In order to qualify for the tax benefit the Shares must be held by trustees for a certain period.

Transcription

1 Page 1 Definitions For the purpose of this booklet: The Scheme means The Pfizer Irish Employee Share Ownership Scheme The Company means Pfizer companies specified in the Revenue approved Trust Deed covering this Employee Share Ownership Scheme. Computershare means Computershare Investor Services (Ireland) Limited Share Entitlement... means the number of Shares that can be bought by the Trustees on your behalf with the percentage of basic wage/salary which is decided as qualifying bonus in any year for the purpose of this Scheme, together with permitted funds accumulated through salary forego. Shares means fully paid common stock of Pfizer Inc. Participants means colleagues who have joined the Scheme. Trustees means Computershare Trustees (Ireland) Limited The Pfizer Irish Employee Share Ownership Scheme Summary of main features of the Scheme The Scheme is designed to meet Revenue Commissioners requirements, enabling colleagues to acquire Shares in Pfizer Inc. on tax advantageous terms from money paid over by the Company to the Trustees of the Schemes as bonus and salary foregone by colleagues. In order to qualify for the tax benefit the Shares must be held by trustees for a certain period. The Scheme is available to all eligible colleagues who work for The Company. The booklet should be regarded as a general guide only. It does not form part of the more detailed Trust Deed and Rules of the Scheme, which should be referred to for full details and which are available for inspection through your Human Resources department.

2 Page 2 Contents Description Page Definitions... 1 What is a Share?... 3 How do I decide whether to join the Scheme?... 4 Joining the Scheme... 5 Opportunity to forego salary in favour of Shares... 6 Holding the Shares in trust... 7 Transfer or sale of Shares... 8 Transferring Shares to an Irish Broker Nominee Account... 9 What about Tax? What about Capital Gains Tax? Special circumstances General information Appendix 1 Undertakings Appendix 2 Examples... 16

3 Page 3 What is a Share? A Share in Pfizer Inc. (the U.S. parent company of Pfizer companies worldwide) is one of many millions into which the ownership of Pfizer Inc. is divided. These Shares are owned by individuals, trusts and corporations all called stockholders or shareholders. Each shareholder owns part of the value of the company, the size of that part being proportionate to the number of Shares owned. Each shareholder partakes in the profits of the Company by receiving dividends paid out by the Company. Shares in Pfizer Inc. (NYSE:PFE) may be bought and sold by the public through stock exchanges that deal in Pfizer Inc. Shares. Share prices vary according to whether more people want to buy them or sell them. They reflect a company s performance and future prospects. The Pfizer share price in Euro currency is also affected by the currency exchange rate movements between the U.S. Dollar and the Euro.

4 Page 4 How do I decide whether to join the Scheme? It is up to you to decide whether to take up in whole or in part your Share Entitlement. The decision is your own. If you are unsure, get advice, from your bank manager, or accountant, or solicitor or other investment advisor. Whilst it is hoped that Participants will enjoy seeing their investment grow, always remember that share prices will go down as well as up particularly in the short term. The future price of Pfizer Inc. Shares cannot be guaranteed. A significant advantage for Participants is that your Share Entitlement is purchased and may be eventually sold on maturity, without incurring any income tax liability but to get this tax advantage in full, your Shares will have to be held for you by the Trustees for three years. You may dispose of them after two years but some or all of the tax advantage will be lost. You can see from this that your outlook should be long term if you intend to participate and get the maximum benefit. Additionally, ownership of Pfizer Inc. Shares will give you a greater interest in the performance of the Company worldwide and an opportunity to share in its success.

5 Page 5 Joining the Scheme Am I eligible to join? Yes. All colleagues of the Company at 1 June and 1 December, who have completed 6 weeks service at that date, are eligible to join. How does the Scheme work? Each year, the Company will announce whether the Scheme is to operate for that year and will also announce the amount determined as Share Entitlement for each colleague for the purpose of the Scheme. Colleagues will then be invited to participate and to indicate by a specified time what proportion of their Share Entitlement they wish to take up. The Trustees will purchase Shares twice in a year, in June and December. You will then be informed of the exact cost of any Shares purchased on your behalf. A Statement of Holdings will be issued confirming the number and value of Shares held for you; this is an important document and should be carefully retained. Who pays the stockbroker s commission and other buying expenses? The Company will meet the stockbroker commission costs. Do I have to take Shares? No. If you choose not to take up your full Share Entitlement, the amount of bonus you do not take as Shares will be payable at end-june or end-december as a cash bonus, subject to income tax and Pay-Related Social Insurance (P.R.S.I.) and Universal Social Charge (U.S.C.) in the normal way. Do I have to participate every year? No. You decide on each occasion in each year if and to what extent you wish to participate. Appendix 1 sets out undertakings by Participants and the directions, which Participants will be asked to give to the Trustees.

