Interims & Rights Issue

Costain Group PLC 14 September 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, FRANCE, JAPAN, MALAYSIA, NEW ZEALAND, SOUTH AFRICA OR SWITZERLAND OR INTO ANY JURISDICTION WHERE TO DO SO WOULD BREACH ANY APPLICABLE LAW. Costain Group PLC ('Costain' or the 'Group') Announcement of interim results for the half-year ended 30 June 2007 and a Â£60m equity fund raising (net of expenses) Costain, the engineering, construction and land development group, announces results for the half year ended 30 June 2007, which confirm that the business is performing in-line with expectations, together with a Â£60m equity fund raising (net of expenses) to strengthen the balance sheet which combined with extended and enhanced banking and bonding facilities, the Directors believe, will leave the Group well placed to capitalise on the opportunities available to it in its chosen market sectors. Results confirm Board's expectations that Costain should see a significant recovery in 2007 Six months ended 30 June 2007 2006 Revenue Â£430.0m Â£436.2m Profit /(loss) from operations Â£6.6m Â£(21.9)m Profit/(loss) before tax Â£8.0m Â£(20.7)m Earnings/(loss) per share 1.7p (5.1)p Net cash Â£42.1m Â£49.9m â€¢ Profit recovery at both operational and pre-tax levels o Strong performance from Civil Engineering division o Progress in Building division and return to profitability at COGAP â€¢ Higher quality order book (Â£1.6bn at 30 June 2007): more than 80% of orders in Civil Engineering division o 78% repeat business (up from 67% at 30 June 2006) o Long-term frameworks with blue chip customers â€¢ Significant momentum: high tendering activity plus opportunity pipeline o Â£416m of 2008 revenue secured at 30 June 2007 o Preferred bidder positions in excess of Â£500m Business refocused under new management team. Directors believe significant benefits being realised from 'Being Number One' strategy â€¢ Decisive actions taken over last 18 months to strengthen business o Focus on fewer market sectors o Stronger operational controls, business processes and management structures in place o Plans of action to manage out legacy issues Significant opportunities presented by market dynamics â€¢ Costain's customers moving towards larger-scale contracts and frameworks whilst consolidation creating fewer large service providers Directors believe Costain well placed to leverage opportunities following strengthening of balance sheet and extending and enhancing banking and bonding facilities â€¢ Rights issue to raise Â£60m (net of expenses)...support from major shareholders o Kharafi taking up entitlement in full o UEM taking up part of its entitlement with the remainder to be placed with existing and/or new shareholders â€¢ Extended and enhanced banking and bonding facilities of Â£200 million negotiated subject to rights issue â€¢ Independent valuation of Spanish property assets which directors believe represents significant potential upside â€¢ Exploring PFI options including strategic partnership opportunity â€¢ New agreement with Trustee to address pension funding deficit Return to dividend of 0.5p in respect of this financial year, subject to Pensions Regulator approval, expected on back of successful Rights Issue David Jefferies, Chairman, commented: 'Following a number of decisive management actions, Costain has been refocused. We believe we are seeing significant benefits accruing from the ongoing implementation of our 'Being Number One' strategy. A platform for the next phase of growth has been established and, following the rights issue with a much strengthened balance sheet and additional financial resources, the Directors believe that the Group will be well placed to capitalise on the opportunities available in its chosen market sectors. The first half results confirm the Board's expectations that the Group should see a significant recovery in performance this year and, following the rights issue and with the consent of the Pensions Regulator, a return to the dividend list.' 14 September 2007 Enquires: Costain Tel: 01628 842 444 Andrew Wyllie, Chief Executive Tony Bickerstaff, Finance Director Graham Read, Public Relations Hawkpoint Partners Tel: 020 7665 4500 (Sponsor to Costain) Christopher Kemball Chris Robinson Dresdner Kleinwort Tel: 020 7623 8000 (Joint broker to Costain) Charles Batten Michael Covington Arbuthnot Securities Tel: 020 7210 2000 (Joint broker to Costain) James Steel Richard Dunn College Hill Tel: 020 7457 2020 Mark Garraway Matthew Gregorowski This summary should be read in conjunction with the full text of the following announcement. Appendix I sets out the expected timetable of principal events. Appendix II sets out the risk factors to be considered carefully by shareholders and other investors. Appendix III sets out the terms and conditions of the sub-underwriting of the Rights Issue. Appendix IV sets out the terms and conditions of the Placing. Appendix V sets out definitions of terms used in this announcement. This announcement has been issued by and is the sole responsibility of Costain Hawkpoint Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser and sponsor to Costain and is acting for no one else in connection with the Rights Issue and will not be responsible to anyone other than Costain for providing the protections afforded to clients of Hawkpoint, nor for providing advice in connection with the Rights Issue or any other matter referred to herein. Arbuthnot Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as Joint UK Broker and joint underwriter to Costain and is acting for no one else in connection with the Rights Issue and will not be responsible to anyone other than Costain for providing the protections afforded to clients of Arbuthnot, nor for providing advice in connection with the Rights Issue or any other matter referred to herein. Dresdner Kleinwort Limited, which is authorised and regulated by the Financial Services Authority, is acting as Joint UK Broker for Costain and for no-one else in connection with the contents of this document and will not be responsible to anyone other than Costain for providing the protections afforded to customers of Dresdner Kleinwort Limited, or for affording advice in relation to the contents of this document or any matters referred to herein. Dresdner Bank AG, London Branch which is authorised by BAFin and by the Financial Services Authority and which is regulated by the Financial Services Authority for the conduct of designated investment business in the United Kingdom, is acting as joint underwriter for Costain and for no-one else in connection with the contents of this document and will not be responsible to anyone other than Costain for providing the protections afforded to customers of Dresdner Bank AG, London Branch, or for affording advice in relation to the contents of this document or any other matters referred to herein. This announcement does not constitute an offer to sell or the solicitation of an offer to acquire or subscribe for New Ordinary Shares, Provisional Allotment Letters, Nil Paid Rights and/or Fully Paid Rights and/or to take up any entitlements. The offer to acquire New Ordinary Shares pursuant to the proposed Rights Issue will be made solely on the basis of the information contained in the Prospectus to be published in connection with the proposed Rights Issue. The information contained in this announcement is not for release, publication or distribution to persons in the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland or in any jurisdiction where to do so would breach any applicable law. This announcement is not an offer of securities for sale in, into or from the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland. The New Ordinary Shares, Provisional Allotment Letters, Nil Paid Rights and Fully Paid Rights have not been and will not be registered under the US Securities Act of 1933 (as amended) or under any relevant securities laws of any state or other jurisdiction of the United States, and will not qualify for distribution under any of the relevant securities laws of Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland. Accordingly, the New Ordinary Shares, Provisional Allotment Letters, Nil Paid Rights and/or Fully Paid Rights may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States (absent registration or an applicable exemption from registration) or within Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland. The availability of the Rights Issue to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are located. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements. Certain statements in this announcement are forward-looking statements. Such statements speak only as at the date of this announcement, are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. The information contained in this announcement is subject to change without notice and (except as required by the Listing Rules, the Disclosure Rules and Transparency Rules, the Prospectus Rules, the London Stock Exchange or otherwise by law) none of the Company, Hawkpoint Partners Limited, Arbuthnot Securities Limited, Dresdner Kleinwort Limited, Dresdner Bank AG, London Branch assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. No statement in this announcement is intended to be a profit forecast or to imply that the earnings of Costain for the current year or future years will necessarily match or exceed the historical or published earnings of Costain. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, FRANCE, JAPAN, MALAYSIA, NEW ZEALAND, SOUTH AFRICA OR SWITZERLAND. CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT OVERVIEW The first half of the year was a period of further implementation of our 'Being Number One' strategy. Our focus is on deploying resources only in those areas where we believe we can maintain or build strong market positions and we have had a number of contract wins both during the period and since the half-year end. We have a high quality order book of Â£1.6 billion as at 30 June 2007 of which Â£416 million relates to 2008. As a result of our deliberate focus on quality rather than quantity, the order book is slightly lower than this time last year at Â£1.6 billion (2006: Â£1.9 billion). Our Civil Engineering division, which accounts for more than 80% of the forward order book, has continued its strong performance in the first half and has further consolidated its market positions, in particular in Water and Highways. The Group has also made significant in-roads in Nuclear where it is establishing a solid presence at Sellafield. Following the remedial actions implemented in Building, including a re-alignment into key sectors and a restructuring of the management team, the division made progress during the period. New management controls have been put in place to ensure more selective bidding for higher margin work in its targeted sectors. The performance of the Alcaidesa land development division in southern Spain is significantly weighted towards the second half of the year and the Directors believe current residential market conditions will not impact our long-term strategic land bank development plan. With our joint venture partners, we continue to pursue new opportunities. The Group's oil & gas division, COGAP, has benefitted from the much greater focus on front-end engineering design and project management services and, as a result, returned to profitability during the period. We continue to monitor progress closely and the Board keeps under regular review its options in respect of this division. As previously disclosed, the Group continues to manage out certain legacy contracts which resulted in contract write-downs reflected in full in the 2006 financial year. We continue to actively pursue our entitlements on those contracts subject to dispute. The effective management of Health and Safety is a key priority for Costain and this year Costain received the Sir George Earl trophy, the premier award from RoSPA. Subject to Pensions Regulator approval, a return to a dividend of 0.5p per Ordinary Share in respect of this financial year is expected on the back of a successful Rights Issue. BALANCE SHEET INITIATIVES In recent years, the Company has experienced changing dynamics within the UK construction market reflecting a move towards larger scale opportunities and fewer large service providers. Costain's public sector and private blue-chip customers are entering into new relationships with contractors involving bigger, multi-year framework contracts and integrated full life-cycle services. This trend is likely to result in greater earnings visibility. The Company expects that consolidation within the UK construction market will continue and a small number of large firms will dominate the market. The Board has put in place a clear strategy to enhance Costain's position over time as a leading prime contractor in selected markets. Costain's strategy is to focus its efforts and develop stronger positions in its key targeted markets. The Group's ongoing success is demonstrated by its high quality order book of Â£1.6 billion as at 30 June 2007 of which Â£416 million relates to 2008. In addition, the Group has preferred bidder positions in excess of Â£500 million and a significant pipeline of tendering activity. The Group is therefore undertaking certain initiatives for the specific purpose of strengthening its balance sheet and financial resources. These are outlined below. Rights Issue The Company proposes to raise Â£60 million (net of expenses) by way of a Rights Issue of 267,923,469 New Ordinary Shares at 24 pence per share on the basis of 3 New Ordinary Shares for every 4 Existing Ordinary Shares. Completion of the proposed equity issue will represent a further step in the strengthening of the Group's balance sheet for its medium-term requirement. It will