BANCO POPULAR ESPANOL Madrid, 8 September 2015
For the purposes of the provisions of article 26.1.e) of Royal Decree 1310/2005, of 4 November, we are placing at your disposal the information document which relates to the increase in capital approved by the Ordinary General Shareholders' Meeting of Banco Popular held on 13 April 2015, under point 7 on the agenda, which implements the flexible remuneration system for shareholders known as 'Banco Popular Dividend: a made to measure dividend' programme ended on 30 April.
Yours faithfully,
Javier Lleó Fernández
Vice-Secretary of the Board of Directors
08 September 2015
THIS DOCUMENT WAS DRAWN UP IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 26.1.E) OF ROYAL DECREE 1310/2005.
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PURPOSE
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Background
The General Shareholders' Meeting of Banco Popular Español, S.A. (hereinafter, 'Banco Popular' or the 'Bank') held on 13 April 2015 approved, under point 7 on the agenda, an increase in share capital charged to voluntary reserves for an amount to be defined in the terms provided for in the resolution itself, by the issue of ordinary shares with a nominal value of €0.50 each, for free allotment to the Bank's shareholders (the 'Increase' or the 'Increase in Capital').
In accordance with the terms of the resolution, the power to carry out the Increase in Capital, within the year following its approval, was delegated to the Board of Directors, under article 297.1.a) of the Capital Companies Act and with express power of substitution to the Delegate Committee.
The Bank's Executive Committee and the Board of Directors have agreed to carry out the Capital Increase.
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Purpose
Pursuant to Article 26.1.e) of Royal Decree 1310/2005, of 4 November, the issue and admission to listing of the new Banco Popular shares issued in the context of this Increase shall not entail the obligation of preparing and publishing a Prospectus in relation thereto, 'provided that a document containing information on the number and nature of the shares and the reasons and details of the offer is available'.
In light of these provisions, Banco Popular hereby issues this information document in order to provide all the information mentioned in the preceding paragraph concerning the Capital Increase. Once the Increase has been completed and all the other information is available, it shall be made available to the public through the corresponding communication of the relevant fact.
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REASONS FOR AND WORKING OF THE INCREASE IN CAPITAL
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Reasons for the Capital Increase
The Increase in Capital was approved by the General Shareholders' Meeting of Banco Popular for the purpose of implementing a new remuneration system for its shareholders, which would be more flexible and efficient, known as 'Banco Popular Dividend: a made to measure dividend' programme ended on 30 April. With this new system Banco Popular intends:
to offer its shareholders the opportunity to decide if they would prefer to receive all or part of their remuneration in cash or in new shares issued by the Bank;
to allow those shareholders who desire to do so, to benefit from the favourable tax treatment that applies to the shares issued without limiting in any way their opportunity to receive the remuneration that corresponds to them in cash; and
to improve its shareholder remuneration policy in line with the most recent transactions carried out by other Spanish and international companies.
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Capital Increase Procedure
In accordance with the terms for carrying out the Capital Increase, the Bank's shareholders shall receive one (1) right to free assignment for each Banco Popular share they hold. These rights shall be tradable on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges between 11 and 25 September 2015, inclusive. At the end of this period, the free assignment rights shall automatically be converted into newly issued Banco Popular shares.
Under the 'Banco Popular Dividend: A made to measure dividend' system, Banco Popular shareholders will have the freedom of choice to opt to:
Not transfer their free allotment rights. In this event, at the end of the trading period, shareholders will receive the number of new shares in the proportion that relates to them completely fully paid up.
Transfer all or part of their free allotment rights to Banco Popular by virtue of the undertaking to purchase that it has assumed for this Increase and which is referred to below in this document. In this way, shareholders would opt to cash in their rights and receive an amount in cash equivalent to the payment of the dividend that, as appropriate, Banco Popular would have paid.
