Interserve Regulatory News (IRV)

not for release, publication, distribution or forwarding, directly or indirectly, in whole or in part, in, into or from any jurisdiction where to do so MIGHT constitute a violation of the relevant SECURITIES laws of such jurisdiction.

 PROPOSED DISPOSAL OF PFI ASSETS AND NOTICE OF GENERAL MEETING

November 28 2012: Interserve Plc (the Company), the international support services and construction group, announces today, that it has entered into a conditional agreement with the trustee of the Pension Scheme (the Trustee), to transfer its remaining interest in a portfolio of 19 PFI assets (the PFI Assets), to the Trustee at a valuation of £55m.* The proposed transfer is conditional upon the approval from the shareholders of Interserve Plc at a General Meeting to be held on 7 January 2013.

Key Transaction Highlights

The proposed Transaction will:

·; Provide a significant contribution towards the current Pension Scheme funding shortfall; and

·; Crystallise further value from Interserve's PFI investment portfolio.

In the financial year ended 31 December 2011, the Interests contributed £3.7 million of profit and as at 30 June 2012 had gross assets valued at £33.6 million.

Interserve has completed two previous transactions in relation to its PFI portfolio, announced in June and October. The combined effect of these transactions, including the proposed transaction, will be to have raised £124.5 million in cash, to reduce the actuarial deficit from £150 million to £95 million and reduce the annual deficit recovery payment from £23.2 million to £12.0 million per annum.

Commenting on the Transaction, Chief Executive Officer, Adrian Ringrose said:

"The transaction announced today is good news for both shareholders and members of our pension scheme. Through a series of transactions during 2012 we have realised significant latent value in our PFI portfolio and with today's announcement are proposing to bolster our pension position. The conclusion of our triennial pension funding review, of which this transaction is an integral part, balances the interests of our pension scheme with our ambition to make further progress against our strategic growth plans."

The Transaction, when aggregated together with the disposal of PFI interests to Dalmore, announced in October, will be of such a size as to require Shareholder approval under the Listing Rules. The Circular and Notice of General Meeting and the Form of Proxy, will shortly be available for viewing on the investors section of Interserve's website, www.interserve.com.

This preceding summary should be read in conjunction with the full text of the following announcement and its appendices.

Enquiries:

Interserve Plc +44 (0) 118 932 0123

Tim Haywood, Group Finance Director

Matt Hickman, Investor Relations Manager

Robin O'Kelly, Director of Communications

J.P. Morgan Cazenove +44 (0) 207 742 4000

(Financial Adviser)

Guy Marks

Andrew Coates

Capital MSL +44 (0) 207 307 5334

Richard Campbell

Ian Brown

IMPORTANT NOTICE

J.P. Morgan Limited (which conducts its UK investment banking business as J.P. Morgan Cazenove) which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Interserve and no one else in connection with the Transaction and will not be responsible to anyone other than Interserve for providing the protections afforded to its clients or for giving advice in connection with the Transaction or any of the arrangements referred to or contained in this announcement.

This communication is not a prospectus as required by the Prospectus Directive of the European Parliament and of the Council of 4 November 2003 (No 2003/71/EC). It does not constitute or form part of an offer to sell or any invitation to purchase or subscribe for any securities or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the proposed merger or otherwise.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purpose of complying with the Listing Rules of the Financial Services Authority and information disclosed may not be the same as that which would have been disclosed in accordance with the laws and regulations of any jurisdiction outside of England.

Any acceptance of, or response to, the Transaction should be made only on the basis of the information referred to in the shareholder circular seeking the approval of Interserve shareholders for the Transaction (the "Circular") issued by Interserve.

Copies of the Circular will, from the date of posting to Interserve shareholders, be filed with the UK Listing Authority and submitted to the National Storage Mechanism and available for inspection at www.Hemscott.com/nsm.do and available for inspection by Interserve shareholders at the offices of Interserve plc, Interserve House, Ruscombe Park, Twyford, Reading, Berkshire, RG10 9JU during normal business hours on any weekday (public holidays excepted).

This announcement is for informational purposes only and is not intended to, and does not constitute, or form part of, an offer to purchase nor a solicitation of an offer to sell any Interserve ordinary shares.

