27 Feb 2009 07:00
Trikona Trinity Capital PLC ("Trikona TC" or "the Company")
RECOMMENDED PROPOSALS FOR CHANGES TO THE COMPANY'S INVESTMENT POLICY, APPROVAL OF THE MARKET PURCHASE OF OWN SHARES AND NOTICE OF EXTRAORDINARY GENERAL MEETING
Further to the announcement of 31 October 2008 the Board has now concluded its strategic review which has included a review of both the Company's investment policy and its distribution strategy. A circular will be posted shortly to Shareholders, the text of which is set out below.
Terms defined in the Circular have the same meanings in this announcement.
Enquiries:
| Trikona Capital Advisers Ltd (UK) | |
| Ashesh C. Shah, Managing Director | +44 20 7148 5363 |
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| | |
| Bell Pottinger Corporate & Financial | |
| Mike Davies / Rosanne Perry | +44 20 7861 3232 |
| | |
| Numis Securities | |
| NOMAD: Lee Aston, Hugh Jonathan | +44 20 7260 1000 |
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| Fairfax I.S. PLC | |
| James King, Head of Corporate Finance | +44 20 7598 5368 |
"RECOMMENDED PROPOSALS FOR CHANGES TO THE COMPANY'S INVESTMENT POLICY, APPROVAL OF THE MARKET PURCHASE OF OWN SHARES AND NOTICE OF EXTRAORDINARY GENERAL MEETING
1 Introduction
As an investment company whose shares are admitted to trading on AIM, the Company is required to have an investment policy which must be approved annually by Shareholders. However, the proposal to approve the continuation of the investment policy adopted on Admission was rejected by Shareholders at the Annual General Meeting on 19 December 2008. As a result the Board must seek approval of an investment policy as soon as possible.
Pending approval of an investment policy the Board believes that the Group's ability to conduct its business in the Indian market is compromised and the Group risks jeopardising its existing relationships and may have difficulties in forming beneficial relationships or conducting its business in the future. In addition, the Board believes that, in such circumstances, the Group's ability to make disposals may also be prejudiced.
The Board has now concluded its strategic review announced last October which has included a review of both the Company's investment policy and its distribution strategy.
As a result of its strategic review, the Board has concluded that it is in the best interests of the Company and Shareholders as a whole to adopt a new investment policy to enable the Company to continue to develop profitable assets, while facilitating the release of funds to Shareholders as projects mature and markets improve. As part of this revised strategy, the Board believes that available cash which can be realised from the sale of certain assets in line with the new investment policy should be applied towards one or more market purchases of own shares enabling Shareholders to sell all or part of their holding of Ordinary Shares back to the Company. Further details are contained in section 6.4 of this document.
However, a major Shareholder has proposed an alternative investment policy designed (in the Board's opinion) to result in a return of cash in a greater amount and earlier than the policy recommended by the Board. The Board believes that this policy may give rise to a number of adverse consequences as referred to in more detail in section 6.2 of this document. Further details of this policy are set out in section 6.2 of this document and this policy is reflected in Resolution 2 to be put to Shareholders.
In addition, the Company is offering Shareholders the opportunity to consider a further alternative policy which has certain features of the policy proposed by the major Shareholder but which the Manager has advised the Board may avoid some of the adverse consequences that might result from the implementation of Resolution 2.
The purpose of this document is to set out the background to and reasons for the strategic review and its conclusions and to recommend unanimously that Shareholders vote at the EGM in favour of the Board Policy in Resolution 1 and the authority to make market purchases of own shares in Resolution 5. The Board intends to utilise the authority in Resolution 5 to give effect to whichever investment policy is ultimately approved by Shareholders and therefore Shareholders are recommended to vote in favour of Resolution 5 as it is a general share buy back authority and is a means by which the Company can effect returns to Shareholders.
THE BOARD RECOMMENDS UNANIMOUSLY THAT SHAREHOLDERS VOTE AGAINST RESOLUTION 2. THE BOARD IS NOT MAKING ANY RECOMMENDATION IN RESPECT OF RESOLUTIONS 3 OR 4.
2 Background to the Company and the Indian Market
The Company was established in early 2006 to invest in Indian infrastructure and real estate. In April of that year it raised £250 million in cash through a placing of Ordinary Shares on AIM.
The proceeds of the placing were fully invested within 12 months and, to date, the Group has made 17 investments. As at 30 September 2008, the Company reported NAV per Ordinary Share of 138 pence.