Transfer all or part of their free allotment rights on the market. In this event, shareholders would also opt to cash-in their rights, although in this case they would not receive a guaranteed fixed price but instead the cash payment received for the rights would depend on market conditions in general and on the trading price for those rights in particular.
the NAC, or number of Banco Popular shares in circulation, at the date of this document is 2,119,328,852; and
the trading price or PC, understood as the arithmetic mean of the Bank's average weighted trading price per share on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges in the five (5) trading sessions held on 1, 2, 3, 4 and 7 September 2015, as established in the certificate issued by the Governing Body of the Madrid Stock Exchange, is €3.603.
At that same date, the following details were calculated, using the arithmetical operations provided in the formulas above:
The maximum number of new shares to be issued (NAN) in the context of the Increase is eleven million seven hundred and eight thousand nine hundred and ninety-nine (11,708,999).
Nevertheless, the number of shares effectively issued shall depend on the number of shareholders who opt against transferring their free allotment rights. The Bank shall waive the new shares corresponding to the free allotment rights acquired on applying its irrevocable purchase commitment, due to which only those shares corresponding to the free allotment rights not acquired by Banco Popular on executing this commitment shall be issued. In any event, the said definitive number of shares which will be issued within the context of the Increase in Capital will be made available to the public in due time.
If necessary, Banco Popular will waive the number of free allotment rights that may be necessary for the number of new shares to be a whole number and not a fraction. In this event, an incomplete allotment will be produced for that part of the Increase in Capital drawn and the share capital will be exclusively increased by the amount of the free allotment rights that have not been waived, in accordance with the provisions of article 311 of the Capital Companies Act.
The number of free allotment rights needed to receive one (1) new share (ND) is one hundred and eighty-one (181).
Allotment rights will be allotted to Banco Popular shareholders who are registered as such on the accounts of the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. Unipersonal (Iberclear) at 23:59 hours on the day the advertisement of the increase in capital is published in the Stock Market Official Gazette (planned for 10 September 2015) in the proportion of (1) free allotment rights for each old share that they hold. Therefore, these shareholders shall be entitled to receive one (1) new share for every one hundred and eighty-one (181) old shares held on the aforementioned date.
For the purpose of ensuring that all the free assignment rights can be effectively exercised and that the number of new shares to be issued is a whole number, Banco Popular has waived 33 free assignment rights corresponding to 33 treasury shares.
The maximum nominal amount of the Capital Increase is five million, eight hundred and fifty-four thousand, four hundred and ninety-nine Euros and fifty cents (€5,854,499.50).
Nevertheless, as already indicated, the amount of the effective increase in the Company's share capital will the result of multiplying the definitive number of shares issued by their nominal value (€0.50).
The acquisition price of each free assignment right by virtue of the purchase commitment incurred by Banco Popular is €0.02, in accordance with the formula included in the resolution to issue fully paid bonus shares adopted by the shareholders at the Annual General Meeting held on 13 April 2015, rounded to the nearest thousandth of Euro:
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DETAILS OF THE INCREASE IN CAPITAL
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Timetable
The tentative timetable for the Increase in Capital will be as follows:
10/09/2015 Publication of the announcement of the Increase in the Companies Registry Official Gazette.
Record date for allotment of the free allotment rights (23:59 hours).
11/09/2015 Commencement of the trading period for the free allotment rights and the period for requesting remuneration in cash.
First stock market working day after publication of the announcement in the Companies Registry Official Gazette after which the free allotment rights will be traded on the market.
22/09/2015 End of the period for requesting remuneration in cash under the undertaking to purchase rights assumed by Banco Popular.
25/09/2015 End of the period for trading free allotment rights.
Purchase by Banco Popular of free allotment rights from shareholders who have chosen to receive cash under the undertaking to purchase rights assumed by Banco Popular.
29/09/2015 Waiver by Banco Popular of the rights purchased. Completion of the Increase.
29/08/2015 to
06/10/2015
Processes for registration of the Increase and admission for trading of the new shares on the Stock Markets.
