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Avi Limited - Unbundling Of Avi`s Shareholding In Consol
- Apportionment Ratio For Tax Purposes
Avi Limited
(Formerly Anglovaal Industries Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1944/017201/06)
Share code: AVI
ISIN: ZAE000049433
(`AVI`)
CONSOL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/021828/06)
Share code: CSL
ISIN: ZAE000063251
(`Consol`)
UNBUNDLING OF AVI`S SHAREHOLDING IN CONSOL - APPORTIONMENT RATIO FOR TAX
PURPOSES
1. INTRODUCTION
The circular to AVI ordinary shareholders and preference shareholders
(`shareholders`) dated Friday, 14 January 2005 (`the circular`) provided
shareholders with information about the unbundling of AVI`s entire holding of
ordinary shares in Consol (`Consol distribution shares`) to AVI ordinary
shareholders (`AVI shareholders`) registered in AVI`s register of shareholders
on Friday, 4 March 2005 and the separate listing of Consol on the JSE Securities
Exchange South Africa (`the JSE`)(`the unbundling`).
The purpose of this announcement is to notify AVI shareholders of the ratio to
be used in the apportionment for tax purposes of the original cost or base cost
of an AVI ordinary share (`the AVI share`) between the AVI share after the
unbundling and the Consol distribution share received in terms of the
unbundling. A summary of the South African tax considerations was set out in the
circular.
2. APPORTIONMENT RATIO
The ratio of the respective market values of the AVI shares and Consol
distribution shares on the JSE as at 17:00 on Tuesday,
1 March 2005, being the day after the date of listing of Consol, is 57.69%
relating to the AVI shares and 42.31% relating to the Consol distribution shares
(`the apportionment ratio`). The apportionment ratio is to be used to apportion
the cost between the AVI shares and the Consol distribution shares for the
determination of profits and losses (of a capital and trading nature) derived on
any future disposals of the AVI shares and the Consol distribution shares.
3. AVI SHARES HELD AS TRADING STOCK
AVI shareholders holding their AVI shares as trading stock will be deemed to
have acquired both their AVI shares and Consol distribution shares at an amount
equal to the original cost of the AVI shares, as contemplated in section 11(a),
section 22(1) or section 22(2) of the Income Tax Act. This cost must be
apportioned between the AVI shares and the Consol distribution shares on a pro
rata basis using the apportionment ratio.
4. AVI SHARES HELD AS CAPITAL ASSETS
AVI shareholders holding their AVI shares as capital assets will be deemed to
have acquired their AVI shares and Consol distribution shares for a cost equal
to the base cost of the AVI shares as contemplated in the paragraph 20 of the
Eighth Schedule to the Income Tax Act.
The base cost can be calculated in a number of ways:
* for AVI shares acquired before 1 October 2001, the base cost will either be
the market value of the shares at that date, being R10.78, or a cost determined
on the time-apportionment basis plus any expenditure actually incurred on or
after 1 October 2001;
* for AVI shares acquired after 1 October 2001, the base cost will be the
expenditure actually incurred in respect of the acquisition of such shares; and
* a further method of determining the value for tax purposes (`valuation date
value`) is the 20% of proceeds method. In terms of the unbundling, AVI
shareholders would be deemed to have acquired their AVI shares and Consol
distributions shares on the same day. If an AVI shareholder disposes of either
the AVI shares or Consol distribution shares such AVI shareholder could elect to
utilise 20% of the proceeds from such disposal as the valuation date value of
the respective shares.
The base cost must be apportioned between the AVI shares and Consol distribution
shares on a pro rata basis determined using the apportionment ratio.
If AVI shareholders have elected to determine the valuation date value as the
market value of the AVI shares at 1 October 2001, the pro rata apportionment of
such market value will be R6.22 per AVI share and R4.56 per Consol distribution
share.
AVI shareholders will be deemed to have acquired the Consol distribution shares
on the date on which the AVI shares were originally acquired and to have
incurred the expenditure on that date.
Chislehurston
Sandton
2 March 2005
Investment bank and sponsor
STANDARD BANK
Independent reporting accountants and auditors
KPMG
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