Since 2007, the Group has divested certain of its initial investments to SachsenFonds which have given an average IRR of 97 per cent. and have resulted in aggregate gross proceeds of £86.4 million.
In February 2007, the Company returned £18,307,000 to Shareholders through a share buy back by purchasing and cancelling 20,700,000 Ordinary Shares at a price of 88 pence per Ordinary Share. The Group has conservative gearing and, save as disclosed in its interim accounts in respect of the Indian Companies, has no debt.
Over the last six months, global market conditions have continued to deteriorate. Real estate prices in the Indian market have continued to fall and in India developers face liquidity pressure and difficulties in realising assets. However, the Board believes that the long-term outlook for India remains strong and that there is currently a market for distressed trades in the Indian residential real estate sector, as well as many projects looking for completion capital. The Board believes that this provides opportunities for the Company to expand its core portfolio.
3 Current Investment Policy
At Admission, the Company stated in the Admission Document that its investment policy was focused on asset acquisition for mid to long-term capital appreciation.
Pursuant to this policy, and owing to the nature of Indian laws and regulations, as well as the Indian real estate market, most of the Group's projects involve early-stage development projects with a three year and longer development cycles. Furthermore, the Admission Document made it clear to investors that the Company's life would be for a term of ten years.
4 Rationale for the Strategic Review
The price at which Ordinary Shares have traded since Admission has not increased in line with the increase in NAV over the same period. Although the closing price of an Ordinary Share did increase to a peak of 116.5 pence in April 2008, since that date the gap between the Ordinary Share price and NAV has increased. The Board believes that this reflected sentiment amongst potential investors towards Indian real estate companies generally and the listed equity market as a whole.
As a result, in September 2008 the Board initiated a review in order to identify, together with its broker, the potential mechanisms by which to enhance the share price to reflect the NAV. As at 30 September 2008, the closing price of an Ordinary Share was 54.5 pence whilst the NAV per Ordinary Share was 138 pence.
On 31 October 2008, the Board announced the appointment of two new non-executive directors at the request of one of its major Shareholders, Carrousel Capital Limited - Andrzej Sobczak and Pradeep Verma. At this point the Board also stated it would extend its previously announced review and upon appointment of the two directors, the review would focus on the Company's ongoing investment policy and future distribution of capital. Further details of this strategic review are set out in section 5 below.
5 Strategic Review Analysis
As part of the strategic review and against the current market background the Board has carefully considered accelerating its policy of returning cash to Shareholders and has carried out an analysis of its ability to make cash available for distribution to Shareholders. As at 5 December 2008, when the Company's last interim results were published, the Group's available cash was reported as £31.1 million, less approximately £17 million in Board-approved costs, leaving a remaining available balance of approximately £14 million. Operating costs for the Group run at approximately £9 million per annum.
A range of factors which would affect the Group's ability to generate additional cash through a realisation of its existing investments were identified and considered during the strategic review. The factors considered include the following:
5.1 Indian Regulatory Constraints
There is a general prohibition on repatriating capital invested in India outside India within three years of investment and after this period, only profits may be repatriated. According to a press release issued by the GOI dubbed "Press Note 2", infrastructure, industry, industrial parks, listed entities and hotels are considered exempt categories of investment and the three year lock-in does not apply to such investments. However, as substantially all of the Group's investments in India fall outside these exempt categories, the Board has concluded that it is not possible to repatriate easily out of India to Shareholders a large proportion of the capital invested by the Group either immediately, or in the short term.
In coming to this view the Board commissioned an opinion on the impact of Indian regulations relating to foreign direct investment on various exit strategies. This reaffirmed the Board's view and confirmed that, although an investor may be permitted to exit prior to the expiry of three years with prior approval of the GOI through the FIPB, the FIBP in a recent case turned down a proposal for the transfer of the original investment held by a non-Indian resident joint venture partner in a real estate project company in India, to another non-resident. Disposals in contravention of these rules may lead to action by the GOI against the Group and the Board as well as, potentially the Manager, affecting the Group's ability to continue its business in India.
In addition, Shareholders should note that the rules relating to foreign direct investment have been recently reviewed by the GOI but no guidelines have as yet been published so it is not known how these will impact upon the Group's ability to repatriate capital and profits in the future.
Furthermore, disposal of any of the Group's investments which are permitted either by the FIPB or because they fall within an exempted category may still be subject to contractual restrictions which are referred to below.
Whilst a sale of shares in the Mauritian Companies may be more feasible, the Board has been advised by the Manager that such sales would not be readily achievable due to a shortage of potential purchasers.