6 Page 6 Opportunity to forego salary in favour of Shares An employee can also forego part of salary for share appropriation. Foregoing salary means giving up some of your basic salary to finance the appropriation of Shares in June and December additional to your bonus entitlement. The salary foregone must normally be spread evenly over the January to November pay periods within the year. The maximum that an eligible employee can forego for Shares is 7.5 % of basic salary, subject to a Revenue limit that the total bonus and salary forego may not exceed 12,700 in a full tax year. It is a Revenue requirement that in any one tax year the value of salary forgone shares appropriated may not exceed the value of shares appropriated using the Company contribution (bonus). The overall limit is 12,700. Please note the following points relating to salary forego. 1 Please contact your Human Resources Administrator if you wish to forego salary for share appropriation for the forthcoming year. You will need to sign a form of authorisation. 2 Salary foregone must normally be deducted evenly throughout the first 11 contribution months in the calendar year. 3 The accumulated total of salary foregone at end May and end November will be used as a basis for share appropriation on 1 June and 1 December respectively, provided that at least an equal value of Shares is appropriated from bonus. 4 Salary foregone which is not applied for share appropriation will be carried forward to the next appropriation date within the same tax year. If there is no later appropriation date within that year, it must be redirected to your payslip in December. 5 Interest will not apply to foregone salary between share appropriations. 6 A decision to forego salary may be cancelled at any time. However, refunds to your payslip will normally only be possible in December. 7 Forgoing salary reduces the amount of pay on your payslip which is assessed for income tax. 8 There will be a liability to both P.R.S.I. and U.S.C. on the amount of salary foregone invested in Company Shares. 9 Appropriating Shares under this arrangement and the use of salary foregone does not diminish in any way the Main Pension Plan pension benefit or protection benefit payable to you or your dependants.

7 Page 7 Holding the Shares in trust Why have trustees? To benefit from tax concessions described later, Shares must be held in a trust under the supervision of trustees. Who are the Trustees? Computershare Trustees (Ireland) Limited will act as Trustees and they administer the Scheme in accordance with the Trust Deed. The Trustees are, of course, completely independent of the Company although the Company pays the Trustees fees. You will find the Trustees address stated in your Statement of Holdings. For how long will the Trustees hold my Shares? Generally for a minimum period of two years; and for you to qualify for the full tax advantage, for a period of three years. What about dividends? As a holder of Shares in the Scheme you are entitled to receive any dividends that are paid by Pfizer Inc. out of its profits. Dividends are normally paid every three months. These will be paid to the Trustees (as registered shareholders) and the proceeds will then be passed to you. The tax treatment of dividends prior to you receiving them is dealt with later in this booklet.

8 Page 8 Transfer or sale of Shares When can I have or sell my Shares? After three years the Shares will become unrestricted and you will be free to dispose of them without liability to income tax but Capital Gains Tax may be payable. You may also choose to retain the Shares with the Administrators, Computershare, or to transfer them in accordance with transfer choices permitted at that time. You cannot sell, give away or use your Shares as security against a loan during the first two years, except under the Special Circumstances described later in this booklet. Between year two and year three you can instruct the Trustees to sell your Shares or transfer them to you but income tax will be payable and Capital Gains Tax may also be payable. What are the choices after the three-year holding period? When the Shares become unrestricted after the three year holding period you will be given a choice as to how you wish them to be dealt with. You can opt to: a) Sell them immediately. Or b) Hold them in an unrestricted register with Computershare where they will continue to be held for you until such a time as you may wish to dispose of them. Or c) Transfer them into an Irish Broker Nominee Account You are completely free to make any of the above choices but you may wish to assess the administrative implications and charges associated with each choice as outlined overleaf.

