Frequently Asked Questions
- Why did Singtel carry out a capital reduction?
The capital reduction exercise helped optimise Singtel's capital structure. It enhanced the Group's earnings per share and improved its return on equity. More importantly, with the capital reduction, there is no dilution for shareholders.
After the capital reduction, the Group's financial position remained strong with leverage at a comfortable level. Healthy cash flow generation is expected to support its operating needs and to fund new business opportunities.
- How was the cash distribution price of S$2.74 per share determined?
The price of S$2.74 as cash distribution for each Singtel share cancelled was based on the average closing prices of Singtel shares traded on the SGX-ST from 24 April 2006 to 28 April 2006 (both dates inclusive) (28 April 2006 being the latest practicable date prior to the date of the announcement of the capital reduction).
- How did Singtel decide on a ratio of one share to be cancelled for every 20 shares held?
Singtel assessed its funding requirements and decided to return approximately S$2.3 billion to shareholders. Based on a share price of S$2.74, this resulted in the cancellation of 829 million Singtel shares, or five per cent of Singtel's earlier issued share capital of 16.7 billion shares. The ratio of one share for every 20 held was equivalent to about five per cent.
- How have I, as a Singtel shareholder, benefited from this?
Singtel shareholders benefited from this capital reduction as: The capital reduction enabled Singtel to optimise its capital structure, i.e., achieve a better mix of debt and cash. Having an optimal capital structure enables the company to generate the most efficient level of returns from its capital resources, thus benefiting shareholders. Singtel’s earnings per share is expected to improve as the number of issued shares decreased after the reduction. Each shareholder's proportionate ownership and voting rights in the company remained substantially unchanged.
- Where did the funds come from?
The capital reduction was financed by the Group's existing cash generated from the business operations and short-term investments. The Singtel Directors are of the opinion that the cash distribution under the capital reduction of approximately S$2.3 billion is in excess of the Group's needs and there are sufficient resources to fund the near-term operating and investment needs of the Group.
- Will I have to pay tax on proceeds from the capital reduction?
Generally, for shareholders resident in Singapore, the proceeds should be regarded as a return of capital (and not as the payment of a dividend). Shareholders are generally not subject to Singapore tax on return of capital unless they are traders in securities or have classified their investments as trading stocks, marketable securities or short-term investments.
For shareholders resident in Australia who are holding Singtel shares or CUFS on capital account, that is, not on revenue account or as a trading stock or with a profit-making intention, the Australian Tax Office has confirmed that the capital reduction will not be treated as a dividend distribution for Relevant Shareholders in relation to each Share or CUFS cancelled. Any gain may, however, be subject to Australian capital gains tax.
The above statements should not be regarded as advice on the tax position of any shareholder. Shareholders who are in doubt as to their tax positions or who may be subject to tax in a jurisdiction outside Singapore or Australia should consult their own professional advisers.
- How many Singtel shares did I end up with after the capital reduction?
Shareholders were notified of their shareholdings in the company after the completion of the capital reduction exercise. Group A and ST2 shareholders were notified by CPF of the number of shares held after the capital reduction. New holding statements were also issued to holders of CUFS.