30/09/2015 Cash payment to the shareholders who have chosen to receive cash under the undertaking to purchase rights assumed by Banco Popular.
From 06/10/15
Commencement of ordinary trading of the new shares on the Spanish Stock Exchanges.
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Allotment of free allotment rights and procedure for choosing cash or new shares in the Bank
The free allotment rights will be given to Banco Popular shareholders who are accredited as such on the accounts of Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. Unipersonal (Iberclear) at 23:59 hours on the day the announcement is published in the Companies Registry Official Gazette (planned for
10 September 2015). The free assignment rights shall be tradable on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges through the Spanish Stock Market Interconnection System from 11 to 25 September 2015. During this period, sufficient free
assignment rights may be acquired on the market and in the proportion required to receive new shares.1
Holders of bonds convertible into Banco Popular shares currently in circulation will not have free allotment rights, although they will, if appropriate, have the right to change the bonds for shares exchange ratio, in proportion to the amount of the Increase. In particular, the applicable conversion ratio will be changed, if appropriate, in application of the anti-dilution mechanism provided for in the issue prospectus.
During the free allotment rights trading period shareholders may choose between receiving newly issued Bank shares of the equivalent amount in cash that would have been due to them by way of dividend payment, all in accordance with the terms shown above, as well as purchase sufficient free allotment rights on the market, and in the proportion necessary, to subscribe to new shares.
However, those shareholders who wish to accept the irrevocable commitment to purchase free assignment rights assumed by Banco Popular, thereby receiving an amount in cash equivalent to the fixed and guaranteed purchase price corresponding to the number of free assignment rights of the holders, must notify their decision to the entity where they have deposited their shares by no later than 22 September 2015. The commitment to purchase solely covers rights received by shareholders free of charge, not to rights purchased on the market.
In order to decide between the choices offered by Banco Popular due to the Increase, shareholders should contact the entities where their shares and the related free allotment rights are deposited within the deadlines shown in the previous paragraph.
Unless express notification is received, shareholders who do not choose to receive cash will receive new Banco Popular shares.2
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Expenses and fees
This Increase shall be performed free of expenses and fees related to the assignment of the new shares issued. Banco Popular will pay the costs of issue, subscription, placing in circulation, admission for trading and others related to the Increase.
Therefore, Banco Popular will not charge commission or costs to shareholders who chose to receive their remuneration in cash at the guaranteed fixed price or to receive the new
1 Shareholders who do not have sufficient free allotment rights available to receive one (1) new share in this Increase may: (a) purchase sufficient free allotment rights on the market so that, when added to those already held, they gain the right to receive one (1) new share; (b) transfer all or part of their free allotment rights to Banco Popular by virtue of the undertaking to purchase at a guaranteed fixed price; or (c) transfer all or part of their free allotment rights on the market (although in this case they would not retain the right to receive a guaranteed fixed price but instead the cash payment received for the rights would depend on market conditions in general and on the trading price for those free allotment rights in particular).
2 It is possible that, once the trading period for the free allotment rights has finished, the number of rights held by a particular holder may be a number that, taking into account the formulas for calculation referred to in this document, does not give the right to receive a whole number of shares. In this case, the entity where the holder of the free allotment rights has them on deposit may sell a number of rights that are a fraction of a new share, in such a way that the holder receives the product of sale in cash and does not lose the intrinsic value of such rights. The foregoing notwithstanding, this possibility is subject to the terms and conditions of the deposit and administration contract related to the shares subscribed with the depository concerned or to the instructions given by the holder of the rights. In this case, the sale by the depository does not arise from the commitment to purchase the issuer's rights, but rather from the transfer of those rights to the market as depository.
shares that correspond to them. In the event that rights are sold on the market, Banco Popular will charge the usual commission or expenses to the shareholders in accordance with current law.
Without prejudice to the foregoing, Bank shareholders should take into account that entities that are a part of Iberclear where they have their shares deposited may, in accordance with current law, establish such commission and expenses payable for management as they may freely decide for maintaining the shares on the accounts. Furthermore, the said participating entities may, in accordance with current law, establish such commissions and expenses payable for processing orders for the purchase and sale of free allotment rights as they may freely decide.
