Duke Energy Corporation (holding Company) · NYSE:DUK

Duke Energy Corporation (holding Company) — Investor Presentation (March 2005)

27 slides from Duke Energy Corporation (holding Company)'s investor presentation, Mar 15, 2005

  1. Slide 1: Duke Energy Corporation DKE & DUR Equity Units Tax Information

    Duke Energy Corporation Presented by Linda E. Carlisle March 15, 2005 DKE & DUR Equity Units Tax Information www.whitecase.com

  2. Slide 2: Duke Equity Units Overview

    Duke Equity Units Overview Investor $25 Investment at original issue. Equity Unit Note sold (“remarketed”) 2.75 $0 5 yrs after original issue. $2 Duke Note Forward Contract Stock $25 $25 $25 Treasury STRIPs STRIPs mature 3 months after purchase. Duke Energy Forward Contract settled 3 yrs after origi

  3. Slide 3: Cash Payments to Investors

    Duke Equity Units Overview Cash Payments to Investors 1. Quarterly cash distributions - „ Coupon payment on Note; and „ Contract adjustment payment on Forward Contract. 2. Excess proceeds from remarketing Notes — (remarketing proceeds in excess of Treasury STRIPs purchase price). Page 2 Presentation

  4. Slide 4: Tax Treatment of Separate Instruments: Duke Capital Notes

    Duke Equity Units Tax Treatment of Separate Instruments Duke Capital Notes 1. All ($25) of original issue purchase price of Equity Unit was allocated to Note. 2. Note treated as “contingent payment debt.” „ Investors report as taxable income accrued original issue discount (OID) – not coupon payment

  5. Slide 5: Tax Treatment: Remarketing of Notes

    Duke Equity Units Tax Treatment of Separate Instruments Duke Capital Notes Remarketing of Notes 1. Notes were sold 3 months before scheduled settlement of Forward Contracts. 2. Treated as taxable sale of Notes by Investors. „ Amount realized reported on 1099-B. „ Investors recognized ordinary gain o

  6. Slide 6: Remarketing of Notes: Calculation of Gain or Loss

    Duke Equity Units Tax Treatment of Separate Instruments Duke Capital Notes Remarketing of Notes — Calculation of gain or loss 1. Gain or loss from remarketing Note equals: „ Amount realized by Investor from sale; minus „ Investor’s adjusted tax basis in Note. 2. Amount realized by Investor from rema

  7. Slide 7: Remarketing of Notes: Calculation of Gain or Loss (cont.)

    Duke Equity Units Tax Treatment of Separate Instruments Duke Capital Notes Remarketing of Notes — Calculation of gain or loss 3. Investor’s tax basis in Note equals: „ Equity Unit purchase price allocated to Note; „ Plus OID accrued on Note; „ Minus Coupon payments received on Note. Page 6 Presentat

  8. Slide 8: Tax Treatment: Forward Contract

    Duke Equity Units Tax Treatment of Separate Instruments Forward Contract 1. None ($0) of original issue purchase price of Equity Unit was allocated to Forward Contract at original issue. 2. Quarterly “contract adjustment payments” reported on 1099-MISC as taxable income - „ 28.85% of quarterly distr

  9. Slide 9: Tax Treatment: Treasury STRIPs

    Duke Equity Units Tax Treatment of Separate Instruments Treasury STRIPs 1. Investors owned undivided interest in Treasury STRIPs purchased with remarketing proceeds. 2. Excess of STRIPs principal amount over purchase price was treated as OID. 3. $25 of STRIPs principal amount received at maturity of

  10. Slide 10: Tax Treatment: Duke Common Stock

    Duke Equity Units Tax Treatment of Separate Instruments Duke Common Stock 1. Holding period began day after settlement of Forward Contract. 2. Investor’s basis for shares of Duke common stock: „ If Investor treated contract adjustment payments as taxable income, the Investor’s basis for shares of co

  11. Slide 11: Tax Information Reporting - 2004

    Duke Equity Units Tax Information Reporting - 2004 1. 1099-OID „ OID on Notes; „ OID on Treasury STRIPs. 2. 1099-MISC „ Contract adjustment fees. 3. 1099-B „ Amount realized from Note remarketing. Page 10 Presentation for Duke Energy Corporation www.whitecase.com

  12. Slide 12: Hypothetical Examples for DKE Equity Units

    Duke Equity Units Examples The following three hypothetical examples relate to investments in DKE Equity Units. In each example, it is assumed that the investor treated contract adjustment payments as taxable income. The principles of the examples also apply to DUR Equity Units. Page 11 Presentation

  13. Slide 13: Example 1: Unit Held Through Remarketing

    Duke Equity Units Examples Example 1. „ DKE Equity Unit purchased at original issue. „ DKE Equity Unit held through remarketing. „ Investor received Duke common stock on settlement of Forward Contract. 1. Investor accrued OID on Note. 2. Investor treated contract adjustment payment (28.85% of each q

  14. Slide 14: Example 1: Calculation of Gain on Remarketing of Note

    Duke Equity Units Examples Example 1 (cont’d) Calculation of Gain on Remarketing of Note Amount realized (1099-B): $25.395 „ Treasury STRIPs: $25.329 „ + Excess proceeds: 0.066 Adjusted basis: <25.24> „ Purchase price: $25.00 „ + Accrued OID: 4.520 „ - Coupon payments: 4.280 (71.15% of each quarterl

