7.
(b)
Income
The following table shows, for illustrative purposes only and on the bases set out below, the financial effects of acceptance of the Final Offer and the Cash Election on income for a holder of 100 Midland shares if the Final Offer becomes or is declared unconditional in all respects:
Final
Offer
Cash Election
£
£
Gross income from 120 new HSBC Holdings shares (note (i))
Gross income from £65 nominal new HSBC Holdings bonds (note (ii))
Gross income from £65 cash (note (iii))
15.64
15.64
7.74
5.98
Total gross income
23.38
21.62
Gross income from 100 Midland shares (note (iv))
4.53
4.53
Increase
18.85
17.09
This represents an increase of
415.9% 377.0%
Notes:
(i) The gross income from the new HSBC Holdings shares is based on the interim dividend of HK$0.54 (equivalent to 3.81p) per existing HSBC Holdings share and the final dividend of HK$1,31 (9.23p) per existing HSBC Holdings share paid in respect of the year ended 31 December 1991.
(ii) The gross income from the new HSBC Holdings bonds has been based on the estimated coupon of 11.91 per cent. as at 8 June 1992, the latest practicable date prior to the printing of this document. The estimated coupon of 11.91 per cent. has been determined using the redemption yield of 9.17 per cent. on the UK 9% per cent. Treasury Stock 2002, as at 8 June 1992, and using the calculation described in paragraph 7(b) of Part III of the Supplementary Listing Particulars. The terms and conditions of the new HSBC Holdings bonds are summarised in Part III of the Supplementary Listing Particulars.
(iii) The cash receivable under the Cash Election is assumed to be re-invested so as to yield 9.20 per cent. per annum (being the average gross redemption yield for British Government medium coupon 5 year securities as calculated by the FT-Actuaries Index for 5 June 1992).
(iv) The gross income from Midland shares is based on the interim dividend of 1.7p net per share and the second interim dividend of 1.7p net per share paid in respect of the year ended 31 December 1991, together with the associated UK tax credit on those dividends.
(v) No account has been taken of any potential liability to taxation or the treatment of fractions.
(vi) Dividends paid by HSBC Holdings after it becomes UK tax resident will, like dividends on Midland shares at present, carry an associated UK tax credit, so increasing the gross value of the dividends in the hands of certain shareholders.
(vii) All Hong Kong dollar dividends have been converted to sterling at the current exchange rate.
Terms and conditions of the Final Offer
The Midland shares will be acquired fully paid, free from all liens, charges and encumbrances and other interests and together with all rights attaching thereto on or after 2 June 1992 including the right to receive all dividends and other distributions thereafter declared, made or paid.
The Final Offer is conditional, inter alia, on the London Stock Exchange announcing, or (if HSBC Holdings so determines and with the consent of the Panel) agreeing to announce, its decision to admit the new HSBC Holdings shares and new HSBC Holdings bonds to the Official List in accordance with rule 520 of the rules of the London Stock Exchange and on the Hong Kong Stock Exchange granting or agreeing to grant a listing of, and permission to deal in, the new HSBC Holdings shares to be issued pursuant to the Final Offer.
Fractions of new HSBC Holdings shares and amounts of new HSBC Holdings bonds of less than £1 nominal value will not be allotted or issued to accepting Midland shareholders but will be aggregated and sold in the market and the net proceeds of sale distributed pro rata to the Midland shareholders entitled to them. However, individual entitlements of less than £3 will not be paid to Midland shareholders but will be retained for the benefit of the enlarged HSBC Holdings group.
13
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