Forward Looking Statements

This announcement contains (or may contain) statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "prepares", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Interserve, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Interserve's present and future business strategies and the environment in which Interserve will operate in the future and therefore involve a number of known and unknown risks, contingencies, uncertainties and other factors, many of which are beyond the control of Interserve. These forward-looking statements speak only as at the date of this announcement. Except as required by the Financial Services Authority, the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the London Stock Exchange, applicable law or relevant regulation, Interserve expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Interserve's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this announcement should be construed as a profit forecast or be interpreted to mean that the future earnings per share, profits , margins or cash flows of Interserve will necessarily match or exceed the historic published figures.

Neither the content of Interserve's website nor any website accessible by hyperlinks on Interserve's website is incorporated in, or forms part of, this announcement.

THE DEFINED TERMS SET OUT IN APPENDIX 1 APPLY IN THIS ANNOUNCEMENT.

ADDITIONAL INFORMATION REGARDING THE TRANSACTION

INTERSERVEPROPOSED DISPOSAL OF INTERSERVE PFI HOLDINGS 2003 LIMITED TO THE INTERSERVE PENSION FUND AND NOTICE OF GENERAL MEETING

Introduction

The Interserve board of directors announced today, 28 November 2012, that Interserve Investments Limited, a subsidiary of the Company, has entered into a conditional agreement with Interserve Trustees Limited, the corporate trustee of the Pension Scheme, to transfer the entire issued share capital of Interserve PFI Holdings 2003 Limited, representing the majority of the Company's PFI assets, to the Trustee.

The Transaction constitutes, for the purpose of the Listing Rules, a disposal by the Company and, when aggregated together with the disposal of the PFI Para Dalmore Interests and PFI Custodial Dalmore Interests to Dalmore, announced on 12 October 2012, will be of such a size as to require Shareholder approval under the Listing Rules. The Transaction is therefore both subject to and conditional upon Shareholder approval and a General Meeting, to be held at 4.30 p.m. on 7 January 2013 at Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA, has been convened to consider and, if thought fit, pass the Resolution to approve the Transaction. A notice of the General Meeting and of the Resolution to be proposed and considered at the General Meeting is set out in the Circular.

The purpose of the Circular is to: (i) explain the background to and reasons for the Transaction; (ii) explain why the Board considers the Transaction to be in the best interests of Shareholders as a whole; and (iii) convene the General Meeting to seek Shareholder approval for the Transaction.

Background to and reasons for the Transaction

Since 1997, the Company has successfully invested in the private finance initiative introduced by the government in projects across a variety of sectors in the UK, including healthcare, defence and education. These projects, having reached maturity following the completion of the core construction phase, generate long-term and relatively low-risk cash flows. As such, a competitive market of secondary funds, backed by pension funds, has emerged allowing primary investors to divest their PFI portfolio interests. A number of primary investors have chosen to transfer these interests directly to their pension trustee as part of their long-term pension funding strategy. In November 2009, the Company adopted the latter approach and directly transferred 13 of its PFI investments to the Trustee.

The Company is currently pursuing a wide-ranging strategy to redeploy a number of the Group's assets in order to support its medium term growth ambitions and at the same time address its longer term pension obligations. This included the sale, announced on 21 June 2012, of part of the Group's holding in the University College London Hospitals ("UCLH") PFI project and the disposal, announced on 12 October 2012, of the PFI Para Dalmore Interests and PFI Custodial Dalmore Interests to Dalmore. Under the terms of the Dalmore Sale and Purchase Agreement, Interserve PFI Holdings 2003 Limited received gross cash proceeds equal to £89.5 million. Another key part of the strategic process involves the transfer of Interserve PFI Holdings 2003 Limited to the Trustee. Further details of the Transaction and a summary of the principal terms of the Deed of Transfer are set out in Part VI of the Circular.

Interserve PFI Holdings 2003 Limited holds the Interests in each of PFI Para and PFI Custodial, which together through subsidiaries hold 19 PFI investments (the "PFI Assets").