provide access to the enlarged bonding facilities and give the Group the opportunity to take advantage of the larger contracts available to it and to implement its chosen strategy. The Rights Issue is conditional on, amongst other things, Shareholders granting the Directors authority to allot the New Ordinary Shares. The Prospectus giving details of the Rights Issue and containing, amongst other things, a notice of the Extraordinary General Meeting of the Company to be held on 2 October 2007 will be sent to Shareholders shortly. Both major shareholders are supportive of the Rights Issue, with Kharafi also taking up its entitlement in full. Increased banking and bonding facilities Subject in each case to Admission, the Company has negotiated extended and enhanced banking and bonding facilities from the bank and surety providers to a total of Â£200 million compared with approximately Â£125 million of such facilities as at 31 December 2006. As stated above, these will provide access for Costain to these additional bonding facilities which will enhance the Group's ability to secure the larger framework contracts now available and maintain growth. Land Development The Board has also commissioned an independent valuation of certain of the land and property assets in its Spanish joint venture. The land and property assets were valued at approximately â‚¬151 million. Costain has a 50 per cent. interest in the joint venture and Costain's share of those land and property assets is therefore valued at Â£50 million (based on current exchange rates). The book value of Costain's share in those land and property assets is Â£30 million indicating that there is significant potential upside. Spanish tax would be payable on any realized gains above book value. The independent valuation was carried out before the award of the 30 year concession for the 800 berth marina. With our joint venture partners, we continue to pursue new opportunities. PFI Investments Costain regards its investments in PFI projects in a portfolio including water, health, education and highways projects, as a strategically important activity. PFI is an important procurement route for securing major public sector projects and the Board, which considers that it will remain so for the forseeable future, is exploring options, including the possibility of a strategic partnership, to recognise portfolio valuation and to enhance the Company's investment capacity and capability. The costs and returns associated with PFI activities are reported within the relevant operating division. RESULTS Revenue for the half year ended 30 June 2007 was Â£430 million (2006: Â£436.2 million) with a profit from operations of Â£6.6 million (2006: loss of Â£21.9 million). Profit before tax was Â£8.0 million (2006: loss of Â£20.7 million) and earnings per share were 1.7p (2006: loss per share of 5.1p). The Group has no significant borrowings and net cash balances at the half year totalled Â£42.1 million (2006: Â£49.9 million), including the Group's share of cash held by construction joint venture arrangements of Â£20.2 million (2006: Â£22.1 million). REVIEW OF OPERATIONS Civil Engineering Revenue during the period was Â£280.4 million (2006: Â£217.0 million), with a profit from operations of Â£10.1 million (2006: Â£7.9 million). In Water, we have AMP4 framework agreements with six water companies. We, together with our joint venture partners, are making good progress on the two year Â£80 million contract to provide major water treatment works for the Margate & Broadstairs wastewater treatment scheme. In recognition of our excellence in this sector, our Southern Water/SEC(4D) joint venture won Partnership Initiative of the Year Award at the inaugural Water Industry Achievement Awards and a RoSPA Gold safety award for the second time, and we secured Yorkshire Water's Community Contract Partner of the Year Award. In Highways, we delivered the Porth Relief Road project in South Wales for Rhondda Cynon Taf County Borough Council, following which we were appointed by the same client for the Â£76 million development of the Church Village by-pass. As part of the Aone+ consortium we were also awarded the 5 year Area 10 MAC contract which heralded our strategic entry into the highways maintenance market. A number of M25 schemes were completed and new highways projects won. We delivered certain stages of the M25 Holmesdale tunnel early, construction commenced on junctions 1b to 3 as part of the ECI scheme and we are delighted to have been shortlisted for the M25 PFI DBFO as part of the FLOW consortium. We have been selected as preferred bidder on the M27 project between junctions 11 and 12 and delivery of the A2/A282/M25 project is running ahead of programme and budget. In Rail, the redevelopment of the Grade one listed St Pancras Station is nearing completion. The platform extension and much of the magnificent Barlow Shed have already been handed over in preparation for the Eurostar service to commence on time in November. We, together with our joint venture partners, have been awarded the Â£30 million Kings Cross Eastern Ranges contract, which includes the refurbishment of the existing Grade One listed offices and the provision of a new platform. In February, at London's Waterloo Station, we completed new lift shaft foundation works for Tube Lines in a congested area. This contributes to improved access to the Waterloo and City Lines as part of a major new programme by London Underground to cater for mobility impaired people. The Group was also awarded a contract for London Underground's Tube Cooling Programme to develop an Air Handling Unit. Progress has been good and the unit will be ready for trials later this year. Costain has been developing a design for Tesco at the site of the tunnel failure at Gerrards Cross. Technical approval has been granted by Network Rail and detailed design is well underway. We are also managing the construction of a new station for the DLR at Langdon Park and working with Westfield to manage the construction of the new Wood Lane Station on the Hammersmith & City Line. In Nuclear, we were awarded the Hunterston SAWBE concept design project. The Group was also confirmed as preferred bidder for the Â£10 million Trawsfynydd Safe Store Capping Roof project and the Â£11 million AWVR project for Berkeley. At Sellafield, we have incorporated the Oil & Gas modular design approach to the Â£90 million Evaporator D project. In Marine, we completed the winter maintenance of the major coastal protection scheme at Whitstable, Kent for Canterbury County Council on time. Construction started on the Aire Navigation Suspended Footbridge at Castleford, and we completed a major Container Park expansion at Thamesport Container Dock for Hutchison Whampoa. Building Revenue during the period was Â£108.5 million (2006: Â£158.3 million) with a loss from operations significantly reduced to Â£0.4 million (2006: loss of Â£7.9 million). The division has been restructured around target market sectors and tighter tendering and operational controls have been introduced. The Group continues to play an active part in the Government's PFI procurement programme. The Group incurs considerable costs in bidding new PFI projects and, as part of its ongoing overall re-investment and return from PFI, has sold its equity share in Bridgend Custodial Services Ltd for a profit of Â£2.7 million in the first half of 2007. In Health, we reached financial close on the South Holland Community Hospital project and the Leicester Learning Disabilities Unit project, the first two out of three phases of the 3 Shires Batch PFI. Through 'ProCure21', one of the Government's major health sector initiatives, the Group completed both the Mental Health Unit at Fairfield Hospital and the new facilities at Bridgenorth Hospital, and was awarded a second scheme at Cheltenham Hospital. During the period, the Group was also awarded a third project for the Cheltenham and Gloucester NHS Trust to build the Gloucester Hospital site a new Women's Unit. In Education, we delivered three new PFI secondary schools in Kent into service along with the remaining two PFI schools at Greenford and Acton as part of the Ealing II PFI scheme. We have completed Phase 2 of the Reading City Academy and have commenced on site with the University of Reading's new Â£21m business school and extension to the existing ICMA. During the period we have significantly expanded our presence in the Government's Building Schools for the Future programme ('BSF'). With our JV partners we have commenced on site with three new secondary schools worth Â£70 million in Bradford and entered exclusive negotiations and design development with Bradford City Council on its Â£150 million Phase 2 BSF programme, expected to reach financial close in early 2008. As part of our Learning 21 joint venture with VT Group we have been awarded preferred bidder status on Sedgehill and Catford schools worth Â£56 million as part of the London Borough of Lewisham's Â£210m BSF programme In Retail, we strengthened our relationship with Tesco by being appointed to join its new Strategic Partnership forum. We were one of six main contractors to be appointed a framework contractor by Sainsbury's. Land Development Our development activities in southern Spain were in line with expectations. As previously mentioned, the weighting of earnings is significantly towards the second half of the year. Revenue for the period was Â£1.9 million (2006: Â£7.2 million) with a loss after tax of Â£0.5 million (2006: profit of Â£2.1 million). During the period, we completed the new club house at Alcaidesa and the second golf course has been completed and will open for public use in September this year. Subsequent to the half year end, we were granted a 30-year concession over a 286,000 sq m area at La Linea, adjacent to Gibraltar, to develop an 800-berth marina and a 14,000 sq m retail zone and other ancillary services. The Board has also commissioned an independent valuation of certain of the land and property assets in its Spanish joint venture. The land and property assets were valued at approximately â‚¬151 million. Costain has a 50 per cent. interest in the joint venture and Costain's share of those land and property assets is therefore valued at approximately Â£50 million (based on current exchange rates). The book value of Costain's share in those land and property assets is Â£30 million, indicating that there is significant potential upside. Spanish tax would be payable on any realized gains above book value. The independent valuation was carried out before the award of the 30 year concession for the 800 berth marina. With our joint venture partners, we continue to pursue new opportunities. Costain Oil, Gas & Process ('COGAP') Following progress at COGAP, the division has returned to profitability with an operating profit for the first six months of Â£0.2 million (2006: loss of Â£1.1 million) on revenue of Â£26.2 million (2006: Â£30.8 million). The division has implemented a new strategic approach focused on front-end engineering design and project management services. The Board continues to monitor its progress and keeps options under regular review. Following the significant delays incurred by technical and contractual difficulties to our PEMEX sub-contract, for a nitrogen recovery plant in Mexico, we have reached agreement with the main contractor on how in principle to complete the project. Whilst protracted legal action is possible if the contract is not completed to the new schedule, the Board considers that the current provisions taken against the contract are adequate. International Following the decision to close the International division, we continue to work-out a number of contracts. One of these is the Costa Azul contract, a joint-venture with China Harbour, awarded in December 2004. We are working towards handover of the breakwater, subject to weather conditions, by 1 January 2008 in line with contract. Whilst there could potentially be substantial penalties and additional costs of up to Â£10m if the due date is missed, the Board considers that the current provisions taken against the contract are adequate. RIGHTS ISSUE Terms and conditions The Board intends to offer the New Ordinary Shares by way of rights to all Qualifying Shareholders (other than, subject to certain exceptions, Qualifying Shareholders with a registered address in the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland) on the following basis: 3 New Ordinary Shares at 24 pence per New Ordinary Share for every 4 Existing Ordinary Shares held and registered in their name at the close of business on the Record Date. Fractions of New Ordinary Shares will not be allotted to any Qualifying Shareholders, but will be aggregated and sold in the market ultimately for the benefit of the Company. Qualifying Shareholders with fewer than 4 Existing Ordinary Shares will not be entitled to any New Ordinary Shares. The New Ordinary Shares will, when issued and fully paid, rank in full for all dividends or other distributions mae, paid or declared after the Record Date and otherwise pari passu with the Existing Ordinary Shares in all respects. The Nil Paid Rights or Fully Paid Rights represented by a Provisional Allotment Letter may be converted into uncertificated form, that is, deposited into CREST (whether such conversion arises as a result of a renunciation of those rights or otherwise). Similarly, Nil Paid Rights or Fully Paid Rights held in CREST may be converted into certificated form, that is, withdrawn from CREST. The Rights Issue Price of 24 pence per New Ordinary Share represents a 36 per cent. discount to the Closing Price of an Existing Ordinary Share of 37.25 pence on 13 September 2007 (being the latest practicable date prior to this announcement). Daedalus and Kharafi, the Company's major