Singapore, 4 May 2006 - Singapore Telecommunications Limited (Singtel) today announced that it is proposing a total payout of S$4 billion to shareholders via a S$2.3 billion capital reduction and a S$1.7 billion final gross dividend for financial year 2005/06.

 

The Board of Directors has recommended a 25 per cent increase in the final gross dividend for the year ended 31 March 2006 to 10 cents a share, up from 8 cents last year.

 

Based on the 16.7 billion Singtel shares currently in issue, the proposed capital reduction will involve the cancellation of about 835 million Singtel shares or about five per cent of Singtel’s total issued share capital. Pursuant to the capital reduction, it is proposed that shareholders will have one Singtel share cancelled for every 20 Singtel shares they own as at a books closure date, which will be announced later.

 

For each Singtel share cancelled, shareholders will receive S$2.74 based on the average closing prices of Singtel shares traded on the Singapore Exchange from 24 April 2006 to 28 April 2006 (both dates inclusive). The equivalent amount in Australian Dollars, at a foreign exchange rate to be determined over five market days prior to the books closure date, will be paid to holders of CHESS Units of Foreign Securities of Singtel.

 

Singtel Group CEO Mr Lee Hsien Yang said: "This is the second time we have chosen to return cash to our shareholders through a capital reduction. There are several reasons for this decision.

 

"A capital reduction will help us achieve an optimal capital structure while maintaining financial flexibility. The Group’s earnings per share and return on equity will also be enhanced. There is no dilution for shareholders after the exercise because every shareholder will own roughly the same proportion of the company’s issued share capital as before. Ultimately, capital reduction helps to increase value for our shareholders."

Based on the Group’s results for the year ended 31 March 2006, on a pro forma basis, the proposed capital reduction will raise earnings per share by 5.3 per cent to 26.30 cents and return on equity from 20.6 per cent to 23.3 per cent.

 

The proposed capital reduction requires,  inter alia, approval by shareholders at an Extraordinary General Meeting to be held in July 2006 and thereafter by the High Court of Singapore. Assuming all approvals are received, it is currently expected that shareholders will be paid the cash distribution from the capital reduction in September 2006.

 

A list of frequently asked questions accompanies this news release. Full details of the proposed capital reduction can be found in Singtel’s announcement to the Singapore Exchange and the Australian Stock Exchange available at http://home.singtel.com/investor_relations/capital_reduction_2006/default.asp

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Capital  Reduction - Frequently Asked Questions

1. Why is Singtel carrying out a capital reduction?

The capital reduction exercise will optimise Singtel’s capital structure. It will enhance the Group’s earnings per share and improve its return on equity. More importantly, there is no dilution for shareholders with capital reduction.

 

After the capital reduction, the Group’s financial position is expected to remain strong with leverage at a comfortable level. Healthy cash flow generation is expected to support its operating needs and to fund new business opportunities.

2. How is 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 is 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).

3. 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 results in about 835 million Singtel shares to be cancelled, or five per cent of Singtel’s current issued share capital of 16.7 billion shares. The ratio of one share for every 20 held is equivalent to about five per cent.

 

4. How do I calculate how many of my Singtel shares will be cancelled? How much cash will I receive in exchange?

Save as otherwise described below, one Singtel share will be cancelled for every 20 you hold as at a books closure date to be announced.

The number of Singtel shares to be cancelled may be reduced by rounding-up (where applicable), to the nearest multiple of 10 shares, the number of Singtel shares held by you after the 20-for-one cancellation of Singtel shares.

 

However, no rounding-up will be applied if your resultant shareholding arising from the rounding-up is greater than your original shareholding in Singtel. In this case, the number of shares to be cancelled will be based solely on the 20-for-one cancellation ratio.

 

As no fraction of a Singtel share will be cancelled, you will be excluded from the capital reduction if you have fewer than 20 Singtel shares. If your resultant shareholding following the rounding-up as described above is equal to your original shareholding in Singtel, none of your Singtel shares will be cancelled.

 

The following is an example for a shareholder with 1,430 Singtel shares:

	Number of shares
Before capital reduction	1,430
After capital reduction
One share cancelled for every 20	(71)
Balance	1,359
Rounding up of shares to nearest multiple of 10	1,360
Final number of shares to be cancelled	70
Cash proceeds received by shareholder	S$191.80
Cash proceeds received by CUFS holder (based on an illustrative exchange rate of A$1 to S$1.1931, on 28 April 2006)	A$160.76

The table below shows the pre- and post-reduction number of Singtel shares for Group A and ST-2 shareholders who own the following number of Singtel shares:

Before capital reduction	1 for 20 cancelled	After capital reduction
650	(30)	620
780	(30)	750
910	(40)	870
1,430	(70)	1,360
1,560	(70)	1,490
1,690	(80)	1,610

For further assistance, please visit to use the on-line calculator.