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NUMBER AND TYPE OF SHARES
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Maximum number of shares to be issued in the Capital Increase
In accordance with section 2.2 above, the maximum number of shares to be issued as a consequence of the Increase is eleven million seven hundred and eight thousand nine hundred and ninety-nine (11,708,999).
Nevertheless, the number of shares effectively issued shall depend on the number of shareholders who opt against transferring their free allotment rights. Banco Popular shall waiver the new shares relating to the free allotment rights that it may have acquired in application of the above-mentioned commitment to purchase.3 In any event, the final
number of shares that will be issued in the context of the Increase will be made available to the public in due time by notification of a relevant fact with regard to the close of the issue.
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Rights of the new shares
The new shares issued in the Capital Increase shall be ordinary shares with a par value of fifty eurocents (€0.50) each, of the same class and series as the current shares in circulation, whereby the capital increase performed through this Increase shall be made at par and, therefore, without a share premium. The new shares issued will be represented by notes on account, the account for which will be assigned to Iberclear and its participating entities.
The new shares will give their holders the same voting and financial rights as the Banco Popular ordinary shares currently in circulation from the date that the part of the Increase in Capital that is the object of this Increase is declared subscribed and fully paid up.
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Balance sheet and reserve to which the Capital Increase is charged
The balance sheet that serves as a basis for the Increase is that corresponding to the financial reporting year ended 31 December 2014, which was audited by PricewaterhouseCoopers Auditores, S.L. and approved by Banco Popular's shareholders at the Annual General Meeting held on 13 April 2015, under agenda point one.
3 Likewise, in the event that the number of Banco Popular shares in circulation, minus the shares corresponding to the free assignment rights acquired by Banco Popular by virtue of the purchase commitment (which Banco Popular shall waiver pursuant to the resolution adopted by the shareholders at the Annual General Meeting held on 13 April 2015), results in a fraction, Banco Popular shall also waive the required number of acquired free assignment rights so that the number of new shares that must finally be issued on occasion of the Increase is a whole number and not a fraction.
The Increase will be wholly charged to the freely available reserve known as voluntary reserves, arising from undistributed profits, the amount of which, at 31 December 2014, was €2,772,058 thousand.
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Shares on deposit
Once the period for trading free allotment rights has ended (that is to say, the close of the stock market session on 25 September 2015), the new shares that it has not been possible to allot for reasons not attributable to Banco Popular will be held on deposit for those who prove legal ownership of the relevant free allotment rights. After three (3) years have elapsed from the end date of the aforementioned trading period of the free assignment rights, the new shares that remain unassigned may be sold pursuant to Article 117 of the Spanish Limited Liability Companies Act, at the expense and risk of the interested parties. The net proceeds of the aforementioned sale shall be deposited at the Bank of Spain or the General Deposit Fund at the disposal of the interested parties.
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Admission of the new shares to trading
Banco Popular shall request admission to trading of the new shares issued as a consequence of this Increase on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges, through the Spanish Stock Market Interconnection System and shall perform the formalities and steps required for the new shares issued to be admitted to trading.
- Tax Regime
In the case of personal income tax and non-resident income tax (without permanent establishment), the amount obtained on transferring the free assignment rights to the market is subject to the same tax system established by the tax rules for pre-emption rights. Consequently, in order to determine the cost of acquisition of the shares, the amount obtained on transferring the free assignment rights shall be deducted therefrom. If the amount obtained from said transfer is greater than the cost of acquisition of the shares to which they relate, the difference shall be deemed to be a capital gain for the transferor in the tax period in which the transfer takes place.
For shareholders who are natural persons resident in the Historical Territory of the Basque Country, the amount obtained from transferring the free allotment rights will be considered to be capital gains.