9 Page 9 Selling the Shares on completion of the three year holding period. If you choose to sell immediately the Company will pay the stockbroker commission costs involved. Holding Shares in the unrestricted share register maintained by Computershare on completion of the three year holding period. The unrestricted share register is a facility for colleagues, to make the holding and disposal of Shares more convenient and cost-effective. Under this arrangement, Computershare will hold the matured Shares on your behalf until such time as you may decide to sell them. In the meantime you will continue to receive a combined dividend (restricted and unrestricted shares) in local currency, having deducted obligatory taxes. Selling Shares from the unrestricted share register in the future Should you decide at any time in the future to sell Shares from your unrestricted holding you can give your instructions to Computershare by completing the reverse of your statement of holdings. Arrangements are made by Computershare for regular sales of Shares on the New York Stock Exchange (normally once a week on every Thursday) and the members receive the proceeds shortly afterwards. The stockbroker commission costs of these regular sales are borne by the Company. It is not possible under this arrangement to specify price-selling instructions or the time the Shares will be sold in the market on each Thursday. Shares will be sold at the best available price at the time of going to market. Foreign Exchange Sales proceeds will be issued in Euro currency. As Pfizer Inc shares are listed in US dollars on the New York Stock Exchange it will be necessary to carry out a currency exchange deal to convert the proceeds of the sale to Euro and the associated costs (at the prevailing market rate) will be factored into the transaction share price. Transferring Shares to an Irish Broker Nominee Account This can be arranged for you without cost of transfer. All subsequent dealings and broker account maintenance and selling costs will be between you and the nominated broker and the Company will not be further involved.

10 Page 10 What about Tax? What is my tax position when the Shares are bought? While no income tax is deducted from the part of your Share Entitlement that is applied by the Trustees to acquire Shares on your behalf there will be charge to P.R.S.I. and U.S.C. on this amount. Tax in the third year of the three-year holding period (not the recommended choice) If you tell the Trustees to sell your Shares between year two and year three, you will be taxed at your marginal rate on a) the original value of the Shares, or b) an amount equal to the proceeds of the sale, whichever is the lesser. If after the minimum retention period of two years, and before the expiry of three years (i.e. in the third year) you tell the Trustees to transfer the Shares, you will be liable for tax at your marginal tax rate on the original value of the Shares or the market value at date of transfer if lower. You will have to pay income tax at the standard rate on the original value of the Shares to the Trustees before the transfer takes place. If you usually pay income tax at the higher rate, you will be responsible for paying any further income tax due direct to the Revenue Commissioners. Tax after three years (recommended choice) When each share allocation has been held by the Trustees for three years they will be available to you for transfer or sale. They will be free of income tax, but Capital Gains Tax may be payable. See Appendix 2 for worked examples. You are obliged to include particulars of any transaction mentioned above on your income tax return, and you will be personally responsible for any Capital Gains Tax due under the self-assessment system.

11 Page 11 What about Capital Gains Tax? This arises if you sell your Shares and make a gain on the disposal. The gain is calculated as the difference between the sales proceeds and the original cost of the Shares. In certain circumstances the cost of the Shares may be indexed for inflation between the time of acquisition and disposal. In computing gains on the disposal of Shares after 1 January 2003 indexation relief will apply only for the period of ownership of the Shares up to 31 December The first 1,270 of gains in any year is exempt from tax. Capital Gains Tax is currently charged at 33%. If you hold Shares in Pfizer that you acquired at different times it is important to note that you are treated as disposing of the oldest available Shares you acquired. There is an exception to this rule where you dispose of Pfizer Shares in the four weeks following the acquisition of Pfizer Shares. In these circumstances you will be treated as disposing of the Shares that you acquired in the previous four weeks. You should take advice if you feel you will be liable for Capital Gains Tax. Am I taxed on dividends? Yes. The tax vouchers issued by the Trustees will show the amount of Irish and U.S. tax deducted. These should be kept in a safe place as you will have to attach them to your annual tax return. The reason for this is you are liable for income tax at your higher marginal rate on the gross dividend but you will receive tax credits for U.S. and Irish tax already deducted. What do I put on my tax returns? You must include: The value of your Shares acquired under the Scheme during the tax year. Dividends paid to you during the tax year. Details of any Shares disposed of during the tax year. Shares released to you by the Trustees