5.2 Strategic Relationships
The Group cultivates its relationships with partners in order to enable access to deals and to build a framework from which to gain the economy of repeat transactions. The Group often has contractual relationships with the same partners spread over several projects or with more than one partner in the same project and the Board believes that action in respect of one investment can therefore impact on another. In particular:
On the basis of the above, the Board believes that it is in the best interests of the Company and Shareholders as a whole that the Group does not take any action which is likely to jeopardise the Group's relationships with existing partners or affect its ability to develop new relationships in furtherance of its business.
5.3 Contractual Obligations
The Board has also considered carefully the Group's existing contractual obligations to its development partners and co-promoters. In some cases these contracts impose restrictions upon the Group's ability to terminate, exit or extract capital from such arrangements or require the Group to inject further capital. If the Group were to breach or seek to avoid any of its binding contractual obligations with its partners and co-promoters this might lead to litigation, which could be time consuming, costly and seriously detrimental to the Group's reputation. In particular, the Group will need to retain sufficient funds to ensure it can meet such commitments and to address any unforeseen liabilities which might arise.
Certain of the Group's partners have expressed concerns as a result of the uncertainty surrounding the Group created by the actions taken by certain Shareholders and have questioned the Group's ability to fulfil its existing contractual obligations.
Given the constraints and considerations outlined above, while the Board recognises that it is in the best interests of Shareholders as a whole to implement a means of returning available cash, unlocking cash for early return to Shareholders is not straightforward and cannot be guaranteed.
The Board has also investigated the possibility of funding any buy back of Ordinary Shares out of borrowings but the Board has not found it practically possible for the Group to incur borrowings for this purpose.
However, the Board estimates that up to £100 million may be capable of being returned to Shareholders within 24 months of the EGM by the following means:
Shareholders should note that it is impossible to forecast accurately the timing and quantum of cash realisations and that there can be no certainty that £100 million will be realised by the above methods within the stated timescale or at all and that these estimates are based upon, amongst others, the assumptions that market conditions do not deteriorate further and that all necessary consents are obtained without delay.
In particular, Shareholders should be aware that:
6 Proposed Investment Policies
6.1 The Board's Proposal
The Admission Document made it clear that initial Shareholders could expect net asset value growth, not short-term liquidity. Furthermore, the distribution policy described in the Admission Document anticipated that the Board would consider the distribution of capital profits on Ordinary Shares after the first three years of the Company's life.
In seeking to formulate a proposal which it believes to be in the best interests of the Company and Shareholders as a whole, the Board has been mindful of the need not to erode long-term value for Shareholders and to avoid taking any action which may result in litigation or governmental action being taken against the Company or any member of the Group or which may seriously impair the Group's ability to conduct its business.
With this in mind, the Board recommends the adoption of the following new investment policy in substitution for the Company's existing investment policy as published in the Admission Document:
"The Company will seek to realise assets in an orderly manner, having due regard to all applicable legal, governmental regulatory and contractual restraints and with a view to maximising Shareholder value, until the earlier of such time as: (i) the Company has returned to Shareholders an aggregate amount of £100 million by way of one or more on market buy backs, including by way of tender offer or otherwise; or (ii) the Company has effected one or more market buy backs including by way of tender offer or otherwise of a maximum of 70 per cent. of the Company's currently issued share capital. Until such a return or buyback has been made (which is expected to be within the next 24 months), the Company shall only be permitted to make new investments to facilitate the disposal programme of its assets at the date of adoption of this policy and/or to rebalance the portfolio's shareholdings in public equities at the date of adoption of this policy. Thereafter, the Company's investment policy will be as stated in its admission document dated 13 April 2006."
The Board believes that this policy which envisages a realisation of certain, but not all, of the Group's assets will assist in reducing the gap between the trading price of an Ordinary Share and the NAV per Ordinary Share, whilst at the same time enable the Group to continue to develop potentially profitable assets. The Board has also been advised by the Manager that the adoption of a limited realisation programme is less likely to damage the Group's relationships with its strategic partners or to damage the business of the Group and will allow it to maximise Shareholder value.
As this proposal will result in a change to the Company's existing investment policy, the Board will propose it as a special resolution at the EGM (Resolution 1 in the Notice), in accordance with article 116A of the Articles.
THE BOARD IS RECOMMENDING UNANIMOUSLY RESOLUTION 1.
6.2 Realisation Policy
Shareholders should be aware that a major Shareholder has suggested a different investment policy which focuses on an accelerated disposal of the assets in the Group's portfolio. The Board has been advised by the Manager that this policy is unachievable without exposing the Group to a number of risks referred to in more detail below.