The latest triennial valuation as at 31 December 2011 of the Company's actuarial pension deficit assessed a funding shortfall, as at that date, of £150 million. The Company has agreed with the Trustee that it will aim to eliminate this deficit over the period to 31 June 2019 and will contribute the Interests into the Pension Scheme, which together have a value of £55 million, by way of the transfer of Interserve PFI Holdings 2003 Limited. The Transaction will provide a significant contribution towards the current Pension Scheme funding shortfall whilst crystallising further value from the PFI investment portfolio.

On completion of the Transaction, the Company and the Trustee have agreed that a new schedule of deficit reduction contributions will become effective pursuant to which the Company will make cash payments into the Pension Scheme of £12 million per annum (rising in line with inflation) over a period of seven years. Under the current regime, the Group pays deficit funding contributions of £23.2 million per annum. These cash payments are in addition to the regular cost of Pension Scheme benefits. 

Following completion of the Transaction, the Company will continue to manage the Interests on behalf of the Trustee for an annual fee of £1 million and shall retain all current arrangements for the delivery of facilities services. All future interest and dividend income attributable to the Interests over their lifetime will be payable to the Pension Scheme.

In the financial year ended 31 December 2011, the Interests contributed £3.7 million of profit and as at 30 June 2012 had gross assets valued at £33.6 million. There will be a marginal reduction in Group profit before tax in 2013, resulting from the loss of income from the Interests.

The combination of the Transaction, the sale of part of Interserve's holding in the UCLH PFI project and the recent disposal of the PFI Para Dalmore Interests and PFI Custodial Dalmore Interests to Dalmore has raised £124.5 million in cash and will reduce the actuarial deficit from £150 million to £95 million, and the annual deficit recovery payment from £23.2 million to £12 million per annum.

Under the Listing Rules, the proposed disposal by IIL of the Sale Shares to the Trustee, when aggregated together with the disposal of the PFI Para Dalmore Interests and PFI Custodial Dalmore Interests to Dalmore announced on 12 October 2012, will be of such a size as to require Shareholder approval. Therefore, the Transaction is subject to and conditional upon Shareholder approval and a General Meeting, to be held on 7 January 2013, is being convened for the purpose of obtaining such consent.

Information on Interserve PFI Holdings 2003 Limited

Interserve PFI Holdings 2003 Limited is an indirectly 100 per cent. owned subsidiary of the Company which holds the Interests in PFI Para and PFI Custodial, which together through subsidiaries hold the PFI Assets. The PFI Assets were held by the Company at a carrying value of £43.4 million as at 31 December 2011 (which excludes a hedging reserve of £36.5 million attributable to those investments which are recycled through reserves to derive the exceptional profit) and generated pre-tax profits of £7.4 million in the year ended 31 December 2011.

The Transaction

On 27 November 2012, IIL entered into a Deed of Contribution with the Trustee, pursuant to which IIL agreed, pursuant to the rules of Pension Scheme, to pay to the Trustee an employer's contribution of £55 million.

On 27 November 2012, IIL entered into a Deed of Transfer with the Trustee pursuant to which IIL has agreed to transfer the entire issued shareholding of Interserve PFI Holdings 2003 Limited to the Trustee. The transfer of the Sale Shares under the Deed of Transfer is conditional upon approval of the Transaction by Shareholders. IIL have also agreed to fund the stamp duty payable upon the disposal of the Sale Shares.

Interserve PFI Holdings 2003 Limited holds each of the PFI Para Interests and PFI Custodial Interests. In addition, IIL entered into a Deed of Set-Off with the Trustee, pursuant to which the debt of £55 million due to the Trustee created in respect of the employer's contribution shall be set-off against the debt due to IIL in respect of the consideration payable pursuant to the Deed of Transfer.

Further details of the Transaction and a summary of the principal terms of the Deed of Transfer are set out in Part VI of the Circular.

Current trading and future prospects

As announced by the Company in its interim management statement, published on 12 November 2012, the Group continues to perform in line with the Board's expectations.

The Group has won further significant contracts from new and existing clients and continues to benefit from early action taken to enhance cost-efficiencies. In the period 1 July to 12 November 2012, the Group won over £500 million of work from clients including the NHS, Viridor, Scottish Power Networks, the Ministry of Justice, the Department for Education, University of Oxford, English Heritage, Northern Powergrid, Malmaison Hotels, West Yorkshire Police Authority, Arabian Industries, Hyundai Engineering, Ethiad Airways and UAE Roads and Transport Authorities.

