We are unable to comment on any specific circumstances. Each shareholder should contact their own tax adviser concerning the tax consequences of their particular situation.
Deferred shares will be acquired at a nominal price at the end of the deferred redemption period - i.e February 2008 - and therefore will be deemed to be disposed at that date for CGT purposes.
Cost Basis For UK Shareholders:
For UK capital gains tax purposes, the original base cost of Existing ordinary shares is apportioned between the New ordinary shares and the B shares by reference to their respective market values in accordance with the following:
The proportion of the original base cost allocated to the B shares is calculated by multiplying the original base cost by a ratio, X/(X+Y) where:
X is equal to the number of B shares issued to the shareholder multiplied by 15 pence; and
Y is equal to the number of New ordinary shares multiplied by 116.125 pence, being the relevant market value of a New ordinary share
Due to the existence of fractional entitlements for most shareholders, where the number of Existing ordinary shares does not divide exactly by 8, this ratio will be different for each shareholder.
The remaining original base cost is allocated to the New ordinary shares.
Cost Basis for US Shareholders:
Generally, no existing tax basis is expected to be allocated to the B shares under Alternative 2 for US federal tax purposes. The receipt of B shares is expected to be viewed for the majority of individuals as the receipt of a dividend under US tax law. In respect of the share consolidation the existing tax basis is allocated on a proportional basis. For example if A owns 8 shares/ ADRs with an original total cost of £8, on consolidation the 7 new shares/ ADRs inherit the old original total cost base of £8, I.e. the individual share cost base will increase by 8/7.