The investment policy proposed by this major Shareholder is as follows:
"The Company shall promptly but having due regard to all applicable legal, governmental and regulatory restraints and with a view to maximising Shareholder value dispose of all of its existing assets in an orderly fashion.
If the Company's Ordinary Shares are trading at a price below the NAV per Ordinary Share, the Company shall immediately effect a return of capital through a cash distribution to Shareholders.
The Company shall continue to seek new investment opportunities. If the Company's Ordinary Shares are trading at a price above the NAV per Ordinary Share, the Board will selectively determine, on a periodic basis, whether or not to make new investments."
The Board has carefully considered the Realisation Policy in the light of the prevailing legal and regulatory framework, the Group's contractual commitments and the consequent availability of cash and does not believe that it is in the best interests of the Company and Shareholders as a whole for the following reasons:
Whilst the Board does not recommend the Realisation Policy, the Board believes it is appropriate to afford Shareholders the opportunity to consider whether or not to adopt it. The Realisation Policy will, if adopted, be in substitution for the Company's existing investment policy as stated in the Admission Document.
Like Resolution 1, Resolution 2 will result in a change to the Company's existing investment policy. The Board will therefore propose a special resolution (Resolution 2 in the Notice) to adopt this as the Company's investment policy. However, this Resolution will not be effective if Resolution 1 is passed or Resolution 3 referred to below is passed and becomes effective.
HOWEVER, FOR THE REASONS STATED ABOVE THE REALISATION POLICY IN RESOLUTION 2 IS NOT THE BOARD'S PREFERRED POLICY AND THE BOARD RECOMMENDS UNANIMOUSLY THAT SHAREHOLDERS VOTE AGAINST RESOLUTION 2.
6.3 Alternative Policy
In view of the fact that certain Shareholders may wish for a greater return of funds than that envisaged in the Board Policy but at the same time do not want the Company to adopt a policy which the Manager has advised the Board may result in a realisation of the entire portfolio at less than its maximum value with the consequences referred to above, the Board has decided to put forward to Shareholders a further alternative proposal. The Alternative Policy contemplates a realisation of the entire portfolio but at a slower and more measured pace than that envisaged by the Realisation Policy, thereby reducing the risks outlined in section 6.2 above. The Board believes that a lengthier realisation process may result in higher cash realisations and that the Alternative Policy is more likely to result in the Company being able to carry on business effectively over a longer period. The Alternative Policy is as follows:
"The Company shall, but having due regard to all applicable legal, governmental, regulatory and contractual restraints and with a view to maximising Shareholder value, dispose of all of its existing assets in an orderly fashion until such time as the average of the middle market price of an Ordinary Share during any period of 60 consecutive dealing days on which Ordinary Shares are trading on AIM is not more than 30 per cent. below the NAV per Ordinary Share last announced before the commencement of such 60 day period. Until such time, the Company shall only be permitted to make new investments to facilitate its disposal programme of its assets. Thereafter, the Company's investment policy will be as stated in its admission document dated 13 April 2006.
Net sale proceeds shall be returned to Shareholders by way of one or more on market buy backs including by way of tender offer or otherwise."
Like Resolutions 1 and 2, Resolution 3 will result in a change to the Company's existing investment policy. The Board will therefore propose a special resolution (Resolution 3 in the Notice) to adopt the Alternative Policy as the Company's investment policy However, Resolution 3 will not be effective if Resolution 1 is passed. The Alternative Policy will, if adopted, be in substitution for the Company's existing investment policy as stated in the Admission Document.
NEVERTHELESS THE BOARD'S PREFERRED POLICY IS THAT CONTAINED IN RESOLUTION 1 AND IT IS NOT MAKING ANY RECOMMENDATION OF THE ALTERNATIVE POLICY IN RESOLUTION 3 EVEN IF THE REALISATION POLICY IN RESOLUTION 2 FAILS.
If none of Resolutions 1, 2 or 3 are passed and take effect, Resolution 4 is being proposed so that Shareholders have the ability to revert to the Company's existing investment policy. NEVERTHELESS THE BOARD'S PREFERRED POLICY IS THAT CONTAINED IN RESOLUTION 1 AND IT IS NOT MAKING ANY RECOMMENDATION OF THE EXISTING POLICY IN RESOLUTION 4 EVEN IF THE REALISATION POLICY IN RESOLUTION 2 AND THE ALTERNATIVE POLICY IN RESOLUTION 3 FAIL.