shareholders together holding approximately 57 per cent. of the issued share capital of the Company, are supportive of the Rights Issue and have committed to vote in favour of the resolutions to be proposed at the EGM. In addition, Kharafi has committed to subscribe in full for its entitlement of 59,376,392 New Ordinary Shares under the Rights Issue and Daedalus has committed to sell rights over 81,261,941 New Ordinary Shares and apply the proceeds of sale in subscribing for 12,753,964 New Ordinary Shares, being the remainder of its entitlement of 94,015,905 New Ordinary Shares. The Underwriters intend initially to acquire the Nil Paid Rights to the 81,261,941 New Ordinary Shares to be sold by Daedalus, pay up these rights and then seek to procure institutional investors to purchase the resultant Fully Paid Rights. Following the Rights Issue, Kharafi is expected to hold 138,544,915 Ordinary Shares (representing 22.16 per cent of the Enlarged Share Capital) and Daedalus is expected to hold 138,108,505 Ordinary Shares (representing 22.09 per cent of the Enlarged Share Capital). Other than in relation to those New Ordinary Shares which Kharafi and Daedalus have agreed to take up or procure that their nominees take up and which the Directors have indicated their intention to take up or procure that their nominees take up, the Company has arranged for the Rights Issue to be underwritten by Arbuthnot and DBAG in full in order to give greater certainty as to the amount of capital to be raised. The Rights Issue is conditional, amongst other things, upon: (a) the passing at the EGM of the resolution authorising the Directors to allot New Ordinary Shares; (b) Admission becoming effective by not later than 8.00 a.m. on 3 October 2007 (as the Dealing Day immediately after the date of the Extraordinary General Meeting) or such later time and/or date, being no later than 10 October 2007, as the Company and the Underwriters may agree; and (c) the Underwriting Agreement otherwise becoming unconditional in all respects and not having been terminated in accordance with its terms prior to Admission. Prior to Admission, the Underwriters may terminate the Underwriting Agreement in certain circumstances, the likelihood of which the Directors consider to be remote. After Admission, however, the Underwriting Agreement will not be subject to any right of termination (including in respect of any statutory withdrawal rights). Application has been made to the UK Listing Authority for the New Ordinary Shares (nil and fully paid) to be admitted to the Official List and to the London Stock Exchange for the New Ordinary Shares (nil and fully paid) to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence on the London Stock Exchange, nil paid, at 8.00 a.m. on 3 October 2007. It is expected that dealings in the New Ordinary Shares, fully paid, will commence on the London Stock Exchange at the same time. The Rights Issue will result in the issue of 267,923,469 New Ordinary Shares (representing approximately 43 per cent. of the Enlarged Share Capital). Use of proceeds Costain is experiencing changing dynamics within the UK construction market reflecting a move towards larger scale opportunities. As Costain's customers seek to enter into new relationships with contractors involving larger, multi-year framework contracts and integrated full life-cycle services, Costain must demonstrate to its customers that it has the necessary financial resources, including bonding capabilities, to meet their ongoing needs. The proceeds of the Rights Issue, amounting to approximately Â£60 million (net of expenses), will strengthen Costain's balance sheet. Costain's enhanced capital base of permanent equity, together with the resultant increase in cash resources, will enable Costain to access additional bank and bonding facilities as described above. These increased facilities and strengthened balance sheet will enable Costain to maintain and develop its business in line with its strategy. In addition, the proceeds will be available for working capital requirements, including those resulting from the Company entering into larger, multi-year framework contracts in its ordinary course of business and the costs associated with the increased banking and bonding facilities. PENSIONS As at 30 June 2007, the deficit in the UK Pension Fund recorded in the Group's unaudited balance sheet in accordance with IAS 19 was Â£38.4 million, a reduction of Â£30.3 million from the position recorded in the Group's audited balance sheet as at 31 December 2006. The actuarial report in respect of the latest valuation as at 31 March 2007 is being finalised for the Trustee. The provisional figures show the deficit in the scheme has reduced to Â£44.6 million from Â£60.8 million recorded in the actuarial report as at 31 March 2005. Following discussions with the Trustee, the Company has agreed with the Trustee to a new contribution plan that is now expected to eliminate the deficit over a shorter period of ten years under the valuation assumptions agreed with the Trustee. As a result the Company contribution rate will increase marginally. In the year to December 2007, the total contributions by the Company to the defined benefit scheme are expected to amount to approximately Â£12m. In early 2006, Costain approached the Pensions Regulator regarding resumption of dividend payments and the Company proposed that it would match any dividends to Shareholders pound for pound by a payment into the UK Pension Fund. The principle of this proposal was accepted by the Pensions Regulator, subject to the approval of the Trustee and formal clearance from the Pensions Regulator at the time of the proposed resumption. The Company has agreed this proposal with the Trustee and, whilst it has not had further discussions with the Pensions Regulator, has no reason to believe that this agreement would not be ratified by the Pensions Regulator. DIVIDEND The Board of Costain remains fully committed to the resumption of dividends as soon as practicable. The Company can only pay dividends to the extent that it has distributable reserves available for this purpose. The Rights Issue has been structured in a way that is expected to have the effect of creating distributable reserves equal to the net proceeds of the Rights Issue less the par value of the New Ordinary Shares issued by the Company. It should be possible for the Company to declare dividends from the aggregate distributable reserves created by the Rights Issue and any created by future business activity (to the extent the aggregate of those reserves exceeds the amount of the current negative distributable reserves position), provided that the Company has sufficient cash resources to fund such dividends, the distributable reserves have not otherwise been reduced, a matching payment is made to the UK Pension Fund, the Pensions Regulator gives its consent and the Directors consider it appropriate to declare such dividends. The Board expects to adopt a progressive dividend policy with a small dividend initially, bearing in mind the need (subject to getting the formal approval of the Pensions Regulator) to make matching payments to the UK Pension Fund and to retain sufficient funds to fund the further development of the Group's business, but capable of increasing over time in line with underlying earnings. In the absence of unforeseen circumstances and subject to the success of the Rights Issue, approval from the Pensions Regulator and to no significant adverse or anticipated significant adverse movement on the pension fund deficit, the Directors currently expect to pay a dividend of 0.5p per share in respect of the year to 31 December 2007 (such a dividend will be payable in 2008). This dividend would be paid on both the Existing Shares and the New Ordinary Shares. This statement is not intended to be, and should not be considered as, a profit forecast for the Company. BOARD At the beginning of the year, it was announced that Dato'Ahmed Pardas Bin Senin, a nominee of UEM Builders Berhad, had resigned as Deputy Chairman and a Non-Executive Director of the Company with effect from 25 January 2007 and that Mr Mohd Hussein Bin Abdul Hamid, also a nominee of UEM Builders Berhad, had been appointed to the Board as Non-Executive Director with effect from the same date. In July, it was announced that Mike Alexander had been appointed to the Board as an independent non-executive director. Mr Alexander was Chief Executive of British Energy plc between 2003 and 2005 and prior to that Chief Operating Officer of Centrica plc, having held a number of senior positions within British Gas plc including Managing Director, British Gas Trading and Commercial Director, British Gas Exploration & Production. Before joining British Gas in 1991, he spent 25 years at BP plc in various roles. Finally, it was also announced in July, that David Allvey and Mohd Hussein Hamid had been appointed joint Deputy Chairmen. OUTLOOK Following a number of decisive management actions, Costain has been refocused. The Group believes it is seeing significant benefits accruing from the ongoing implementation of the 'Being Number One' strategy. A platform for the next phase of growth has been established and, following the Rights Issue with a much strengthened balance sheet and additional financial resources, the Directors believe that the Group will be well placed to capitalise on the opportunities available in its chosen market sectors. The first half results confirm the Board's expectations that the Group should see, following the Rights Issue and with the consent of the Pensions Regulator, a return to a dividend of 0.5p per Ordinary Share in respect of this financial year. Now that the recovery is well established and with the benefit of the proceeds from the Rights Issue and the new facilities, the Company expects steady progress from its new base. David Jefferies - Chairman Andrew Wyllie - Chief Executive 14 September 2007 APPENDIX I EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2007 Announcement and Prospectus published Friday 14 September Record Date for entitlements under the Rights Issue the close of business Friday 28 September on Latest time and date for receipt of Forms of Proxy 10.30 a.m. on Sunday 30 September Extraordinary General Meeting 10.30 a.m. on Tuesday 2 October Despatch of Provisional Allotment Letters (to Tuesday 2 October Qualifying Non-CREST Shareholders only) Admission 8.00 a.m. on Wednesday 3 October Dealings in Nil Paid Rights and Fully Paid Rights 8.00 a.m. on Wednesday 3 October commence on the London Stock Exchange Existing Ordinary Shares marked 'ex-rights' by the 8.00 a.m. on Wednesday 3 October London Stock Exchange Nil Paid Rights credited to stock accounts in CREST as soon as Wednesday 3 October (Qualifying CREST Shareholders only) practicable after 8.00 a.m. on Nil Paid Rights and Fully Paid Rights enabled in as soon as Wednesday 3 October CREST practicable after 8.00 a.m. on Recommended latest time for requesting withdrawal of 4.30 p.m. on Friday 19 October Nil Paid Rights or Fully Paid Rights from CREST (i.e. if your Nil Paid Rights or Fully Paid Rights are in CREST and you wish to convert them into Provisional Allotment Letters) Recommended latest time and date for depositing 2.00 p.m. on Monday 22 October renounced Provisional Allotment Letters, nil paid or fully paid, into CREST or for dematerialising Nil Paid Rights or Fully Paid Rights into a CREST stock account Latest time and date for splitting Provisional 3.00 p.m. on Tuesday 23 October Allotment Letters, nil paid or fully paid Latest time and date for acceptance and payment in 11.00 a.m. on Thursday 25 October full and registration of renounced Provisional Allotment Letters Dealings in New Ordinary Shares, fully paid, 8.00 a.m. on Friday 26 October commence on the London Stock Exchange and New Ordinary Shares credited to CREST stock accounts (uncertificated holders only) Expected date of despatch of definitive share By Friday 9 November certificates for New Ordinary Shares in certificated form Notes: (i) Each of the times and dates set out in the above timetable and mentioned in this document and the Provisional Allotment Letter is subject to change by the Company (with the agreement of Hawkpoint and the Underwriters), in which event details of the new times and dates will be notified to the UK Listing Authority and, where appropriate, to Shareholders. (ii) References to times in this document are to London times. APPENDIX II RISK FACTORS 1. General risk factors Forward-looking statements (risks associated with them) This document includes statements that are, or may be, 'forward-looking statements'. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms 'believes', 'estimates', 'plans ', 'anticipates', 'targets', 'aims', 'continues', 'expects', 'intends', 'may', ' will', 'would' or 'should' or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth strategies and the markets in which the Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including without limitation: market position of the Group, earnings, financial position, cash flows, return on capital, anticipated investments and capital expenditures, changing business or other market conditions and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the events described herein and the Group. Forward-looking statements contained in this document based on these trends or activities should not be taken as a representation that such trends or activities will continue in the future. Economic and market cycles and volatility The Group's business may be affected by the general risks associated with all companies operating in the same markets as the Group. The construction markets in which the Group operates depend on numerous factors, many of which are beyond its control and the exact effect of which cannot be accurately predicted. Such factors include general economic and political activities, including the extent of any governmental regulation and taxation. An investment could be affected adversely by changes in economic, political, administrative, taxation or other regulatory factors, in any jurisdiction in which the Group may operate now or in the future. Senior management and skilled personnel. The Group is dependent on members of its senior management team and a flexible, highly skilled and well-motivated work force and believes its future success will depend in part on its ability to attract, develop and retain highly skilled management and personnel. If the Group does not succeed in attracting, developing and retaining skilled personnel, it may not be able to grow its business as anticipated. Further, the departure from the Group of any of the Executive Directors or certain senior employees could, in the short term, have a material adverse effect on the Group's business. Environmental, health and safety laws, regulations and standards The Group is subject to a broad range of laws, regulations and standards, including those relating to pollution, the health and safety of employees, protection of the public, protection of the environment and the storage and handling of hazardous substances and waste materials. These regulations and standards are becoming increasingly stringent. It is the Group's policy to require that all of its subsidiaries, employees, suppliers and sub-contractors comply with applicable laws, regulations and standards. However, violations of such laws, regulations and standards, in particular, environmental and health and safety laws could result in restrictions on the operations of the Group's sites, damages, fines or other sanctions, increased costs of compliance, potential reputational damage and potential loss of future contracts. Major incident exposing an inadequate safety regime The nature of the business conducted by the Group requires the adoption and maintenance of a rigorous health and safety programme. The Group works on a number of significant and high profile projects and therefore the health and safety performance is critical to the success of all areas of the Group's business. The Group takes the management of both operational and occupational safety extremely seriously. Any failure in health and safety performance which results in a major or significant health and safety incident is likely to be costly for the relevant business in terms of potential liabilities incurred as a result. Furthermore, such a failure could generate significant adverse publicity and have a negative impact on the Group's reputation and its ability to win new business, which in turn could adversely affect the operating, financial and share price performance. Terrorist incidents The Group and its employees work in various locations where there is a risk of terrorist activity. A major terrorist incident in any of these locations could affect ongoing work carried out there, causing such work to be delayed or cancelled. Any such delays or cancellations would affect future revenue-streams of the Group and could have an adverse impact on the Group's business, operational results or financial condition. A major terrorist incident could also result in a reduced demand for the Group's services if, as a result of such an incident, there is a reduction in new works and projects commissioned in those locations in which the Group might expect to work. Such an incident might also result in the Group reducing its activities in such locations, or possibly withdrawing from that location altogether. Whilst the Group always take advice from specialist security consultants before carrying out work in any location which the Group identifies as liable to terrorist attack to ensure that the risks from possible acts of terrorism are mitigated, due to the unpredictability of terrorist activity, there is no guarantee that such steps will be sufficient to safeguard the interests of the Group and its employees in those locations. Pension liabilities The Group operates a defined benefit pension scheme, being the Costain Pension Scheme, which has been closed to new members since 1 June 2005. As at 30 June 2007, there were 1009 active members accruing pensionable service. Updated valuations under IAS 19 for the schemes as at 30 June 2007 value the scheme's assets at Â£456.6 million, and liabilities at Â£495.0 million. This leaves a gross deficit in the scheme of Â£38.4 million, which, when subjected to related deferred tax at 28 per cent., results in a net pension liability under IAS 19 of Â£27.6 million. Costain has reached an agreement with the Trustee that the deficit is reduced over a period of ten years. The introduction of the Pension Protection Fund increases the costs borne by Costain. The value of the deficit recognised in the Group's balance sheet pursuant to IAS 19 is dependent on certain critical assumptions including mortality rates, future salary levels and investment returns and is likely to vary from year to year. Recent and prospective changes in the regulatory environment and funding requirement principles may lead to requirements to increase funding in respect of the scheme in future years (possibly to a level in excess of that needed to achieve solvency on an IAS 19 basis). The powers of the Pensions Regulator may also impact on any plans to make returns of capital from the Group to Shareholders. For example, the Pensions Regulator has powers to levy contribution notices and financial support directions in certain circumstances in order to ensure that additional contributions are paid into a pension scheme or that other financial support is put in place to the benefit of a pension scheme. In the event that the market value of the scheme's assets declines in relation to its assessed liabilities, the Group may be required to increase its contributions to cover any further funding shortfalls. This could have an adverse impact on the Group's operational results and cash flow. Following the agreement with the Trustee regarding reducing the deficit (including the agreement that, subject to Pensions Regulator consent, any dividends will only be paid by the Company if a matching payment is made into the UK Pension Fund), the Trustee has agreed that none of the proceeds of the Rights Issue need be applied to the UK Pension Fund. Major Shareholders As at the date of this document as far as the Company is aware, Daedalus and Kharafi hold approximately 35.09 per cent. and 22.16 per cent., respectively, of the issued ordinary share capital of the Company. Following completion of the Rights Issue, Daedalus and Kharafi are expected to hold approximately 22.09 per cent. and 22.16 per cent., respectively, of the issued ordinary share capital of the Company. Each of Daedalus and Kharafi are currently able to, and following the Rights Issue will continue to be able to, exercise a significant degree of influence over matters requiring Shareholder approval, including the approval of significant corporate transactions, and this may have the effect of delaying, preventing or deterring a change in control of the Group, could deprive Shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of the Group and might affect the market price of the Ordinary Shares. In addition, any decision by either of Daedalus or Kharafi to sell all or a portion of the Ordinary Shares held by it could adversely affect the market price of the Ordinary Shares. 2. Risks relating to the Group's existing business Risk of incorrectly budgeting/costing long term contracts If the Group is unable to accurately estimate the overall risks, revenues or costs on a particular contract, then a lower than anticipated profit may be achieved or a loss incurred on such contract. The Group generally enters into four principal types of contracts with clients: fixed price contracts, 'cost plus' contracts; framework contracts with clients that span a number of years and incorporate an agreed mechanism for bearing costs and sharing profits; and long term PFI projects. A significant proportion of the Group's business depends for its profit on costs being controlled and projects being completed on time, such that costs are contained within the pricing structure of the relevant contract. 'Cost plus' contracts provide for reimbursement of the costs required to complete a project, but generally have a lower base fee and an incentive fee based on cost and/or scheduled performance. If actual costs exceed the revenues available under such a contract or are not allowable under the provisions of the contract, Costain may not receive reimbursement for all of these costs. Cost overruns, whether due to inefficiency, poor design where the contractor has design responsibilities, faulty estimates, cost escalation, and/or cost overruns by sub-contractors or other factors, result in lower profit or a loss on a project. A significant number of contracts are based in part on cost estimates that are subject to a number of assumptions. If estimates of the overall risks, revenues or costs prove inaccurate or circumstances change, then a lower profit or a loss on the contract may result. Failing to win contracts If the Group failed to win major work from a key client this could cause short term turnover and profitability issues. The Group is always aware of this and seeks a balanced client base. Contract disputes The Group's contracts may require extra or change order work as directed by the customer even if the customer has agreed in advance on the scope or price of the work to be performed. This process may result in disputes over whether the work performed is beyond the scope of the work included in the original project plans and specifications or, if the customer agrees that the work performed qualifies as extra work, the price the customer is willing to pay for the extra work. Even when the customer agrees to pay for the extra work, the Group may be required to fund the cost of such work for a period of time until the change order is approved and funded by the customer. Risk of missing deadlines The construction industry is highly schedule driven, and failure to meet schedule requirements within contracts could adversely affect the Group's reputation and/or exposure to financial liability. Many of the Group's contracts are subject to specific completion schedule requirements with liquidated damages charged in the event the construction schedules are not achieved. Failure to meet any such schedule requirements could damage the Group's reputation within the industry and client base, as well as incurring significant liquidated damages. In particular, and as reported in the 2006 results, two significant legacy contracts represent potential risks: (A) Costa Azul Breakwater, Mexico The hand-over of this complex project is scheduled at the end of the year. Given the nature of this project, should there be a delay, Costain could face additional costs and could be liable for financial penalties under the terms of the contract. The Directors estimate that Costain's liability could be up to a maximum of Â£10 million. In conjunction with the joint venture partner, China Harbour Engineering Company, a number of actions to mitigate the risks have been taken and a very experienced team is working on the completion. In addition, there may be contractual issues that mean Costain is entitled to an extension of time in which to complete the project. However, the ability of Costain to complete the project may be adversely affected by sea conditions and weather factors beyond its control. (B) COGAP - PEMEX, Mexico As has previously been reported, this contract, on which Costain is a sub-contractor, has suffered delays and cost overruns. Costain and the main contractor, Techint SA de CV have reached agreement on how in principle to complete the project. However, if either party fails to meet their revised respective obligations, the matter may be subject to protracted legal dispute and Techint may call the bond money it holds in respect of the project which in aggregate amounts to approximately US$6.7 million. Competition Contractors are required to compete for new work, which is won through a process of competitive tendering or bilateral negotiation. The contractors' reputation, prior experience with the client and pricing will all have a bearing on gaining new work. The failure by the Group to compete effectively on these criteria could reduce the Group's profitability. The Group competes with international, national and local support services and construction groups. Some of these groups are larger than the Group and may have greater financial, technical and operating capabilities. The sectors in which the Group operates are highly competitive on the basis of both price and service. As a result of this competition, the Group suffers the risk that it will fail to win new contracts in its chosen growth markets or will fail to win contracts which are sufficiently profitable to maintain and improve the financial condition of the Group. The Group is seeking to introduce new methods of risk management and contract selection, which will maintain or increase its success rate and generate higher margins, whilst meeting its selectivity and risk management criteria, but the success of this approach cannot be guaranteed. Contract bonds It is common practice for contractors to issue performance bonds, generally at ten per cent. of the contract value, advance payment bonds to secure upfront payments on contracts and/or retention bonds to secure the release of retained monies, usually to a maximum of ten per cent. of the contract value. These bonds are at risk of being called if a contractor defaults on its contractual obligations on a construction project. The bonds are issued by specialist financial