12 Page 12 Special circumstances What happens my Pfizer Shares with Computershare if I leave the company before I am eligible for retirement? If you leave the Company due to injury, disability or redundancy, you may then ask for your Shares to be transferred to you or sold on your behalf immediately. If this is before three years have elapsed since the Shares were acquired, you will then be liable to pay income tax but only on half the value of the Shares when they were acquired. If you leave the Company for any other reason other than immediate retirement and you do not wish to transfer or sell your Shares until they are three years old, all your Shares will continue to be administered by Computershare but only until the next release date. You will then be advised of transfer or sale choices available to you covering all Shares available to you at that time. Similar sale or transfer choices will be offered to you if and when subsequent Shares approach the conclusion of the three-year holding period. What happens my Pfizer Shares with Computershare if I leave the Company and immediately start to receive a retirement pension? Upon retirement your Shares will continue to be held for you by the Trustees until the three year holding period expires, and then you will be advised of sale or transfer choices available to you. If you wanted to release scheme Shares before the third anniversary of the date of appropriation and you have attained the State pension age of 66, you can ask the Trustees to release them to you earlier than anticipated but you will be liable for income tax at 50% of the value of the Shares. What happens to my Shares if I die? All your Shares become part of your estate and will be released by the Pfizer Trustees/Administrators to the legally established executors/ administrators of your estate. No income tax will be payable on any of the Shares regardless of the time the Shares have been held. Capital Acquisitions Tax may be payable.

13 Page 13 General information Can the Scheme be altered? Government legislation covering schemes of this type varies from time to time; you must be prepared for changes in income tax rates, capital gains tax rates and limits, eligibility conditions and so on. The figures given in this booklet are those ruling at the time of publication. The Company reserves the right where it has the power (with the consent of the Trustees) to modify the Scheme in future or to terminate it, but no such change will adversely affect the rights of Participants in respect of Shares already held by the Trustees on their behalf. Will the Scheme affect my pay or conditions? Participation in the Scheme is voluntary and a matter of personal choice. It is not a condition of service. The Scheme does not affect pay conditions or other terms of employment. What if I change my address? Any change of address should always be notified to your Human Resources Department. You should give similar notice to Computershare at the same time to ensure quarterly dividend vouchers are delivered safely to your correct address. Pfizer Human Resources Department will update Computershare each week with details of your current address at that time. What about access to a website for inquiries? Intranet access from your computer workstation is possible as is access through the Internet. The web address is This will allow you access full details of your share transactions and dividend payments and historical listings relating to your current holdings restricted and unrestricted shares. Access to the website is by security PIN obtainable from Computershare.

14 Page 14 Appendix 1 Undertakings Pfizer colleagues must give the following undertakings and standing directions to the Trustees. (A) Undertakings 1 To allow the Shares under the Scheme to stay with the Trustees of the Scheme throughout the Retention Period (usually two years). 2 Not to use Shares to secure any loan or to sell Shares or to allow anyone else to have any rights to them during the Retention Period. 3 To pay to the Trustees an amount of money equal to income tax at the standard rate on the amount set out by law if the Participant directs the Trustees of the Scheme to transfer Shares to the Participant himself at any time before the Release Date (three years after appropriation). 4 Not to instruct the Trustees of the Scheme to sell any Shares at any time before the Release Date in any way other than by sale for the highest price that they can reasonably get at the time of sale. 5 Generally to be bound by the Rules of the Scheme as amended from time to time.

15 Page 15 (B) Standing directions to the Trustees of the Scheme Irrevocably to direct the Trustees that, in the event of any offer being made pursuant to which holders of Shares are enabled to acquire Shares, securities or rights of any description in Pfizer Inc. by subscription or purchase, the Trustees shall in respect of all Shares, securities or rights which have been appropriated to a Participant: 1 If a Participant shall have put the Trustees in funds so to do in accordance with the provisions of the Scheme, take up all or part of such Rights. 2 If a Participant shall have directed the Trustees to sell all or part of such Rights, sell such Rights and 3 In any other case either sell such Rights, or allow them to lapse, as the Trustees shall think fit. Without prejudice to the above in the absence of any written instruction from Participants regarding any offer or other transaction referred to in Section 511 (6) of the Taxes Consolidation Act, 1997 affecting any Shares held by the Trustees for Participants apart from dealing with rights issues mentioned above, the Trustees shall take such action as they shall think best for Participants provided they have taken all reasonable steps to obtain the Participant s instructions in relation hereto. If a Participant wishes the Trustees to dispose of any Shares appropriated to a Participant under the Scheme after the appropriate Release Date otherwise than by transfer into a Participant s name, the Participant undertakes to instruct the Trustees accordingly so that such instructions are received by the Trustees not later than 21 days before the Release Date. If the Trustees do not receive such instructions within such time limit the Trustees will transfer to the Participants themselves such Shares immediately after the Release Date.