If none of the investment policies outlined in this document are approved by Shareholders, the Board will seek to formulate another investment policy to put before Shareholders at a later date.
Shareholders should note that if Resolution 5 is not passed, the Company will be unable to effect the purchase or purchases of own shares contemplated by the Board Policy, Realisation Policy and Alternative Policy and Resolutions 1, 2 and 3 respectively.
Shareholders should also note that, under the AIM Rules, the Company's nominated adviser is responsible for assessing the appropriateness of a company for AIM. If the Company continues to be without an investment policy, it is possible that the Company might be deemed inappropriate for AIM. The Board is strongly of the view that it is in the best interests of the Company and Shareholders as a whole for the Company's shares to continue to be admitted to trading on AIM.
6.4 Market Purchases of Own Shares
Having concluded the strategic review of the Company's investment policy and the Company's distribution policy, the Board believes that it is in the best interests of Shareholders as a whole for Shareholders to be offered the opportunity to dispose of part or all of their investment in the Company. The Board therefore proposes that notwithstanding which investment policy is approved at the EGM, one or more market purchases of own shares be made and Resolution 5, which is proposed as an ordinary resolution, contains a general share buy back authority authorising the Company to do this.
The Company's ability to implement its investment policy and the related own share purchases contemplated in this document are subject to Isle of Man legal requirements and to the requirement that the Company has both distributable reserves and cash. In particular, the Company is only permitted authority to purchase its own shares for 18 months from the date of the EGM. Accordingly, in the future the Board may need to seek a further authority from Shareholders to make purchases of own shares so it can give full effect to the investment policies and returns set out in this document.
The Board is of the view that the proposed market purchases of own shares are in the best interests of the Company and Shareholders as a whole as they will enable those Shareholders who require cash in the short term to exit, while preserving long-term value in the Company for Shareholders who decide not to take up the own share purchases.
6.5 Arrangements with the Manager
Once the Group ceases or substantially ceases to carry on its business, the Manager will have the right to terminate the Management Agreement. However, the Board has been advised that neither the adoption of the Board Policy, Alternative Policy or Realisation Policy are likely to bring about an immediate right of the Manager to terminate the Management Agreement. At some point during a realisation process the Manager might seek to argue that cessation has occurred but this will be a question of fact at the time to be determined, if not agreed, in accordance with the dispute resolution procedure in the Management Agreement. If the Management Agreement is terminated for this reason, the Manager is entitled to receive management fees up to the date of termination together with an accelerated profit share calculated by reference to the independently assessed value of the portfolio as at the date of termination.
The Manager is also entitled to terminate the Management Agreement with immediate effect if TCM is put into voluntary liquidation. In such an event the Manager would be similarly entitled to the management fees up to the date of termination together with an accelerated profit share calculated by reference to the independently assessed value of the portfolio as at the date of termination.
If TCM is liquidated on a voluntary basis and the Manager does not elect to terminate the Management Agreement, subject to Mauritian laws, it is likely that the Manager would seek to recover its contractual entitlements as a creditor in the liquidation which might include the management fee in respect of the balance of the unexpired term calculated by reference to the aggregate of the proceeds of the placing on Admission and income retained within the Group for reinvestment which is currently approximately £280 million in total.
Under the Management Agreement the Manager is appointed for a period of ten years subject to an early termination right at six years should the Manager not achieve certain performance benchmarks. There is no provision enabling the Company to terminate the Management Agreement on the disposal of all its properties. In these circumstances, if the Manager does not elect to terminate the Management Agreement, the Manager would continue to be entitled to receive, for the balance of the unexpired term, its annual management fee calculated by reference to the proceeds of the placing on Admission and income retained within the Group for reinvestment which is currently approximately £280 million in total.
The Board is aware of the significant contribution made by the Manager in sourcing transactions which accord with the investment policy adopted by the Company at the time of Admission and the returns achieved by the Company in respect of the assets where disposals have already taken place. In doing so, the Manager has established long-term relationships designed to enable the Company to make long-term investments and the structure of the management fee payable pursuant to the Management Agreement reflects this. The Board believes that it is in the best interests of the Company and Shareholders as a whole to ensure that the Manager is properly incentivised to conduct the revised investment strategy of the Company and therefore intends, in the event Shareholders elect to adopt any of the proposed new investment policies described in sections 6.1, 6.2 or 6.3 and Resolutions 1, 2 and 3, to work with the Manager to seek to establish an incentive fee arrangement in the event of early realisations by the Manager. This might result in a change to the Management Agreement whereby part of the management fee would be satisfied by the issue to the Manager of Ordinary Shares instead of cash.