institutions and banks on behalf of the Group. In the normal course of business, as at 13 September 2007 (the latest practicable date prior to publication of this document), the Company had contract bonds of Â£81.8 million issued in connection with a number of different contracts. In the event that Costain is unable to meet its commitments in relation to these contracts, these contract bonds could become payable, leading to a significant call upon the Group's financial resources and the Group could have difficulty obtaining additional performance bonds on satisfactory terms, or at all. If the Group could not obtain new performance bonds it would have a significant impact on its ability to win new business and maintain its current operations. Sub-contractor and supplier failure The Group is reliant on its supply chain. If a sub-contractor or supplier of goods or services failed financially or was responsible for late or inadequate delivery or poor quality of work on a project then it could damage the Group's reputation and/or cause it to suffer financial losses. Loss of IT systems The Group is dependent on IT systems for the delivery of its business. The Group believes that its IT systems are reliable and well protected but recognises that such systems need constant updating and maintenance because their failure could cause financial loss to the Group as well as damage to its brand and reputation. Insurance The Group believes it has robust, comprehensive and adequate insurance cover but recognises that a claim could be made against it which exceeds the limits of insurance cover or is in respect of a matter that is uninsurable. In those circumstances the Group could suffer financial loss. Change of Government policy Certain of the Group's divisions are dependent on the current UK Government's policy with regard to improving public infrastructure, buildings and services, notably in the education, roads, health, secure establishments and defence sectors. The UK Government may decide in future to change its priorities and programmes, including reducing present or future investment in transport, health or defence projects or other areas in which the Group would expect to compete for work. Any reduction in such government investment and funding would be likely to adversely affect the Group's future revenues and profitability in the relevant sectors. Underwriting and Financing The Group's ability to conduct its businesses profitably is substantially dependent upon its ability to generate or obtain capital. The Company's current facility agreements, which were due to expire in June 2008, have been extended to December 2008. The Company has also negotiated a further extension and enhancement of those facilities which will be conditional on Admission. The Rights Issue is underwritten (save in relation to the New Ordinary Shares agreed to be taken up by Kharafi, Daedalus and the Directors) pursuant to the Underwriting Agreement, the scope and principal terms (including conditions and termination rights) of which are set out in paragraph 6.1(a) of Part X of the Prospectus. The underwriting of the Rights Issue will become fully effective on 3 October, provided that all of the conditions are satisfied or waived and none of the termination rights is exercised. Failure to complete the Rights Issue and to successfully extend and enhance these facilities would mean that the Directors might have to take alternative steps to manage the Group's working capital resources, trading activities and related bonding commitments such that it remains within the existing bank covenants and facility levels. These actions would adversely impact on the Group's performance, and in particular its ability to win future business, make and retain investments, take advantage of acquisitions or other opportunities or otherwise respond to competitive challenges. Additional risks associated with PFI projects The market for PFI projects is becoming increasingly competitive and there is no guarantee that current margins can be maintained in the future. PFI construction projects usually carry additional risks compared to standard construction projects. These additional risks are often borne, or partly borne, by the construction company. The bidding process is considerably longer than standard construction projects, with more onerous and detailed requirements demanded within bidding submissions. As such, bid costs are typically higher than standard construction projects. There is a risk that unsuccessful bids may adversely impact the operating results of the Group. The debt repayment profile is fixed at the point that revenue streams are expected to commence from the customer. If the project is delivered late, then the debt repayment has to be satisfied without the corresponding income stream. The Group is dependent upon construction and service sub-contractors for the delivery of PFI projects. The Group's ability to invest in, develop and operate PFI projects could be adversely affected if the construction and service sub-contractors with whom the Group wishes to work do not have sufficient capacity to work with the Group on its chosen projects. In addition, if a sub-contractor's work was not of the requisite quality or a sub-contractor became insolvent, this could have a material adverse affect on projects managed by the Group and might not only reduce financial returns but could adversely affect the Group's reputation and reduce its ability to win business in the future. To the extent that the Group uses a single sub-contractor on a number of projects, these risks would be increased. There are also a number of additional risks that are typically allocated to the construction company in a PFI contract. These risks vary from contract to contract, but typical examples include meeting a building's energy targets, taking responsibility for difficult ground conditions and/or ground contamination and assuming the risk that a change in law will adversely affect the project. Procurement delays Certain government-related projects on which the Group may work may require relevant approvals from Government ministers or senior civil servants. It is possible that, due to difficulties obtaining such approvals, projects may be delayed before procurement has started, during the tender stage or during the period between the appointment of a preferred bidder and the exchange of contracts. These matters are likely to be beyond the control of the Group and any resulting delays could affect future revenue streams of the Group and have an adverse impact on the Group's businesses, results of operations and financial condition. 3. Risks relating to the Rights Issue and the New Ordinary Shares Fluctuation of share price The Company's share price has fluctuated, and may continue to fluctuate. The factors which may affect the Company's share price include but are not limited to: â€¢ the Group's expected and actual performance and the performance of the construction industry in general; â€¢ the level of activity amongst its customers in the sectors in the territories in which the Group operates; â€¢ speculation regarding mergers or acquisitions involving the Group and/ or major divestments by the Group; â€¢ speculation regarding the intentions of the Company's major shareholders or significant sales of shares by such shareholders; â€¢ the status of the Group's financing or re-financing activities, including its future compliance with any financial covenants in its facilities; and â€¢ announcements of changes in the Company's credit rating. Furthermore, the Company's share price may fall in response to market appraisal of its current strategy or if the Group's operating results and/or prospects from time to time are below the prior expectations of market analysts and investors. In addition, stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market price of securities and which may be unrelated to the Group's operating performance and prospects. Ability to pay dividends The Company's ability to pay dividends in the future is uncertain. Future dividends to be received by Shareholders will depend on the progress of the businesses in the territories in which the Group operates and the Company's continuing ability to be profitable. Under the Companies Act 1985, the Company can only pay dividends to the extent that it has distributable reserves and cash available for this purpose. The Company currently has no distributable reserves. The Rights Issue has been structured in a way that is expected to have the effect of creating distributable reserves equal to the net proceeds of the Rights Issue less the par value of the New Ordinary Shares issued by the Company. The Company will need to earn profits in order to generate further distributable reserves in the future. The Company has agreed with the Trustee that a dividend may be paid if a matching payment is made into the UK Pension Fund and has also committed to seeking Pensions Regulator clearance before resuming the payment of dividends. The Company's existing financing arrangements currently contain restrictions on the ability of the Company to pay dividends but such restrictions will be removed following the extension and enhancement of those facilities as negotiated by the Company. Such extension and enhancement is conditional on Admission. The Company can give no assurance to Shareholders that it will actually be able to pay a dividend going forward. Possible issue of additional shares The Company may issue additional shares in the future, which may adversely affect the market price of the outstanding Ordinary Shares. The Company has no current plans for a subsequent offering of its shares or of rights or invitations to subscribe for shares. However, it is possible that the Company may decide to issue additional shares in the future. An additional offering of shares by the Company or the public perception that an offering may occur, could have an adverse effect on the market price of the Company's outstanding Ordinary Shares. Dilution of ownership of Ordinary Shares If Qualifying Shareholders do not take up the offer of New Ordinary Shares under the Rights Issue, their proportionate ownership and voting interests in the Ordinary Shares will be reduced, and the percentage that their Existing Ordinary Shares represents of the Enlarged Share Capital will be reduced accordingly. An active trading market in Nil Paid Rights may not develop An active trading market in the Nil Paid Rights may not develop on the London Stock Exchange during the trading period. In addition, because the trading price of the Nil Paid Rights depends on the trading price of the New Ordinary Shares, the Nil Paid Rights price may be volatile and subject to the same risks as noted in the paragraph above entitled 'Fluctuation of share price'. The existing volatility of the New Ordinary Shares may also magnify the volatility of the Nil Paid Rights. APPENDIX III APPENDIX III SUB-UNDERWRITING TERMS AND CONDITIONS IMPORTANT INFORMATION FOR SUB-UNDERWRITERS ONLY MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE SUB-UNDERWRITING OF THE RIGHTS ISSUE. THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT AND REFERRED TO HEREIN ARE DIRECTED ONLY AT PERSONS SELECTED BY DRESDNER BANK AG, LONDON BRANCH ('DBAG') AND/OR DRESDNER KLEINWORT SECURITIES LIMITED ('DKS') AND/ OR ARBUTHNOT SECURITIES LIMITED ('ARBUTHNOT') WHO ARE 'INVESTMENT PROFESSIONALS' AS DESCRIBED IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS 2000 (FINANCIAL PROMOTION) ORDER 2001 (AS AMENDED) (THE 'ORDER'), ARE PERSONS FALLING WITHIN ARTICLE 49(2)(a) TO (d) ('HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.') OF THE ORDER OR TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS 'RELEVANT PERSONS'). THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT ACTIVITY TO WHICH THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. This announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland or in or into any other jurisdiction in which such publication or distribution is unlawful (a 'Prohibited Jurisdiction'). This document and the information contained herein are not for publication or distribution, directly or indirectly, to person in a Prohibited Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. Unless otherwise defined in this Appendix, definitions used in this Appendix shall have the same meanings set out in Appendix V. Terms and Conditions of the Sub-underwriting of the Rights Issue If a Relevant Person chooses to participate in the sub-underwriting by DBAG and Arbuthnot of the Rights Issue (the 'Sub-underwriting') by making or accepting an offer for a sub-underwriting participation (each such Relevant Person being hereinafter referred to as a 'Sub-underwriter') it will be deemed to have read and understood this Appendix in its entirety and to be making or accepting such offer on the terms and conditions, and to be providing the representations, warranties and acknowledgements, contained in this Appendix. In particular, each Sub-underwriter represents, warrants and acknowledges to each of DBAG and Arbuthnot for themselves and as agents for the Company that it: 1. is, and at the time it agrees to sub-underwrite the Underwritten Shares will be, outside the United States and it will acquire any Underwritten Shares pursuant to its sub-underwriting participation in an 'offshore transaction' in reliance on Regulation S of the Securities Act; or 2. (i) is a qualified institutional buyer ('QIB') (as defined in Rule 144A of the Securities Act) and (ii) has duly executed a US investor representation letter in the form provided to it (or otherwise agreed by DKS and Arbuthnot) and has delivered the same to Dresdner Kleinwort Securities LLC. The New Ordinary Shares referred to in this announcement (including the Underwritten Shares) have not been and will