 

5. Who is eligible for the capital reduction exercise?

The following groups of persons are eligible to participate in the capital reduction based on the Singtel shares or CUFS held as at the Books Closure Date ("Relevant Shareholders"):

o  CPF members
Holders of Group A shares and ST-2 shares which are shares offered at preferential fixed prices of S$1.90 and S$2.50 per share in October 1993 and August 1996 respectively. The Group A shares and ST-2 shares are held by CPF on behalf of CPF members.

o  CUFS holders
Holders of CUFS (or CHESS Units of Foreign Securities relating to shares in Singtel). The CUFS are held by CDN (or CHESS Depositary Nominees Pty Limited) on behalf of CUFS holders.

o  Shareholders
Persons who are registered in Singtel’s register as holders of Singtel shares, except that where the registered holder is CDP, this means the depositors (other than CPF or CDN) who have shares credited to their securities accounts with CDP. This does not include persons who maintain securities sub-accounts with depositary agents.

Note: 
a. Relevant Shareholders who hold or own less than 20 Singtel shares will not be entitled to have their shares cancelled pursuant to the capital reduction. 

b. The rounding up described in question 4 above does not apply to persons such as securities sub-account holders, CPF members whose Singtel shares are held on their behalf by CPF agent banks and persons whose Singtel shares are held on their behalf by financial institutions under the Supplementary Retirement Scheme or by nominees. Singtel expects that the entitlements of such persons to any cash distribution will be allocated by the relevant main account holder on a  pro rata basis, based on the number of Singtel shares owned by each such person. On or after the date on which the capital reduction takes effect, the relevant number of Singtel shares from the securities account of the main account holder will be reduced, and the main account holder will correspondingly reduce the number of shares held by such persons.

 

6. How will I, as a Singtel shareholder, benefit from this?

Singtel shareholders will benefit from this capital reduction. The key benefits are as follows: 

o Singtel’s earnings per share is expected to improve as its number of issued shares will be lower after the reduction. Each shareholder's proportionate ownership and voting rights in the company’s issued share capital also remain substantially unchanged.

o The proposed capital reduction would enable Singtel to achieve the right level of capital structure, i.e. a right mix of debt and equity. An optimal capital structure will enable the company to generate the most efficient level of returns from its capital resources, thus benefiting shareholders.

 

7. When will I receive the final dividend and proceeds from the capital reduction?

The final dividend of 10 cents a share, if approved at the Annual General Meeting to be held in July 2006, is expected to be paid to you, less tax at 20 per cent, in August 2006.

 

The proposed capital reduction requires, among other things, approval by Singtel shareholders at an Extraordinary General Meeting to be held in July 2006 and thereafter by the High Court of Singapore. Assuming all approvals are received, it is currently expected that you will be paid the cash distribution in respect of the proposed capital reduction in September 2006.

 

Shareholders who hold Singtel Group A and/or ST-2 shares will have the final dividend and proceeds from the capital reduction credited into their CPF Ordinary Accounts.

 

8. On what date will the capital reduction exercise be effective, i.e. when will my shareholding be reduced?

Books closure is expected in September 2006 (the "Books Closure Date"). Shareholders who are duly registered as at this date will have their shares cancelled (where applicable) and later receive the cash distribution of S$2.74 for each share cancelled. Indicative timeline (actual dates will be announced in due course):

Date of EGM - 28 July 2006
Court approval - August 2006
Books Closure Date - September 2006
Earliest expected payment date for cash distribution - September 2006

 

9. Do shareholders in Australia receive their proceeds in S$ or A$? If it is A$, what exchange rate will be used?

Holders of CUFS (or CHESS Units of Foreign Securities relating to shares in Singtel) will receive their cash distribution in the Australian Dollar equivalent of S$2.74  for each CUFS cancelled. The exchange rate to be used for conversion will be the average of the quoted exchange rates between the Australian Dollar and the Singapore Dollar selected by a Singtel Director prevailing over the five market days immediately preceding the Books Closure Date.

 

10. Where are the funds coming from?

The capital reduction will be 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.

 

11. Will I have to pay tax on proceeds from the capital reduction?

The tax implications of the capital reduction to you will vary depending on your specific circumstances such as your income bracket and the nature of your holdings.

 

Generally, for most shareholders in Singapore, the proceeds are likely to be regarded as capital in nature and capital gains are not taxable in Singapore. Relevant Shareholders are generally not subject to Singapore tax on a 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, it is likely that the proposed capital reduction should be a capital gains tax event for Relevant Shareholders in relation to each Share or CUFS cancelled. Any gain may therefore be subject to Australian capital gains tax. The Company will seek confirmation from the Australian Tax Office on the Australian tax consequences, and will make an announcement after it receives such confirmation.

The above statements should not be regarded as advice on the tax position of any shareholder, and shareholders should consult their own professional advisers.

 

12. For shareholders who end up with odd lots after the share cancellation, are there special arrangements with brokers to reduce minimum brokerage fees?

Under the proposed capital reduction, the resultant number of shares held by shareholders following the cancellation will be rounded up (where applicable) to the nearest multiple of 10 shares, which is the minimum trading board lot on SGX-ST. This is intended to minimise (where possible) holdings of less than multiples of 10 shares.