United Utilities return of capital to shareholders

Tess

I have had 500 shares in United Utilities since 1991 and have now received a load of bumpf from them about the return of capital to shareholders with three options on how to receive this. It all seems very confusing - does anyone else understand the options and if so which appears to be the best?

magyar

Tess wrote: »

I have had 500 shares in United Utilities since 1991 and have now received a load of bumpf from them about the return of capital to shareholders with three options on how to receive this. It all seems very confusing - does anyone else understand the options and if so which appears to be the best?

What are the options?

Tess

Apparently we will receive 17 new shares for each 22 shares held. Also a "B" share for each share held and we have to choose what to do with these "B" shares. This is what the brochure says:

1.2 B Share Alternatives

Shareholders (other than Restricted Overseas Shareholders) holding B Shares will have three
alternatives as to how to receive their Return of Capital:

(i) Initial B Share Redemption (Alternative 1): this allows Shareholders to receive an immediate
cash redemption payment of 170 pence in respect of each B Share so elected; and

(ii) B Share Dividend (Alternative 2): this allows Shareholders to receive an immediate cash
dividend of 170 pence in respect of each B Share so elected;

(iii) Final B Share Redemption (Alternative 3): this allows Shareholders to defer redemption of the
B Shares to the Final B Share Redemption Date and receive on such date a cash redemption
payment of 170 pence and the B Share Continuing Dividend in respect of each B Share so
elected.

Shareholders need not make the same choice for their entire B Share holding. Shareholders who do
not elect for any of these alternatives will receive the Initial B Share Redemption in respect of all of

their B Shares.

Hope this makes sense to you!

cheerfulcat

Tess, what's best depends on your personal tax position. If you have not used your capital gains tax annual exempt amount ( you are allowed to make profits of £9,600 this tax year before paying CGT ) then option 1 might be best.

If you would rather receive the money as income ( instead of capital gains ) then you'd go for option 2. Bear in mind that if you take the payment as a dividend ( option 2 ), you need to work out whether the grossed-up dividend will take you into a higher tax rate band.

Option 3 lets you defer the capital gain to next tax year.

You can mix & match these options to suit your own personal tax situation.

HTH

Tess

Thanks very much, that makes it a lot clearer. I'll be choosing option 1.

gladtobegrey

I've received a communication from UU today clarifying the position for those that hold their UU shares in an ISA:

Further to our recent correspondence regarding the United Utilities Return of Capital, we can confirm that [if] you hold your shares within an ISA, the only option available to you is the Default Option, the Initial B Share Redemption:

Each B share will be redeemed at GBP1.70 per B share by United Utilities Group on the Initial Share Redemption Date, expected to be 11th August 2008.

Eckythumper

cheerfulcat wrote: »

Tess, what's best depends on your personal tax position. If you have not used your capital gains tax annual exempt amount ( you are allowed to make profits of £9,600 this tax year before paying CGT ) then option 1 might be best.

If you would rather receive the money as income ( instead of capital gains ) then you'd go for option 2. Bear in mind that if you take the payment as a dividend ( option 2 ), you need to work out whether the grossed-up dividend will take you into a higher tax rate band.

Option 3 lets you defer the capital gain to next tax year.

You can mix & match these options to suit your own personal tax situation.

HTH

If I hold 2200 shares @ £7.50 they are currently worth around £16500 .

Under the new issue I will hold 1700 shares @ £7.50 worth £12750 + 2200 b shares @ £1.70 valued at £2890.

A loss of £860.

I would be better off selling half of them, using my capital gains tax allowance and only losing money on the remaining shares.

No matter which way I jump I'm going to lose out financially on a so called payout to shareholders of £1.5 Billion. There is no benefit to basic rate tax paying shareholders. Why not give me a discount on my water rates.

cheerfulcat

Eckythumper wrote: »

Under the new issue I will hold 1700 shares @ £7.50 worth £12750 + 2200 b shares @ £1.70 valued at £2890.

2200 * £1.70 = £3740 - you'll be down around £10 on your holding, not £860.

Eckythumper

cheerfulcat wrote: »

2200 * £1.70 = £3740 - you'll be down around £10 on your holding, not £860.

I take full responsibility for the maths, not the calculator. But,why should I make any loss on a so called payout.

pound4pound_2

United Utilities. Surely the "return of capital" is simply a forced encashment of part of your investment. You had 22 shares. This is reduced to 17 and you are given £8.50 (5x£1.70). You aren't gaining anything, merely being forced to cash in part of your investment. If you were really to be given something you didn't already have, you would need to be given the £1.70 per share and still retain the same number of shares. The payment would then be a Special Dividend not a dilution of capital.

ad44downey

I got a special dividend a while ago, I think it was from Severn Trent, I was still no better off. My investment was reduced accordingly.