not be registered under the US Securities Act, and may not be offered or sold within the United States absent registration or an exemption from registration. The New Ordinary Shares (including the Underwritten Shares), the Nil Paid Rights, the Fully Paid Rights and the Provisional Allotment Letters have not been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares (including the Underwritten Shares), the Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment Letters or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States. This announcement and Appendix do not constitute an offer to sell or issue or a solicitation of an offer to buy or subscribe for New Ordinary Shares in any jurisdiction including, without limitation, the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland or any other jurisdiction in which other such offer or solicitation is or may be unlawful. The distribution of this announcement and the Sub-underwriting and issue of the New Ordinary Shares in certain jurisdictions may be restricted by law. Persons to whose attention this announcement has been drawn are required by the Company, DKS, DBAG and Arbuthnot to inform themselves about and to observe any such restrictions. Details of the Underwriting Agreement and the New Ordinary Shares The Company has today entered into an underwriting agreement with, inter alia, DBAG and Arbuthnot (the 'Underwriting Agreement') under which DKS, as an affiliate of DBAG, and Arbuthnot, each as agent of the Company, has, subject to the terms set out therein, agreed to use their reasonable endeavours to procure persons to acquire on the terms and subject to the conditions set out therein any of the 195,437,618 New Ordinary Shares in aggregate which they have agreed, severally, to underwrite ('Underwritten Shares') that are not taken up pursuant to the Rights Issue (the 'Rump'). For the avoidance of doubt, the number of Underwritten Shares excludes the 72,485,851 New Ordinary Shares in respect of which the Company has received irrevocable undertakings to take up rights in respect of such New Ordinary Shares and in respect of which the Directors have indicated their intention to take up rights in respect of such New Ordinary Shares. To the extent that DKS and Arbuthnot do not procure persons to take up the Rump, DBAG and/or Arbuthnot and/or the Sub-underwriters (as the case may be) shall acquire the Stick at the Rights Issue Price. The Stick, if any, shall be allocated by DBAG and Arbuthnot, in their discretion, to the Sub-underwriters, subject to the terms set out below. The New Ordinary Shares will, when issued and fully paid, rank in full for all dividends declared after the Record Date and otherwise pari passu in all respects with the Existing Shares. Application for Listing and Admission to Trading Application will be made to the UKLA for admission of the Nil Paid Rights, the Fully Paid Rights and the New Ordinary Shares to the Official List of the UKLA (the 'Official List') and to the London Stock Exchange for admission to trading of the Nil Paid Rights, the Fully Paid Rights and the New Ordinary Shares on the London Stock Exchange's market for listed securities. It is expected that Admission will take place at 8.00am on 3 October 2007. Principal Terms of the Sub-underwriting This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Sub-underwriting. 1. DBAG (through DKS) and Arbuthnot will arrange the Sub-underwriting and participation will only be available to persons invited to participate by DBAG and/or DKS and/or Arbuthnot. 2. The price payable per New Ordinary Share shall be the Rights Issue Price. 3. A Sub-underwriter's commitment to sub-underwrite and subscribe for up to a fixed number of Underwritten Shares will be agreed with and confirmed to it orally (the 'Sub-underwriting Commitment') and a written confirmation (a 'Confirmed Commitment Letter') will be dispatched as soon as possible thereafter. The oral confirmation to the Sub-underwriter by DKS (as an affiliate of DBAG) or by Arbuthnot (as appropriate) (the 'Oral Confirmation') constitutes an irrevocable, legally binding contractual commitment to DBAG or Arbuthnot (as the case may be) (each as agent for the Company) to sub-underwrite up to a fixed number of Underwritten Shares allocated to it on the terms and conditions set out in this Appendix (the 'Contract'). 4. You have accepted that in consideration of your sub-underwriting participation, you will be entitled to (subject to paragraphs 5 and 6 below): (a) a commitment commission of 0.5 per cent of the aggregate value at the Rights Issue Price of your Sub-underwriting participation (the 'Aggregate Subscription Price') in respect of the period from (and including) the date of the Underwriting Agreement to the date falling 30 days thereafter; (b) a further commitment commission of 0.125 per cent. of the Aggregate Subscription Price in respect of each period of 7 days (or any part thereof) of the Commitment Period commencing from and including the date 30 days after the date of the Underwriting Agreement; and (c) if Admission occurs, a further commitment commission of 0.75 per cent. of the Aggregate Subscription Price. 5. If the conditions set out in the Underwriting Agreement are not satisfied in accordance with their terms or waived or if DBAG and Arbuthnot exercise their right to terminate the Underwriting Agreement (other than for force majeure), you will receive an aggregate Sub-underwriting commission of 0.5 per cent. of the Aggregate Subscription Price. 6. If DBAG and Arbuthnot exercise their right to terminate the Underwriting Agreement for force majeure, your sub-underwriting participation will cease but no commissions will be payable to you. A Form of Confirmation will be included with each Confirmed Commitment Letter and this should be completed and returned by fax by 3.00 p.m. on the business day following the giving of the Oral Confirmation. If the Oral Confirmation was given by DKS, the Confirmed Commitment Letter should be completed and returned by fax to Simon Green at DKS. If the Oral Confirmation was given by Arbuthnot, the Confirmed Commitment Letter should be completed and returned by fax to Richard Johnson at Arbuthnot. On the basis that Provisional Allotment Letters are posted to Qualifying non-CREST Shareholders on 2 October 2007 and Nil Paid Rights in respect of New Ordinary Shares are credited to accounts maintained by Qualifying CREST Shareholders within CREST with effect from 3 October 2007, any Underwritten Shares allotted pursuant to the Rights Issue, to the extent not taken up or treated as taken up under the terms of the Rights Issue by 11.00 a.m. on 25 October 2007 will be deemed to have been declined and the provisional allotments in respect of such shares will lapse. DKS, as an affiliate of DBAG, and Arbuthnot, each as agent for the Company, will seek to procure persons to acquire such Underwritten Shares by not later than 3.00 p.m. on 29 October 2007, if placees can be found to acquire such shares for a consideration at least equal to the Rights Issue Price and the expenses of such placing. Sub-underwriters will be called upon to acquire some or all (as the case may be) of such Underwritten Shares only if placees for any of such Underwritten Shares cannot be (or, in the opinion of DKS and/or DBAG and/or Arbuthnot, would not be able to be) procured on such basis. Any allocation to Sub-underwriters will be notified as soon as possible thereafter but, on the basis set out above, not later than the close of business on 29 October 2007, for settlement in cleared funds by 11.00 am on 31 October 2007 or by the Sub-underwriter ensuring that its CREST account enables delivery of such Underwritten Shares to be made to it on 1 November 2007 against payment of the settlement price. DBAG, DKS and Arbuthnot shall be entitled to effect the Rights Issue and/or the Sub-underwriting by such method as they shall in their sole discretion determine. To the fullest extent permissible by law, none of DBAG, DKS or Arbuthnot, any holding company thereof, not any subsidiary, branch or affiliate of any of them (each an 'Affiliate') nor any person acting on behalf of any of them shall have any liability to Sub-underwriters (or to any other person whether acting on behalf of a Sub-underwriter or otherwise). In particular, none of DBAG, DKS and Arbuthnot, any Affiliate thereof nor any person acting on their behalf shall have any liability in respect of its conduct of the Rights Issue (including the Sub-underwriting) or of such alternative method of effecting the Rights Issue and/or the Sub-underwriting as it may determine. Conditions of the Rights Issue The obligations of DBAG and Arbuthnot under the Underwriting Agreement are conditional, inter alia, on: 1. the passing of the Resolutions at the Extraordinary General Meeting on the EGM Date (and not, without the prior written consent of DBAG and Arbuthnot, at any adjournment thereof) without any amendment not previously approved in writing by the DBAG and Arbuthnot; 2. none of the warranties given by the Company in the Underwriting Agreement being untrue, inaccurate or misleading at the date of the Underwriting Agreement and there being no change of circumstances such that, if such warranties were to be repeated at any time before Admission by reference to the facts and circumstances then subsisting, any such warranty would be untrue, inaccurate or misleading, in each case in a manner which is material in the context of the Admission or the Rights Issue; 3. there not having occurred or arisen prior to Admission any significant change or new matter as is referred to in section 87G of the FSMA which requires a supplementary prospectus to be published; 4. each condition to enable the Nil Paid Rights and the Fully Paid Rights to be admitted as a participating security (as defined in the Regulations) in CREST (other than Admission) being satisfied on or before the EGM Date; 5. the FSA agreeing to admit the Rights Shares (nil paid and fully paid) to the Official List and the London Stock Exchange agreeing to admit the Rights Shares to trading on its market for listed securities (both subject only to allotment of the Rights Shares) by no later than the EGM Date and Admission occurring at 8.00 a.m. on the first Dealing Day following the EGM Date; 6. the Existing Facilities Agreements remaining in full force and effect between the publication of the Prospectus and Admission, all representations and all warranties repeated or given by the Company under the Facilities Amendment Agreements being, or when given being, correct and accurate in all respects, all conditions precedent to the New Facilities Agreements and the Facilities Amendment Agreements (other than those conditions relating to Admission and the Underwriting Agreement becoming unconditional) having been satisfied or waived in accordance with the terms of such agreements before Admission and the Company having confirmed to DBAG and Arbuthnot (after consulting with the Existing Facilities Agreements and New Facilities Agreements lead arrangers) in writing following the EGM and in any event no later than 5.00 p.m. on the EGM Date that: so far as it is aware (i) there is no reason why (A) all of the conditions precedent to the Facilities Amendment Agreements and the New Facilities Agreements will not be satisfied as at Admission and (B) any representations or warranties required to be given or repeated pursuant to the Facilities Amendment Agreements or the New Facilities Agreements will not be capable of being given or repeated as required by such agreements; and (ii) no fact, matter or circumstance exists which is likely to result in any of the Existing Facilities (as amended and restated by the Facilities Amendment Agreements) or the New Facilities being withdrawn or otherwise not being available for draw-down by the Company in full; and there has been no material breach of the terms of the Existing Facilities Agreements or the Facilities Amendment Agreements which has not been remedied or waived and, so far as it is aware, no fact, matter or circumstance exists which is likely to result in any material breach of the terms of the Existing Facilities Agreements, the Facilities Amendment Agreements or the New Facilities Agreements occurring; 7. each of the Undertakings having been complied with in full before Admission (to the extent that they fall to be complied with before such time); and 8. the UEM Instruction Letter having been duly signed and delivered by UEM and Rood Nominees Limited to DBAG and having not been revoked, in each case before Admission. If (a) the conditions set out in the Underwriting Agreement are not satisfied or (to the extent permitted under the Underwriting Agreement) waived by DBAG and Arbuthnot by the required time (or before such later time and/or date as the Company, DBAG and Arbuthnot may agree) or (b) the Underwriting Agreement is terminated in the circumstances specified below, the Rights Issue will lapse and the rights and obligations of the Sub-underwriters hereunder shall cease and determine at such time and no claim can be made by any Sub-underwriter in respect thereof. Rights of Termination DBAG and Arbuthnot may, following discussion with the Company where the circumstances permit at any time prior to Admission, terminate their respective obligations under the Underwriting Agreement by giving notice to the Company if inter alia: 1. in the opinion of DBAG and Arbuthnot (acting in good faith), the warranties in the Underwriting Agreement are not true and accurate or have become misleading (or would not be true and accurate or would be misleading if they were repeated at any time before Admission) by reference to the facts subsisting at the and in the opinion of DBAG and Arbuthnot (acting in good faith) such breach is material and adverse in the context of