or any future taxable year.
CONSEQUENCES OF PFIC STATUS
If the Company were to be classified as a PFIC, a U.S. Holder generally
would be subject to special tax rules with respect to gain realized on the
sale or any other disposition of such ADSs, and any "excess distribution" by
the Company to the U.S. Holder with respect to ADSs held for more than one
taxable year. In general, excess distributions are any distributions
(including return of capital distributions) received by the U.S. Holder in a
taxable year that are greater than 125% of the average annual distributions
received by the U.S. Holder in the three preceding taxable years, or the U.S.
Holder's holding period, if shorter). Under these rules (i) the gain or excess
distribution would be allocated ratably over the U.S. Holder's holding period
for the ADSs, (ii) the amount allocated to the current taxable year would be
treated as ordinary income, (iii) the amount allocated to each prior year
would be subject to tax at the highest rate in effect for that year and (iv)
the interest charge generally applicable to under payments of tax would be
imposed with respect to the resulting tax attributable to each such prior
year. For purposes of the foregoing rules, a U.S. Holder who uses such ADSs as
security for a loan will be treated as having disposed of such ADSs.
For tax years beginning after 1997, a U.S. Holder of ADSs in a PFIC that are
treated as "marketable stock" may also make a "mark-to-market" election. A
shareholder making the "mark-to-market" election will not be subject to the
PFIC rules described above. Instead, in general, an electing shareholder will
include in each year as ordinary income the excess, if any, of the fair market
value of the ADSs at the end of the taxable year over their adjusted basis and
will be permitted an ordinary loss in respect of the excess, if any, of the
adjusted basis of the ADSs over their fair market value at the end of the
taxable year (but only to the extent of the net income of previously included
income as a result of the "mark-to-market" election). The electing U.S.
Holder's basis in the ADSs will be adjusted to reflect any such income or loss
amounts.
If the Company is a PFIC in any year, a U.S. Holder who beneficially owns
ADSs during such year must file an annual return or IRS Form 8621 that
described its interest in the Company, the distributions received from the
Company and any gain realized on the disposition of ADSs.
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ESTATE AND GIFT TAXES
An ADR held by an individual U.S. Holder whose domicile is determined to be
in the U.S. for purposes of the Estate Tax Treaty and who is not a national of
the U.K. will not be subject to U.K. inheritance tax on such individual's
death or on a lifetime transfer of the ADR except in certain cases where the
ADR (i) is part of the business property of a U.K. permanent establishment of
an enterprise of the U.S. or (ii) pertains to a U.K. fixed base used for the
performance of independent personal services. The Estate Tax Treaty generally
provides a credit against U.S. federal estate or gift tax liability for the
amount of any tax paid in the U.K. in a case where the ADR is subject to both
U.K. inheritance tax and to U.S. federal estate or gift tax. A Share or ADR
comprised in a settlement generally will not be chargeable to U.K. inheritance
tax if the settlement was made when the settlor was domiciled in the U.S. and
was not a national of the U.K. An individual U.S. Holder will be subject to
U.S. estate and gift taxes with respect to the ADRs in the same manner and to
the same extent as with respect to other types of personal property.
U.K. STAMP DUTY ("SD") AND STAMP DUTY RESERVE TAX ("SDRT")
SDRT at the then applicable rate arises upon the deposit with the Depositary
of the Shares in exchange for ADSs evidenced by ADRs. The current rate of SDRT
on the deposit of Shares is 1.5%. In certain cases, U.K. SD could also arise
on the deposit and the current rate is (Pounds)1.50 per (Pounds)100 (or part
thereof). The amount of SDRT payable will be reduced by any SD paid in
connection with the same transaction. SDRT will be payable by the Depositary
in the first instance. In accordance with the terms of the Deposit Agreement,
holders of ADRs must pay an amount in respect of such tax to the Depositary.
Provided that the instrument of transfer is not executed in the United
Kingdom and remains at all subsequent times outside the United Kingdom, no
U.K. SD will be payable on the acquisition or transfer of ADSs. Nor will an
agreement to transfer ADSs give rise to a liability to SDRT, provided both
parties are not resident in the U.K. and the agreement is made outside the
U.K.
A transfer of Shares by the Depositary or its nominee to the relative ADR
holder when the ADR holder is not transferring beneficial ownership will give
rise to U.K. SD at the rate of (Pounds)0.50 per transfer.
Transfer of Shares, as opposed to ADSs will normally give rise to a charge
to U.K. SD at the rate of (Pounds)0.50 per (Pounds)100 (or part thereof) of
the price payable for the Shares at the time of the transfer or agreement to
transfer. SD and SDRT are usually the liability of the purchaser. Where such
Shares are later transferred to the Depositary, further SDRT will normally be
payable upon the deposit at the rate of 1.5% of the value of the Shares at the
time of transfer. In certain cases, U.K. SD could also arise in the transfer
at the rate of (Pounds)l.50 per (Pounds)100 (or part thereof), subject to the
amount of any SDRT being reduced by such SD on the same transaction.
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