16 Page 16 Appendix 2 Examples The following examples of some possible outcomes of share transactions are given for illustrative purposes only and should not be taken as any indication of how the Pfizer Inc. share price is likely to perform in the future. Example 1 Making a profit of 300 This example assumes that a participant chooses to take up a share entitlement to the extent of 30 Shares and that the price of the Shares is 50 each making a total purchase cost of 1,500. The participant sells the 30 Shares after four years, when the price of the Shares has risen to 60 per Share. Proceeds of Sale = 1800 Profit of sale Selling Price - Cost Price = Profit 1,800-1, 500 = 300 Income Tax Nil Capital Gains Tax Nil Note on Capital Gains Tax: The gain on the disposal of the Shares is calculated as the difference between the market value of the Shares and the cost of those Shares. The base cost of Shares acquired before 1 January 2003 may in certain circumstances be indexed for inflation between the period of acquisition and 31 December Capital Gains of 1,270 can be realised tax free each year. The gains in excess of the annual exemption of 1,270 are chargeable at 33%. Please refer to the Revenue website ( for further details on Capital Gains Tax.

17 Page 17 Example 2 Making a profit of 11,393 Take for example a Participant who accumulates the following Shares over a number of years: Tax Year No. of Shares Cost/ Indexed cost/ Total Acquired Share Share (Note 1) indexed cost 1999/ , / , , ,229 Assume the 700 Shares are sold in the current year for 85 per Share. The position will be as follows: Selling Price - Cost Price = Chargeable gain Proceeds of sale of 700 Shares at 85 each Revised purchase cost for Capital Gains Tax purposes 59,500-48,107 = 11,393 Calculation of Capital Gains Tax Chargeable gain = 11,393 Less amount allowed tax-free - 1,270 Taxable gain = 10,123 Capital gains tax at 33% of 10,123 = 3, Summary The individual has made a profit of 11,393 but needs to pay CGT of 3, from his gain leaving him with a clear profit of 8, Note 1 The indexation factors that apply to index the cost of shares that were acquired prior to for inflation from the date of acquisition to are available on the Revenue website ( )

18 Page 18 Example 3 Death of Shareholder A Participant who has accumulated 750 Shares over the years dies without having disposed of them. In this case the Shares become part of the legal estate of the deceased participant. As part of that estate they will be administered by the person appointed as Executor or Administrator of the estate. A liability to Capital Gains Tax will not arise in the case of death. The Shares pass to the recipient at the price ruling at the date of death and this price is used as the cost price in calculating any subsequent profit on sale of those Shares. There may however, be some exposure to Inheritance Tax on the part of persons taking inheritances from the estate. An important exception is that a surviving spouse/civil partner can take the full amount of any inheritance from the deceased without any liability to Inheritance Tax. In other cases the Inheritance Tax liability can vary with the degree of relationship of the individual beneficiary to the deceased. This can be a difficult area and persons who are likely to be affected should seek appropriate professional advice. Example 4 Deciding not to take up the maximum share appropriation in June or December Circumstances may arise where a colleague who opts for a particular level of salary forego at the beginning of the tax year cannot allocate the full bonus entitlement for the purchase of Shares. Should this situation arise the member should decide how much of the Share entitlement they could afford to take and then discuss the matter with Human Resources Department so that arrangements can be made: a) To adjust the level of salary forego for the remainder of the tax year to bring the total amount within Revenue limits. Or b) To refund any excess as taxable pay through payroll. Here is one interpretation of how a situation could arise and how it could be dealt with. A Participant has exceptional financial requirements for Christmas and decides not to use the full bonus for the appropriation of Shares or, decides not to use the full amount that has been accumulated in the Participant s salary forego account. What should be done? 1 Decide how much money you can afford to spend on Shares, e.g Apply for half that amount when completing the Invitation to Participate in the Scheme. (This invitation is issued to you around May and November each year.) 3 Because you have specified a bonus allocation to Shares of 250, this will attract the maximum allowed for matching contribution from your salary forego fund of 250 and may result in unused salary forego funds in that account. 4 Money not allocated to Shares from bonus will automatically be directed to your payslip where it will be assessed for income tax in the normal way.

19 Page 19 5 Excess money in your salary forego fund which cannot be used in the same tax year to acquire Shares will automatically be directed to your payslip before year-end where it will be assessed for income tax and related taxes in the normal way.