Admission or the Rights Issue; or 2. in the opinion of DBAG and Arbuthnot (acting in good faith), there has been a breach by the Company of any of its obligations under the Underwriting Agreement or certain related agreements which is in the opinion of DBAG and Arbuthnot (acting in good faith) material in the context of Admission or the Rights Issue; or 3. in the opinion of DBAG and Arbuthnot (acting in good faith), there has been a material adverse change in the financial or trading position or prospects of the Group as a result of which DBAG and Arbuthnot consider (acting in good faith) it is impracticable or inadvisable to proceed with Admission or the Rights Issue; or 4. any new matter or circumstance arises, and as a result of such matter or circumstance, it is necessary, in the opinion of DBAG and Arbuthnot (acting in good faith), to amend or supplement the Prospectus in the approved terms, in order that the Prospectus will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading or in order to ensure the Prospectus complies with the Prospectus Rules, the Companies Act, the FSMA, the Listing Rules and all other statutes and governmental and regulatory authority regulations applicable to the Rights Issue and which, in any case, in the opinion of DBAG and Arbuthnot (acting in good faith) is material and adverse in the context of Admission or the Rights Issue, or 5. any sub-underwriter terminates its sub-underwriting commitment following publication of any supplementary prospectus or the announcement of any intention to publish such a supplementary prospectus; or 6. any press or public announcement concerning the Group or the Rights Issue has been made by or on behalf of the Group which has not been sanctioned by the Underwriters prior to its release (such sanction not to be unreasonably withheld or delayed) and which in the opinion of DBAG and Arbuthnot (acting in good faith) is detrimental to the Group and material and adverse in the context of Admission or the Rights Issue; or 7. in the opinion of DBAG and Arbuthnot (acting in good faith), there has been after today's date: (a) a change in national or international, financial, political, economic or stock market conditions (primary or secondary); or (b) an incident of terrorism, outbreak or escalation of hostilities, war, declaration of martial law or any other calamity or crisis; or (c) a suspension or material limitation in trading of securities generally on any major stock exchange in the United Kingdom; or (d) a change in currency exchange rates or exchange controls in the United Kingdom, or a disruption of settlement systems in the United Kingdom, or a material disruption in commercial banking in the United Kingdom, in each case as would be likely to prejudice materially the success of the Rights Issue, Each Sub-underwriter agrees with DKS, DBAG and Arbuthnot that the waiver by DBAG and Arbuthnot, or the agreement by DBAG and Arbuthnot to the extension of time for the satisfaction, of any condition of the Underwriting Agreement or the exercise by DBAG and Arbuthnot of their right of termination of the Underwriting Agreement, or any other discretion under such agreement, shall be within the absolute discretion of DBAG and Arbuthnot and that none of DKS, DBAG nor Arbuthnot shall have any liability to any Sub-underwriter whatsoever in connection with any decision to waive any such condition, agree to any such extension or to exercise or not to exercise any such right or discretion. By participating in the Sub-underwriting, each Sub-underwriter agrees that its rights and obligations hereunder terminate only in the circumstances described above and will not be capable of rescission or termination by any Sub-underwriter. Information for Sub-underwriters A Prospectus will be published in connection with the Rights Issue and Admission and will be approved by the UKLA. Sub-underwriters have been sent an underwriting proof of the draft Prospectus (the 'U Proof'). A Sub-underwriter may only rely on the information contained in the U Proof in deciding whether or not to participate in the sub-underwriting. Each Sub-underwriter, by accepting a participation in the Sub-underwriting, agrees that the content of this announcement and the U Proof are exclusively the responsibility of the Company and confirms to DBAG, DKS, Arbuthnot and the Company that it has neither received nor relied on any other information, representation, warranty or statement made by or on behalf of DKS, DBAG or Arbuthnot or any of their respective affiliates or the Company (other than the amount of the relevant sub-underwriting participation and amount of sub-underwriting commissions communicated by DKS or Arbuthnot (as appropriate) in the Oral Confirmation), and none of DKS, DBAG, Arbuthnot or any of their respective affiliates or the Company will be liable for the decision of any Sub-underwriter to accept an invitation to participate in the Sub-underwriting based on any other information, representation, warranty or statement which the Sub-underwriter may have obtained or received. Each Sub-underwriter acknowledges to and agrees with each of DKS, DBAG and Arbuthnot for themselves and as agents for the Company, that it has relied only on the information in the U Proof and this announcement in making its decision to participate in the sub-underwriting. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation. Registration and Settlement Settlement of transactions in the New Ordinary Shares following Admission will take place within CREST, subject to certain exceptions. DKS, DBAG and Arbuthnot reserve the right to require settlement for and delivery of the Underwritten Shares to any Sub-underwriter by such other means as they respectively deem necessary if delivery or settlement is not possible within CREST within the timetable set out in this announcement or would not be consistent with the regulatory requirements in the jurisdictions of such Sub-underwriter. Following the results of the Rights Issue and completion of the placing of any Rump, (i) if DKS and Arbuthnot have procured persons to acquire the whole of the Rump, each Sub-underwriter shall be notified of such fact through publication of an announcement on a Regulatory Information Service or (ii) if there is a Stick remaining, each Sub-underwriter shall be sent a confirmed allocation letter that will state the number of Underwritten Shares, if any, which it is required to acquire and the aggregate amount owed by it. It is expected that settlement of the Stick will be on 1 November 2007. Interest is chargeable daily on payments not received from Sub-underwriters on the due date in accordance with the arrangements set out in this Appendix at the rate of 2 per cent. above the base rate from time to time of Barclays Bank Plc. If a Sub-underwriter does not comply with these obligations, DKS and/or DBAG and /or Arbuthnot may sell the Underwritten Shares allocated to such Sub-underwriter and retain for their own benefit from the proceeds, an amount equal to the Rights Issue Price multiplied by the number of Underwritten Shares comprised in its Sub-underwriting Commitment plus any interest due. The relevant Sub-underwriter will, however, remain liable, inter alia, for any shortfall below the Rights Issue Price and it may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of its Underwritten Shares on its behalf. If Underwritten Shares are to be delivered to a custodian or settlement agent of a Sub-underwriter, the relevant Sub-underwriter should ensure that its Confirmed Commitment Letter is copied and delivered immediately to the relevant person within that organisation. Insofar as Underwritten Shares are registered in the name of a Sub-underwriter or that of its nominee or in the name of any person for whom the Sub-underwriter is contracting as agent or that of a nominee for such person, such Underwritten Shares will, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Representations and Warranties by Sub-underwriters By participating in the Sub-underwriting, each Sub-underwriter (and any persons acting on its behalf): 1. represents and warrants that it is entitled to subscribe for and purchase Underwritten Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees and other consents which may be required there under and complied with all necessary formalities; 2. represents and warrants that the issue to the Sub-underwriter, or the person specified by such Sub-underwriter for registration as holder of Underwritten Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services); 3. represents and warrants that it has complied with its obligations in connection with money laundering under the Criminal Justice Act 1993, the Money Laundering Regulations 1993 and the Money Laundering Regulations 2003 (together, the 'Regulations') and, if it is making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations; 4. represents and warrants that it is a person falling within Article 19 (5) or Article 49(2) (a) to (d) of the Order and undertakes that it will acquire, hold, manage or dispose of any Underwritten Shares that are allocated to it for the purposes of its business; 5. represents and warrants that it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Underwritten Shares in, from or otherwise involving the United Kingdom; 6. represents and warrants that it has all necessary capacity and authority and has obtained all necessary consents and authorities to enable it to commit to participation in the Sub-underwriting and to perform its obligations in relation thereto and will honour its obligations (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this announcement); 7. undertakes that it will pay for the Underwritten Shares acquired by it in accordance with this Appendix on the due time and date set out herein, failing which the relevant Underwritten Shares may be placed with other subscribers or sold as DKS and/or DBAG and/or Arbuthnot determine without them incurring liability to such Sub-underwriter; 8. acknowledges that participation in the Sub-underwriting is on the basis that it is not and will not be a client or customer of DKS, DBAG or Arbuthnot and that DKS, DBAG and Arbuthnot have no duties or responsibilities to it for providing the protections afforded to their respective clients or customers or for providing advice in relation to the Sub-underwriting or in respect of any representations, warranties, undertakings or indemnities contained in the Underwriting Agreement nor for the exercise or performance of any of DBAG's or Arbuthnot's rights and obligations thereunder, including any right to waive or vary conditions or exercise any termination right; 9. undertakes and agrees that (i) the person whom it specifies for registration as holder of the Underwritten Shares will be (a) the Sub-underwriter or (b) a nominee of the Sub-underwriter, (ii) none of DKS, DBAG, Arbuthnot nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement and (iii) the Sub-underwriter and any person acting on its behalf agrees to acquire Underwritten Shares on the basis that such Underwritten Shares will be allotted to the CREST stock account of DKS who, in respect of Sub-underwriters procured by DKS, will hold them as nominee on its behalf until settlement in accordance with its standing settlement instructions and, in respect of Sub-underwriters procured by Arbuthnot, will hold them as nominee and then transfer them to Arbuthnot on its behalf until Arbuthnot undertakes settlement in accordance with its standing settlement instructions; 10. acknowledges that any agreements entered into by it pursuant to these terms and conditions shall be governed by and construed in accordance with the laws of England and that it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract; 11. acknowledges that the Underwritten Shares, the Provisional Allotment Letters and the Nil Paid and Fully Paid Rights in respect of the Underwritten Shares have not been and will not be registered under the securities legislation of any state of the United States, Canada, France, Japan, Malaysia, New Zealand, South Africa or Switzerland and, subject to certain exceptions, may not be offered, sold, delivered or transferred, directly or indirectly, within those jurisdictions; 12. undertakes and agrees that neither it nor any of its affiliates (as defined in Rule 501(b) of the Securities Act) nor any person acting on its or their behalf will offer or sell any Underwritten Shares within the United States except in accordance with Rule 903 of Regulation S of the Securities Act or to QIBs pursuant to the exemption from the registration requirements of the Securities Act provided by Rule 144A; 13. undertakes and agrees that neither it nor its affiliates (as defined in Rule 501(b) of the Securities Act) nor any person acting on its or their behalf have engaged in or will engage in any 'general solicitation or general advertising' (within the meaning of Regulation D under the Securities Act) or 'directed selling efforts' (as defined in Regulation S under the Securities Act) in connection with any offer or sale of the Underwritten Shares; 14. acknowledges that the agreement to settle each Sub-underwriter's commitment (and/or the commitment of a person for whom it is contracting as agent) free of stamp duty and stamp duty reserve tax depends on the settlement relating only to an acquisition by it and/or such person direct from DKS or Arbuthnot (as appropriate) for the Underwritten Shares in question. Such agreement assumes that the Underwritten Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer the Underwritten Shares into a clearance service. If there were any such arrangements, or the settlement related to other dealing in the Underwritten Shares, stamp duty or stamp duty reserve tax may be payable, for which none of the Company, DKS, DBAG and Arbuthnot will