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JSE ABSP
ABSP
ABSP - ABSA Bank - Announced changes in secondary tax on companies and
taxation of dividends and their effect on absa bank
preference shares
ABSA BANK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1986/004794/06)
ISIN: ZAE000079810
JSE share code: ABSP
(Absa Bank)
ABSA BANK LIMITED - ANNOUNCED CHANGES IN SECONDARY TAX ON COMPANIES AND
TAXATION OF DIVIDENDS AND THEIR EFFECT ON ABSA BANK PREFERENCE SHARES
Arising from the Budget speech, 21 February 2007, Absa Bank wishes to
clarify certain issues regarding changes in secondary tax on companies
(STC) and the introduction of taxation of dividends, as they apply to Absa
Bank`s non-cumulative non-redeemable preference shares (the ABSP preference
shares).
At this stage we interpret the announced changes and the effect on current
and future investors in ABSP preference shares (the preference
shareholders) as follows:
1. In phase 1, which will become effective on 1 October 2007:
- the STC rate will be reduced from 12,5% to 10,0%; and
- STC will be payable on all distributions, regardless of profits.
There will be no effect on the dividend income of the preference
shareholders as a result of the changes introduced in phase 1.
2. In phase 2, which is envisaged to commence in 2008, STC will be
replaced with a 10% dividend tax on shareholders, which will be
enforced administratively as a withholding tax.
We would like to study the text of the draft legislation giving effect to
the abovementioned changes before expressing a final view on its impact on
the ABSP preference shares. At the moment we believe that phase 2 of the
proposed legislative changes will require certain amendments to the terms
and conditions of the ABSP preference shares (terms and conditions). It is
Absa Bank`s view that any such changes should be consistent with the
intention of the existing tax changes clause contained in the terms and
conditions and should be in the best interests of all parties. Any changes
to the terms and conditions will have to be approved by the preference
shareholders.
The ABSP preference shares are an important capital and funding instrument
for Absa Bank and a final decision on the impact of the proposed
legislative changes on the ABSP preference shares will only be taken once
clarity on the proposed changes to the legislation has been obtained. We
will immediately communicate any decisions in this regard to our preference
shareholders.
Enquiries
Carel Gronum
Head: Capital Management
Tel: (+2711) 350 8995;
e-Mail: carelg@absa.co.za
Jacques Schindehutte
Group executive director
Tel: (+2711) 350 4850
e-Mail: jacquessc@absa.co.za
Lead sponsor:
Merrill Lynch South Africa (Proprietary) Limited
Co-sponsor:
Absa Capital, a division of Absa Bank Limited
Johannesburg
27 February 2007
Date: 27/02/2007 15:37:01 Produced by the JSE SENS Department.
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