Distribution of the shares in HEXPOL

Hexagon's Annual General Meeting on 5 May 2008 resolved to transfer all of the shares of Hexagon Polymers AB (renamed as Hexpol AB) to the shareholders of Hexagon in the form of a dividend. The record date at VPC for receipt of Hexpol shares was 5 June 2008. The shares in Hexagon were traded excluding rights to Hexpol shares as of 3 June 2008. The Hexpol shares were listed on the OMX Nordic Exchange Stockholm with 9 June 2008 as the first date of trading.

In accordance with the “Lex ASEA” rules, the shares in Hexpol were distributed to the Hexagon shareholders in proportion to their current shareholding in Hexagon. For each multiple of ten class A or class B shares, one share of the corresponding class of Hexpol shares was received. If holdings of class B shares are not equally divisible by ten, fractions of a share was received. Such fractions of Hexpol shares were combined into complete Hexpol shares, which were sold on the OMX Nordic Exchange under the auspices of Swedbank. Settlement amounts, with no deductions for brokerage, were paid via VPC to each particular shareholder.

The reason for a separate listing of the polymer operations is that Hexpol has reached a size and level of profitability that makes the business attractive as an independent listed company. The spin-off enables the management and Board of Directors of both Hexagon and Hexpol to capitalize on the operational and strategic opportunities that arise in each company, including increased potential to continue to grow via the establishment of new operations and the acquisition of companies.

Tax considerations

The distribution of Hexpol shares was made under the Lex ASEA provisions and will thus not result in any immediate tax consequences in Sweden. The distribution may, however, entail tax consequences in the shareholder's country of residence.

For more information see information brochure (link to the right).

The Swedish Tax Agency’s general advice

The Swedish Tax Agency has issued general advice concerning allocation of acquisition costs for shares as a result of Hexagon’s distribution of shares in Hexpol AB.

Regardless of class, 94 per cent of the acquisition cost for the shares in Hexagon AB should be attributed to these shares, and 6 per cent of the acquisition cost for the shares in Hexagon AB should be attributed to the shares received in Hexpol AB.

For more information see Swedish Tax Agency’s general advice (link to the right).

For shareholders resident in Switzerland

Due to the secondary listing of the Hexagon B share at SWX Swiss Exchange, Hexagon has applied for a tax ruling in the Canton of St.Gallen where Leica Geosystems is located. For the purpose of cantonal/communal income taxes of the Canton of St.Gallen applicable to residents of the Canton of St.Gallen, the stock dividend is treated as follows: The nominal value of the Hexpol shares (2 SEK) is treated as taxable income. The difference between the fair market value and the nominal value is exempt from income taxes. This exemption from income tax is granted in a tax ruling by the cantonal tax authority in St.Gallen.

With respect to other cantons than St.Gallen, it is uncertain whether other cantons take the same view as the Canton of St.Gallen. It cannot be excluded that some cantons may fully tax the stock. Shareholders resident in other cantons may ask their cantonal tax authority to grant them the same tax treatment of the distribution of Hexpol as the tax authority of St.Gallen by referring to the tax ruling granted by the tax authority of St.Gallen.

For direct federal tax purposes, no tax ruling was obtained from the responsible tax authority. According to the information received from the cantonal tax administration of St.Gallen, it must be expected that, for direct federal tax purposes, the stock dividend distributed to the shareholders of Hexagon may be characterized, notwithstanding the Swedish tax treatment, as a fully taxable dividend in the hands of Swiss resident shareholders holding the shares as part of their private assets.

With respect to Swiss resident shareholders holding the shares as part of a business, or non-Swiss resident persons holding the shares through a fixed place of business or a permanent establishment located in Switzerland, as a rule, the tax treatment follows the accounting treatment, i.e. taxable income may be realized if and to the extent that the shareholder recognizes income in its books kept in accordance with Swiss accounting principles.

The above is not intended to be tax advice. Each shareholder must obtain their own tax advice applicable to their specific tax situation.