Questions & Answers

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1.- What is this shareholder remuneration method?

ACS wants to continue providing shareholders with an alternative which, in no way limiting the possibility of their receiving the full annual remuneration in cash, if they so wish, allows them to receive shares in the Company with the tax treatment applying to liberated shares. 

In order to implement this system, the Annual General Meeting of Shareholders of ACS held on 10 May 2018 approved a liberated capital increase, which is to be executed within the year following the date of approval on one occasion or two at the very most, and also approved that the Company assumes the irrevocable commitment to purchase the free allocation rights corresponding to said liberated capital increase at a fixed price (the Purchase Commitment), which will allow all the shareholders wishing to do so to sell their rights and receive a cash amount equivalent to the dividend payment.

On 11th June 2018, the Chairman and CEO of the Company, performing the powers delegated to him, resolved to carry out the First execution of the liberated share capital increase (the “First Execution”), by a total effective amount of 299 million euro (equivalent to 0.936 euros per share). 

2.- How is this remuneration system implemented?

The shareholders of the Company are scheduled to receive a free allocation right for each ACS share they own as of 21th June 2018, at 23:59 CET.

These rights will be negotiable and therefore they may be transferred under the same conditions as the shares from which they originate on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges during a term of fifteen (15) calendar days, after which period the rights will automatically become newly issued shares of the Company, and they will be allocated to those who at the time are holders of free allocation rights.

On the other hand, ACS assumes, in respect of the holders of free allocation rights, an irrevocable commitment to acquire the above-mentioned rights at a guaranteed fixed price which will be determined in conformity with the formulas approved at the General Meeting of Shareholders of the Company (the Purchase Commitment). In this way, the Company guarantees all the shareholders the possibility of monetising their rights at a fixed price in the event they do not wish to receive new shares.

3.- How many free allocation rights do I get for each ACS share I hold and when will I receive them?

The legitimate holders of ACS shares will receive one free allocation right for each share held as of 21th June 2018 at 23:59 CET.

4.- How many free allocation rights are required to receive a new share?

39 free allocation rights.

5.- When will the final terms of the capital increase and the rest of the conditions be disclosed?

On 19th June 2018 the Company is scheduled to disclose the terms of the First Execution, the number of free allocation rights (39) required to obtain a new share and the final price of ACS’ Purchase Commitment (0.936 €).

6.- What options do I have with this remuneration method?

Once they have received their free allocation rights, the shareholders of ACS will have the option, according to whatever they freely choose, of:

(a)   Do nothing. In such event the shareholder will receive a number of fully liberated new shares in the proportion to which he is entitled.

(b)   By virtue of the Purchase Commitment, transferring to ACS at the guaranteed fixed price all or a part of the free allocation rights owing to the shares acquired before 21th June 2018 , but not for those acquired later than this date. In this way, a shareholder would choose to monetise his rights at a fixed price.

(c)   Transferring all or a part of the free allocation rights on the market. In this case, the shareholder would also choose to monetise his rights, although in this case he would not receive a guaranteed fixed price; instead the consideration for the rights would depend on market conditions in the time of the sale.

The shareholders of the Company may combine any of the alternatives mentioned in sections (a), (b) and (c) above. It should be noted that the tax treatment of the above-mentioned alternatives varies.

7.- Who should I address in order to communicate the option I have chosen?

You must contact the depositary institution in order to communicate your decision.

If you do not give any instructions, you will receive free shares according to the number of free allocation rights you own.

8.- What term do I have to communicate the option I choose?

If you decide to sell your rights on the market, you must communicate to the depositary institution during the negotiation period established for the purpose. The negotiation period is scheduled to take place between 22th June and 29th June 2018 inclusive. 

If you decide to sell your rights to ACS at the guaranteed fixed price (Purchase Commitment), you must likewise communicate to your depositary institution before 29th June 2018.

If you do not give out any instruction, you will receive shares according to the number of free allocation rights you own.

9.- If I choose to receive shares, do I have to pay for them?

No. The capital increase will take place free of expenses and fees in respect of the allocation of the newly issued shares.

ACS will pay for the issuance, subscription, circulation, listing and any other costs in relation to the capital increase. However, the institution where your shares are deposited may establish, in accordance with the law in force, any administration-related fees and expenses that it freely determines, arising from maintaining the securities in its book records.

10.- May I choose to receive part in free shares and part in cash?

Yes.

11.- What option is more interesting: receiving cash or shares?

It is a personal decision for you to make. If you would rather receive new ACS shares free of charge, which you will always be able to sell whenever you need to, then you should choose not to sell the free allocation rights and accept the shares.

Now if cash is what you prefer, then you can sell your free allocation rights.

In any case, your decision will depend on your personal, financial and property circumstances, as well as on the tax regime applying to each option and the one applying to you, therefore we recommend that you check with your advisors before deciding, if you think this is appropriate.

12.- In the event I choose to receive cash, what is better: selling the free allocation rights to ACS or on the market?

If you decide to sell your free allocation rights to ACS, the sale will take place at a guaranteed fixed price (Purchase Commitment), but the same withholding tax will be applied as if it were a cash dividend.

If you sell your free allocation rights on the market, no tax withholding will be applied, but you will not have the guaranteed fixed price (Purchase Commitment) offered by ACS. Therefore, in this case you may receive more or less cash than if you decide to sell them to ACS, depending on the quoted price of the free allocation rights at the time of the sale.