Following PFI divestments, the Group's financial position has materially strengthened from that reported in the half-year report for the six months ended 30 June 2012.

Risk factors

Shareholders should consider fully the risk factors set out in Part II of the Circular.

General Meeting

A notice convening a general meeting of the Company to be held at 4.30 p.m. on 7 January 2013 at Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA is set out at the end of the Circular. A Form of Proxy to be used in connection with the General Meeting will be enclosed with the Circular. The purpose of the General Meeting is to seek Shareholders' approval for the Transaction.

Action to be taken

Shareholders will find enclosed a Form of Proxy with the Circular for use at the General Meeting. Whether or not they intend to be present at that meeting, Shareholders are requested to complete the Form of Proxy (in accordance with the instructions printed thereon) and return it to the Company's registrars, Capita Registrars at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and, in any event, so as to arrive by 4.30 p.m. on 5 January 2013. Completion and return of a Form of Proxy will not preclude Shareholders from attending that meeting and voting in person if you so wish.

Further information

Shareholders' attention is drawn to the further information contained in Parts III to VII of the Circular.

Shareholders are advised to read the whole of the Circular and not to rely solely on the information contained in this news release.

Enquiries:

Interserve Plc +44 (0) 118 932 0123

Matt Hickman

Robin O'Kelly

J.P. Morgan Cazenove +44 (0) 207 742 4000

(Financial Adviser and Corporate Broker)

Guy Marks

Andrew Coates

Capital MSL +44 (0) 207 307 5334

Richard Campbell

Ian Brown

APPENDIX 1

Definitions and Glossary of Technical Terms

Reference to a company in this announcement shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established.

IMPORTANT NOTICE

J.P. Morgan Limited (which conducts its UK investment banking business as J.P. Morgan Cazenove) which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Interserve and no one else in connection with the Transaction and will not be responsible to anyone other than Interserve for providing the protections afforded to its clients or for giving advice in connection with the Transaction or any of the arrangements referred to or contained in this announcement.

This communication is not a prospectus as required by the Prospectus Directive of the European Parliament and of the Council of 4 November 2003 (No 2003/71/EC). It does not constitute or form part of an offer to sell or any invitation to purchase or subscribe for any securities or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the proposed merger or otherwise.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purpose of complying with the Listing Rules of the Financial Services Authority and information disclosed may not be the same as that which would have been disclosed in accordance with the laws and regulations of any jurisdiction outside of England.

Any acceptance of, or response to, the Transaction should be made only on the basis of the information referred to in the shareholder circular seeking the approval of Interserve shareholders for the Transaction (the "Circular") issued by Interserve.

Copies of the Circular will, from the date of posting to Interserve shareholders, be filed with the UK Listing Authority and submitted to the National Storage Mechanism and available for inspection at www.Hemscott.com/nsm.do and available for inspection by Interserve shareholders at the offices of Interserve plc, Interserve House, Ruscombe Park, Twyford, Reading, Berkshire, RG10 9JU during normal business hours on any weekday (public holidays excepted).

This announcement is for informational purposes only and is not intended to, and does not constitute, or form part of, an offer to purchase nor a solicitation of an offer to sell any Interserve ordinary shares.

Forward Looking Statements

This announcement contains (or may contain) statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "prepares", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Interserve, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Interserve's present and future business strategies and the environment in which Interserve will operate in the future and therefore involve a number of known and unknown risks, contingencies, uncertainties and other factors, many of which are beyond the control of Interserve. These forward-looking statements speak only as at the date of this announcement. Except as required by the Financial Services Authority, the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the London Stock Exchange, applicable law or relevant regulation, Interserve expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Interserve's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this announcement should be construed as a profit forecast or be interpreted to mean that the future earnings per share, profits , margins or cash flows of Interserve will necessarily match or exceed the historic published figures.

Neither the content of Interserve's website nor any website accessible by hyperlinks on Interserve's website is incorporated in, or forms part of, this announcement.