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The following questions relate to the distribution (the "Distribution") by Minnesota Mining and Manufacturing Company ("3M") to its shareholders of all of the outstanding shares of Imation Corp. The Distribution was effective July 1, 1996. Q: Why am I receiving shares of Imation Corp.? 3M has spun off its data storage and imaging systems groups as a newly-formed company named Imation Corp. The 3M Board of Directors approved the distribution of the outstanding shares of common stock to 3M stockholders, effective July 1, 1996. Q: How many shares of Imation common stock did 3M stockholders receive as a result of the spin-off? 3M stockholders of record on June 28, 1996 received one share of Imation common stock for every ten shares of 3M common stock held. Q: What if my 3M shares did not divide evenly by 10? Were fractional shares issued? If you were entitled to a fractional share of Imation Corp. common stock as a result of the stock dividend, you received payment in lieu of such fractional share. On or about July 16, all of the fractional shares were aggregated into whole shares by the distribution agent and sold on the open market. You should have received a check for the sales proceeds of the fractional share (net of any commissions incurred in connection with such sales) within two weeks. Q: How much will a share of Imation be worth? Where does it trade? What symbol? The normal supply and demand of the market determines the market price of the stock. You can follow the market price of both 3M and Imation common stock by referencing the local paper or by checking with a stockbroker. Both stocks now trade on the New York and Chicago Stock Exchanges. Imation trades under the symbol IMN. 3M trades under the symbol MMM. Q: How will the spin-off affect the market price of my 3M shares? Due to the spin-off, the market price of 3M common stock should have declined by roughly one tenth of the per share value of Imation common stock. This adjusted 3M market price should have been reflected on the stock market beginning on July 16. For example, if the Imation stock price on July 15 was $25/share, it could be expected that the 3M stock price would have decreased by about $2.50 (1/10 of Imation stock price). Together, the market values of your 3M stock and the Imation stock that you received should add up to approximately the value of your 3M stock just prior to the spin-off. You should consult your stock broker for the current trading prices of Imation and 3M common stock. Q: Will Imation pay dividends? Imation has not declared a dividend since its spin-off on July 1, 1996. The payment and amount of cash dividends on Imation common stock is at the discretion of Imation's Board of Directors. Q: Will Imation offer a dividend reinvestment plan? Imation does not currently offer a dividend reinvestment plan. Q: How do I sell my shares? Your 3M and Imation shares may be purchased and sold through your stockbroker. We do not make recommendations regarding the purchase or sale of Imation or 3M common stock, but a financial advisor could help you in that decision. Q: Can I buy or sell my shares without going through a broker? Imation does not currently offer a plan under which the company helps you buy or sell small share holdings. However, a broker would be able to provide that service for you. Q: What should I do with my 3M certificates? The shares of 3M common stock that you own remain outstanding and will continue to trade on the New York and Chicago Stock Exchanges. You do not need to take any action with respect to these shares. Q: What is my cost basis for the Imation shares? See "Important Tax Information for 3M Spin-Off" and attached example below. Q: What are the tax implications of this transaction? 3M has received a favorable ruling from the IRS that the receipt of Imation shares in the Distribution will not be taxable for U.S. federal income tax purposes. Cash received instead of fractional shares will be likely treated as proceeds from the redemption of the fractional share and may be taxable. In addition, of course, if you sell your Imation stock, you may have to pay taxes. We recommend that you consult your tax advisor. Q: Was this an IPO (Initial Public Offering)? No. This was not an IPO, but rather a 100% Distribution of Imation's outstanding common stock to 3M stockholders. Q: What is the location/address of Imation?
Imation Corp. Imation Corp. is also located on the Internet at: http://www.imation.com Q: Who do I contact for questions regarding my Imation common stock? You can contact the transfer agent, Norwest Bank Minnesota, N.A.:
Norwest Shareowner Services Example Relating to Calculation of Tax Basis for Shares of Imation Common Stock Received from the Distribution [The following is an example only.]: Let's assume you purchased shares of 3M stock a number of years ago for a total cost of $1,500. Further assume that, after the effect of any stock splits, you held 100 shares of 3M prior to the spin-off. Thus, you would have received 10 shares of Imation stock from the 7/1/96 distribution. At that point, you incurred no tax liability, because the spin-off was ruled by the IRS to be a tax-free distribution. Using the tax basis ratio of .03941 given in the attached letter from 3M, dated 7/15/96 and entitled "Important Tax Information For 3M Spin-Off," your tax basis in your Imation stock would be: Imation tax basis:$1,500 (.03941) = $59.12 If you sold your Imation shares for $25 per share, your capital gain would be:
Proceeds: $250.00 (10 shares @ $25/share) If the shares that were sold were held for more than one year, the gain should be reported as a long-term capital gain. Anything less than one year is considered short-term. The holding period for shares distributed in a tax-free spin-off includes the holding period of the related stock from which the distribution was made. Thus, in this example, the holding period goes back to when you originally purchased your 3M stock, and would equate to a long-term capital gain of $190.88. Using your actual historical cost data, the amount and nature of your gain could be calculated as shown in the above example. You should consult with your personal tax advisor prior to filing your tax return.
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