In the case of Corporation Tax and non-resident income tax (with permanent establishment), the shareholders shall be taxed in accordance with the applicable accounting rules.
Depending on their needs, the Bank's shareholders may combine any of the alternatives mentioned in points (a) to (c) above. In this connection, it should be noted that the tax treatment of the aforementioned alternatives differs.
Unless express notification is received, shareholders who do not choose to receive cash will receive new Banco Popular shares.
For its part, Banco Popular has assumed an irrevocable undertaking to the holders of free allotment rights to purchase such rights at a fixed price. This option is granted only to those shareholders with such status on the date on which the free assignment rights are attributed (10 September 2015 according to the schedule of section 3.1 below) and only for the free assignment rights they receive on that date. Consequently, the cash option cannot be requested with respect to free assignment rights acquired on the market.
This fixed price, which has been calculated using the formula shown below, will allow Banco Popular to guarantee its shareholders the possibility of monetising their rights if they do not wish to receive new shares and, in any case, shall be €0.02. Said purchase commitment shall be valid and may be accepted from 11 to 22 September 2015.
Purchase by Banco Popular of the free allotment rights as a result of the undertaking to purchase being exercised will be carried out as chargeable to the freely available reserve known as the voluntary reserve, arising from undistributed profits, subject to the relevant administrative authorisations.
The number of free allotment rights needed to receive one (1) new Banco Popular share will be that resulting from application of the following formula rounded up to the nearest whole number:
ND = NAC / NPA
where,
NPA = Amount of the Alternative Option / PC
For such purposes, Amount of the Alternative Option = €42,386,577 and PC is the arithmetic mean of the Bank's average weighted trading price per share on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges in the five (5) trading sessions held on 1, 2, 3, 4 and 7 September 2015, issued by the Governing Body of the Madrid Stock Exchange, rounded up to the nearest thousandth of a Euro and, in the case of half of one- thousandth of a Euro, the immediately higher thousandth of Euro.
The Number of New Shares to be issued will be the result of the formula approved by the General Meeting of shareholders shown below:
NAN = NAC / ND
where,
In applying the formulas approved by the General Meeting of shareholders, the Board of Directors has taken into account that:
Purchase Price = PC / (ND + 1) = 3.603 / (181 + 1) = €0.02
Consequently, those shareholders that wish to receive their remuneration in cash may sell their free assignment rights to Banco Popular for a fixed gross price of €0.02.
In general, and in accordance with the criteria stated by the Spanish Directorate General for Taxation in reply to various binding enquiries, the tax regime applicable to shareholders in Spain will be as follows:
The delivery of shares as a result of the Capital Increase will be considered to be a delivery of fully paid-up shares and, therefore, does not constitute income either for the purposes of Personal Income Tax ('IRPF') or Corporation Tax ('IS') or Non-Residents' Income Tax ('IRNR'). The acquisition value, of both the new shares received as a consequence of the Capital Increase and the shares to which they relate, shall be that resulting from distributing the total cost among the number of shares, both the corresponding old and paid-up new shares. The seniority of such fully paid-up new shares shall be that corresponding to the shares to which they relate.
In the case that the shareholders should sell their free assignment rights on the market, the amount obtained from the transfer to the market of said rights to the market shall be subject to the tax system indicated below:
In the case that holders of free allotment rights decide to take advantage of the Group's Undertaking to Purchase, the applicable tax regime for the amount obtained from transmission to the Bank, or to a subsidiary of it, of the free allotment rights held due to their position as shareholders or purchased on the market will be equivalent to the regime applicable to dividends distributed directly, in cash, and, therefore, subject to the relevant withholding.
It should be taken into account that this analysis does not include all the possible tax implications arising from the Increase in Capital. Likewise, special attention shall be paid to the international treaties and conventions currently integrated in national legislation, the amendments made to the legislation in force on the date of this information document, the interpretation criteria thereof and the specific circumstances of each shareholder or holder of free allotment rights.
Madrid, 08 September 2015
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