  15. Slide 15: Example 1: OID on Treasury STRIPs

    Duke Equity Units Examples Example 1 (cont’d) OID on Treasury STRIPs Principal amount: $25.367 - Purchase Price: 25.239 OID (1099-OID): $0.038 Page 14 Presentation for Duke Energy Corporation www.whitecase.com

  16. Slide 16: Example 1: Tax Basis for Duke Common Stock

    Duke Equity Units Examples Example 1 (cont’d) Tax Basis for .6414 Shares Duke Common Stock Equity Unit purchase price allocated to Forward Contract: $0 Forward Contract settlement price: 25 Basis for .6414 shares: $25 Page 15 Presentation for Duke Energy Corporation www.whitecase.com

  17. Slide 17: Example 1: 2004 Tax Reporting

    Duke Equity Units Examples Example 1 (cont’d) 2004 Tax Reporting ƒ 1099-MISC: $0.298 of contract adjustment payments. ƒ 1099-OID: $0.205 of OID on the Note. ƒ 1099-OID: $0.038 of OID on Treasury STRIPs. ƒ 1099-B: $25.395 net proceeds from the remarketing. Page 16 Presentation for Duke Energy Corpora

  18. Slide 18: Example 2: Unit Sold January 3, 2004

    Duke Equity Units Examples Example 2. „ DKE Equity Unit purchased at original issue. „ DKE Equity Unit sold on January 3, 2004 for $13.50.  Fair market value of Note assumed to be $25.  Inferred fair market value of Forward contract assumed to be negative $11.50. 1. Investor accrued OID on Note. 2

  19. Slide 19: Example 2: Sale of Note

    Duke Equity Units Examples Example 2 (cont’d) Sale of Note ƒ Amount realized: $25.00 ƒ Adjusted basis: <25.417> „ Purchase price: $25.00 „ + Accrued OID: 4.330 „ - Coupon payments: 3.913 Loss (ordinary): $<0.417> Page 18 Presentation for Duke Energy Corporation www.whitecase.com

  20. Slide 20: Example 2: Assignment of Forward Contract

    Duke Equity Units Examples Example 2 (cont’d) Assignment of Forward Contract Amount realized: $<11.50> Adjusted basis: 0.00 Loss (capital): $<11.50> Page 19 Presentation for Duke Energy Corporation www.whitecase.com

  21. Slide 21: Example 2: 2004 Tax Reporting

    Duke Equity Units Examples Example 2 (cont’d) 2004 Tax Reporting ƒ1099-OID: $0.008 of OID on the Note. ƒ1099-B: $13.50 net proceeds from sale of the DKE unit.* * Represents the net proceeds received from the sale of the Note for $25 and Investor’s deemed payment of $11.50 to the buyer of the Equity

  22. Slide 22: Example 3: Unit Purchased for $13.50

    Duke Equity Units Examples Example 3. „ DKE Equity Unit purchased for $13.50 on January 3, 2004.  Fair market value of Note assumed to be $25.  Inferred fair market value of Forward Contract assume to be negative $11.50. „ DKE Equity Unit held through remarketing. „ Investor received Duke common s

  23. Slide 23: Example 3: Sale (Remarketing) of Note

    Duke Equity Units Examples Example 3 (cont’d) Sale (remarketing) of Note Amount realized (1099-B): $25.395 „ Treasury STRIPs: $25.329 „ + Excess proceeds: 0.066 Adjusted basis: <24.829> „ Purchase price: $25.00 „ + Accrued OID: 0.196 „ - Coupon payment: 0.367 Gain (ordinary interest income): $0.566

  24. Slide 24: Example 3: OID on Treasury STRIP

    Duke Equity Units Examples Example 3 (cont’d) OID on Treasury STRIP Principal amount: $25.367 - Purchase Price: <25.239> OID (1099-OID): $0.038 Page 23 Presentation for Duke Energy Corporation www.whitecase.com

  25. Slide 25: Example 3: Tax Basis for Duke Common Stock

    Duke Equity Units Examples Example 3 (cont’d) Tax Basis for .6414 Shares Duke common Stock Equity Unit purchase price allocated to Forward Contract:* $<11.50> Forward Contract settlement price: 25.00 Basis for .6414 shares: $13.50 *Assumes that the $11.50 paid to the Investor to assume the burdensom

  26. Slide 26: Example 3: 2004 Tax Reporting

    Duke Equity Units Examples Example 3 (cont’d) 2004 Tax Reporting ƒ1099-MISC: $0.298 of contract adjustment payments. ƒ1099-OID: $0.194 of OID on the Note. ƒ1099-OID: $0.038 of OID on Treasury STRIPs. ƒ1099-B: $25.395 net proceeds from the remarketing. Page 25 Presentation for Duke Energy Corporation

  27. Slide 27: Additional Information

    Duke Equity Units Additional Information Duke Energy Corporation web site ƒ Prospectuses for DKE Equity Units and DUR Equity Units can be found at: http://www.duke-energy.com/investors/resources/debt_redeemed ƒ Tax information regarding the DKE Equity Units can be found at: http://www.duke-energy.co

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