7 Extraordinary General Meeting
Shareholders will find set out at the end of this document a notice convening the Extraordinary General Meeting to be held at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP at 10.30 a.m. on Tuesday 24 March 2009.
At the Extraordinary General Meeting, Shareholders will be asked to consider, and if thought fit, pass the Resolutions.
Resolution 1 (Board Policy) and Resolution 5 (general authority to the Company to purchase own shares) are recommended unanimously by the Board. The Board intends to utilise the authority in Resolution 5 to give effect to whichever investment policy is ultimately approved by Shareholders and therefore Shareholders are recommended unanimously to vote in favour of Resolution 5 as it is a general share buy back authority and is a means by which the Company can effect returns to Shareholders.
The Board's recommendation to Shareholders is to vote in favour of Resolution 1 for the reasons set out in section 6 of this document. The Board is proposing three additional Resolutions at the EGM for the following reasons:
(a) Resolution 2 (Realisation Policy) is being proposed as it reflects the wishes of a major Shareholder. However, for the reasons set out in section 6.2 of this document, the Board does not believe that the Realisation Policy is in the best interests of the Company and all the Shareholders;
(b) Resolution 3 (Alternative Policy) is being proposed as the Board believes it is appropriate to provide Shareholders who (i) want a greater return than envisaged in the Board Policy set out in section 6.1 of this document; but (ii) would not want a policy that may result in a realisation of the Company's entire portfolio at less than the maximum value, an alternative to both Resolution 1 and Resolution 2;
(c) Resolution 4 is being proposed so that Shareholders have the ability to revert to the Company's existing investment policy in the event that none of Resolutions 1, 2 or 3 are passed.
For the reasons set out in this document, the Realisation Policy is not the Board's preferred policy and the Board recommends that Shareholders vote AGAINST Resolution 2.
Furthermore, the Board does NOT recommend Shareholders to adopt the Alternative Policy in Resolution 3 or to reaffirm the Company's existing policy in Resolution 4.
In light of the above, Shareholders should note that, in the event that more than one of Resolutions 1, 2 or 3 are passed by the Shareholders at the EGM the Resolutions shall become effective as follows:
(a) if Resolution 1 is passed it shall be effective irrespective of any other Resolution being passed;
(b) if Resolution 2 is passed and Resolution 1 and Resolution 3 are not passed, Resolution 2 shall be effective. If however, Resolution 1 has also been passed Resolution 2 shall be of no effect. If Resolution 2 has been passed, but Resolution 1 has not and Resolution 3 is passed and becomes effective Resolution 3 shall prevail and Resolution 2 shall be of no effect; and
(c) Resolution 4 shall only have effect if none of Resolutions 1, 2 or 3 have been passed and become effective.
8 Action to be Taken
A Form of Proxy for use by Shareholders in connection with the Extraordinary General Meeting is enclosed with this document.
Whether or not you propose to attend the meeting in person, you are requested to complete and sign the enclosed Form of Proxy in accordance with the instructions printed on it and to return it to the Company's registrars at IOMA House, Hope Street, Douglas, Isle of Man IM86 2AF, as soon as possible and in any event so as to arrive no later than 10.30 a.m. on Sunday 22 March 2009.
YOUR BOARD RECOMMENDS THAT YOU CAST A VOTE IN RESPECT OF ALL RESOLUTIONS. FAILURE TO DO SO OR INACTION ON YOUR PART COULD RESULT IN A RESOLUTION BEING PASSED BY DEFAULT.
Completion of the Form of Proxy will not preclude you from attending the meeting and voting in person should you so wish.
9 Recommendation
The Board believes that the Board Policy (Resolution 1) and the proposed market purchases of own shares (Resolution 5) are in the best interests of the Company and Shareholders as a whole and offer all Shareholders the ability to choose whether they will continue with the Company and benefit from its long-term value or fully or partially exit. Accordingly, the Board recommends unanimously all Shareholders to vote in favour of Resolution 1 adopting the Board Policy and Resolution 5 approving one or more market purchases of own shares and to vote against Resolution 2 at the Extraordinary General Meeting, as they intend to do in respect of their own shareholdings amounting to 6,899,192 Ordinary Shares in the Company representing 2.96% of the Company's current issued share capital.
Yours sincerely
Michael Cassidy CBE Chairman
Date: 27 February 2009"