You must also consider the date on which you receive the cash, because it may vary depending on which alternative you choose.

In either case, the financial institution at which you have your shares deposited may establish, in accordance with the law in force, the fees and expenses that it freely determines for the processing of the purchase and sale orders of the free allocation rights.

13. If I choose to sell my rights on the market, when will I receive my money?

On the third business day following the date of sale.

14.- If I choose to sell my free allocation rights to ACS, when will I receive my money?

It is scheduled to take place on 10th July 2018.

15.- If I choose to receive shares, when will they be at my disposal?

Foreseeably no later than 20th July 2018.

16.- Why is there a difference between the dates on which I would receive cash or the ACS shares?

This is mainly due to the time required to carry out all of the formalities required to get the newly issued shares included in Iberclear (Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. Unipersonal), to have those shares listed on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges, and for the registration of the Second Execution of the capital increase (as well as the simultaneous capital reduction) with the Mercantile Registry.

17.- What happens if the number of free allocation rights corresponding to me does not entitle me to receive a share or if it is not an exact multiple of the proportion required for subscribing shares? What can I do? And if I were to do nothing, what would happen?

If you are a holder of a number of free allocation rights that is below the number of rights required for the allocation of a share or if the number of rights you hold is not an exact multiple of the required proportion, you may:

(a) Acquire a sufficient number of free allocation rights on the market so that, by adding them to those already in your possession, it grants you the right to receive one more share;

(b) Transfer all or part of your free allocation rights to ACS or on the market.

If you do not choose between any of the above alternatives, what is established in the section below will apply.

18.- What will happen with rights that are not sufficient for you to receive a share?

Depending on the securities deposit and administration agreement you have entered into with the depositary institution (or depending on the instructions you have given to that institution), the depositary institution will sell them on the market and will pay you the result of the sale in cash.

Subject to the foregoing, if said agreement or the instructions you have given to the depositary institution do not consider/permit that sale, the liberated shares corresponding to those ‘odd lots’ (yours and those of the rest of the shareholders in the same situation) will be deposited in a securities account under the name of ACS and on behalf of third parties.

Once three years have elapsed following the day on which the deposit was established, the shares may be sold by ACS and the net amount of the sale of the shares will be deposited at the disposal of the parties concerned at the Bank of Spain or at the General Deposits Fund (Caja General de Depósitos) pursuant to the provisions in article 117.3 of the Capital Companies Act. 

19.- What is the tax treatment of each one of the options?

The tax regime applying in Spain to the shareholders will be the following:

a) Delivery of shares.

The delivery of shares as a consequence of the First Execution will be considered for tax purposes as a delivery of liberated shares, and therefore it does not constitute income for the purpose of Personal Income Tax (IRPF in the Spanish acronym), Corporation Income Tax (IS) or Non-Resident Income Tax (IRNR), whether operating through a permanent establishment in Spain or otherwise.

The acquisition value, both of the new shares received as a consequence of the First Execution and of the shares from which they originate, will be the result of splitting the overall cost between the number of shares, including the old shares and the corresponding liberated shares. The liberated shares will have the same seniority as that of the shares from which they originate.

Since this does not constitute income for personal income tax (IRPF) purposes, it is not subject to any withholding tax.

b) Sale of the free allocation rights on the market.

In the event the shareholders sell their free allocation rights on the market, the amount obtained from the transfer of said rights on the market will be subject to the tax regime indicated below: 

  • In IRPF and IRNR for non-residents without a permanent establishment in Spain, the amount obtained in the transfer of the free allocation rights in the market follows the same regime established by the tax regulations for pre-emptive subscription rights. Consequently, the amount obtained in the transfer of free allocation rights will be considered as capital gain for taxpayers subject to IRPF and IRNR for non-residents without a permanent establishment in Spain, accruing this gain in the tax period in which the transfer takes place. All this without prejudice to the potential application to non-residents of international agreements and exemptions established in the IRNR regulations.
  • In addition, for taxpayers subject to IRPF, the amount obtained in the transfers of free allocation rights will be subject to the corresponding withholding tax at a rate of 19%. This withholding shall be made by the corresponding depository entity (and, otherwise, by the financial intermediary or the Notary Public who intervened in its transmission), without ACS intervening in the practice of this withholding nor providing tax information in this regard to its shareholders. Therefore, shareholders are advised to contact the appropriate depositary institutions for this purpose.
  • In the IS and in the IRNR for non-residents with permanent establishment in Spain, taxation will be done in compliance with the applicable accounting regulations. All this without prejudice of the rules of determination of the taxable base in these taxes that, where appropiate, result of application.

    c) Sale of the free allocation rights to ACS pursuant to the Purchase Commitment.

    In the event the holders of the free allocation rights decide to benefit from the ACS Purchase Commitment, the tax regime applying will be equal to the tax regime applying to dividends directly distributed in cash, therefore they will be subject to the corresponding withholding tax.

    It should be noted that this analysis (which has been carried out based on specific principles) does not explain each and every one of the possible tax consequences. Because of this, we recommend that you pay attention to any amendments that may take place, both in the law in force as of the date of this report and in the interpretation criteria, as well as to the particular circumstances of each shareholder or holder of free allocation rights.