be responsible. If this is the case, the relevant Sub-underwriter should take its own advice and notify either (i) DKS or DBAG or (ii) Arbuthnot (as appropriate) accordingly. In addition, Sub-underwriters should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the acquisition by them of any Underwritten Shares or the agreement by them to acquire any Underwritten Shares; 15. acknowledges that any monies of any Sub-underwriter or any person acting on behalf of the Sub-underwriter held or received by DKS or Arbuthnot will be held by them for their own account and benefit and will not be subject to the protections conferred by the FSA's Client Money Rules. As a consequence, these monies will not be segregated from the monies of DKS or Arbuthnot and may be used by DKS and/or Arbuthnot (as appropriate) in the course of their respective businesses, and the relevant Sub-underwriter or any person acting on its behalf will therefore, to the extent it has a claim against DKS and/or Arbuthnot, rank as a general creditor of DKS and/or Arbuthnot (as appropriate); and 16. (i) acknowledges that its acceptance of such participation is not by way of acceptance of the public offer to be made in the Prospectus and Provisional Allotment Letters but is by way of a collateral contract and as such section 87Q of the FSMA does not entitle it to withdraw if the Company publishes a supplementary prospectus in connection with the Rights Issue; and (ii) irrevocably undertakes to each of DKS, DBAG, Arbuthnot and the Company that if at any time it becomes entitled pursuant to section 87Q of the FSMA to withdraw its Sub-underwriting Commitment or otherwise not to sub-underwrite the Rights Issue upon the terms and conditions of this Appendix, it will forthwith re-confirm to both DKS and Arbuthnot its Sub-underwriting Commitment on the terms in this Appendix by completing and returning to DKS or Arbuthnot (as appropriate, depending upon to which of DKS or Arbuthnot it previously returned a Form of Confirmation) a further Form of Commitment in respect of the full Sub-underwriting Commitment referred to in the Form(s) of Commitment returned by it before such withdrawal rights arose. 17. represents and warrants that it has read and understood this Appendix in its entirety and acknowledges that its participation in the Sub-underwriting will be governed by the terms of this document and the U Proof. 18. agrees to indemnify on an after-tax basis and hold harmless the Company, DKS, DBAG and Arbuthnot, any of their respective Affiliates and any person acting on their behalf from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Appendix and further agrees that the provisions of this Appendix shall survive after completion of the Rights Issue and the Sub-underwriting; 19. acknowledges that the Existing Ordinary Shares are listed on the London Stock Exchange/Official List of the UK Listing Authority, and the Company is therefore required to publish certain business and financial information in accordance with the rules and practices of the London Stock Exchange/FSA (collectively, the 'Exchange Information'), which includes a description of the nature of the Company's business and the Company's most recent balance sheet and profit and loss account, and similar statements for preceding financial years, and that the Sub-underwriter is able to obtain or access the Exchange Information without undue difficulty; 20. acknowledges that none of DBAG, DKS or Arbuthnot, nor any of their Affiliates nor any person acting on their behalf has provided, and will not provide it with any material or information regarding the Underwritten Shares or the Company; nor has it requested DBAB, DKS or Arbuthnot, nor any of their Affiliates or any person acting on their behalf to provide it with any such material or information; 21. acknowledges that the content of this document is exclusively the responsibility of the Company and that none of DKS, DBAG nor Arbuthnot, nor any of their respective Affiliates nor any person acting on their behalf will be responsible for or shall have any liability for any information, representation or statement relating to the Company contained in the U Proof or this Appendix or any information previously published by or on behalf of the Company and none of DKS, DBAG or Arbuthnot any of their respective Affiliates nor any person acting on their behalf will be liable for any Sub-underwriter's decision to participate in the Sub-underwriting based on any information, representation or statement contained in the U Proof or this Appendix or otherwise. Each Sub-underwriter further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Sub-underwriter has relied in committing to subscribe for the Underwritten Shares is contained in this Appendix, the U Proof and any Exchange Information, such information being all that it deems necessary to make an investment decision in respect of the Underwritten Shares, and that it has relied on its own investigation with respect to the Underwritten Shares and the Company in connection with its decision to subscribe for the Underwritten Shares and acknowledges that it is not relying on any investigation that DKS, DBAG, Arbuthnot any of their respective Affiliates or any person acting on their behalf may have conducted with respect to the Underwritten Shares or the Company and none of such persons has made any representations to it, express or implied, with respect thereto; 22. acknowledges that it has not relied on any information relating to the Company contained in any research reports prepared by DKS, DGAB, Arbuthnot, any of their Affiliates or any person acting on DKS's, DBAG, Arbuthnot or any of their Affiliates' behalf and understands that (i) none of DKS, DGAB, Arbuthnot, any of their Affiliates nor any person acting on their behalf has or shall have any liability for public information or any representation; (ii) none of DKS, DGAB, Arbuthnot, any of their Affiliates nor any person acting on their behalf has or shall have any liability for any additional information that has otherwise been made available to such Sub-underwriter, whether at the date of publication, the date of this document or otherwise; and that (iii) none of DKS, DGAB, Arbuthnot, any of their Affiliates nor any person acting on their behalf makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of such information, whether at the date of publication, the date of this document or otherwise; 23. represents and warrants that it understands that the Underwritten Shares have not been and will not be registered under the Securities Act or under the securities laws of any state or other jurisdiction of the United States and that the Company has not been registered as an 'investment company' under the United States Investment Company Act of 1940, as amended; 24. represents and warrants that it has not offered or sold and will not offer or sell any Underwritten Shares to persons in the United Kingdom prior to Admission except to qualified investors as defined in section 86(7) of FSMA, being persons falling within Article 2.1(e)(i), (ii) or (iii) of the Prospectus Directive; 25. represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Underwritten Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person; 26. represents and warrants that it is a qualified investor as defined in section 86(7) of FSMA, being a person falling within Article 2.1(e)(i), (ii) or (iii) of the Prospectus Directive; 27. acknowledges that any of DKS, DBAG or Arbuthnot may itself become a Sub-underwriter in respect of some or all of the Underwritten Shares or nominate any connected or associated person to do so; 28. acknowledges that until 40 days after the Acceptance Date an offer or sale of Underwritten Shares within the United States by any dealer (whether or not participating in the Sub-underwriting) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or pursuant to another exemption from registration under the Securities Act to a person that is a QP (as defined below); 29. that (a) it is a qualified institutional buyer within the meaning of Rule 144A of the Securities Act; (b) it is a 'qualified purchaser' within the meaning of Section 2(a)(51) of the United States Investment Company Act of 1940, as amended ('QP'), and is not (i) a broker or dealer which owns or invests less than US$25 million in securities of unaffiliated issuers; (ii) a participant-directed employee plan or (iii) formed for the purposes of investing in the Underwritten Shares or the Company; (c) it has duly executed, or will duly execute, an investor letter in the form provided to it by DKS, DGAB or Arbuthnot in which it will make certain undertakings, representations and warranties in addition to those contained herein; and (d) it is subscribing for the Underwritten Shares for its own account, or for the account managed on behalf of another QIB that is also a QP, and not with a view to any distribution within the meaning of the Securities Act or applicable state law except as set forth below; 30. it acknowledges and agrees that it has, or to the extent it is acquiring Underwritten Shares for the account of another QIB, such other QIB (a) has, sufficient knowledge, sophistication and experience in financial and business matters so as to be capable of evaluating the merits and risks of the purchase of the Underwritten Shares; (b) is able to bear the economic and financial risk (including a complete loss) of such a purchase; (c) has had sufficient time to consider and conduct its own investigation with respect to the offer and purchase of the Underwritten Shares, including the tax, legal, currency and other economic considerations relevant to such investment and (d) will not look to the Company, DKS, DBAG, Arbuthnot any of their respective Affiliates or any person acting on their behalf for all or part of any such loss or losses it or they may suffer; 31. it acknowledges and agrees that the Company, DKS, DBAG and Arbuthnot, their respective Affiliates and any person acting on their behalf will rely upon its representations, warranties, undertakings, agreements and acknowledgements set forth herein and in the investor letter, and agrees to notify the Company, DKS, DBAG and Arbuthnot promptly in writing if any of its representations, warranties, undertakings, agreements or acknowledgements cease to be accurate and complete. The acknowledgements, undertakings, representations and warranties referred to above are given to each of the Company, DKS, DBAG and Arbuthnot (for their own benefit and, where relevant, the benefit of their respective Affiliates and any person acting on their behalf) and are irrevocable. No UK stamp duty or stamp duty reserve tax should be payable to the extent that the Underwritten Shares are issued or transferred (as the case may be) into CREST to, or to the nominee of, a Sub-underwriter who holds those shares beneficially (and not as agent or nominee for any other person) within CREST and registered in the name of such Sub-underwriter or such Sub-underwriter's nominee. Any arrangements to issue or transfer the Underwritten Shares into a depositary receipts system or a clearance service or to hold the Underwritten Shares as agent or nominee of a person to whom a depositary receipt may be issued or who will hold the Underwritten Shares in a clearance service, or any arrangements subsequently to transfer the Underwritten Shares, may give rise to stamp duty and/or stamp duty reserve tax, for which none of the Company, DKS, DBAG or Arbuthnot will be responsible and the Sub-underwriter to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Sub-underwriting as an agent or nominee) the allocation, allotment, issue or delivery of Underwritten Shares has given rise to such stamp duty or stamp duty reserve tax undertakes to pay such stamp duty or stamp duty reserve tax forthwith and to indemnify on an after-tax basis and to hold harmless the Company, DKS, DBAG and Arbuthnot in the event that any of the Company and/or DKS and/or DBAG and/or Arbuthnot has incurred any such liability to stamp duty or stamp duty reserve tax. In addition, Sub-underwriters should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the acquisition by them of any Underwritten Shares or the agreement by them to acquire any Underwritten Shares. All times and dates in this document may be subject to amendment. DKS or Arbuthnot will notify the Sub-underwriters and any person acting on behalf of the Sub-underwriters of any such changes. This document has been issued by the Company and is the sole responsibility of the Company. The rights and remedies of DKS, DBAG, Arbuthnot and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise or partial exercise of one will not prevent the exercise of others. Each Sub-underwriter may be asked to disclose in writing or orally to DKS and/or Arbuthnot: (a) if he is an individual, his nationality; or (b) if he is a discretionary fund manager, the jurisdiction in which the funds are managed or owned. Dresdner Kleinwort Securities Limited, which is authorised and regulated by the Financial Services Authority, and Dresdner Bank AG, London Branch, which is authorised by BAFin and by the Financial Services Authority for the conduct of designated investment business in the United Kingdom, are acting for the Company and for no one else in connection with the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Dresdner Bank AG, London Branch and Dresdner Kleinwort Securities Limited or for providing advice in relation to the Rights Issue, or any other matters referred to herein. Arbuthnot Securities Limited, which is authorised and regulated by the Financial Services Authority, is acting for the Company and for no one else in connection with the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Arbuthnot Securities Limited or for providing advice in relation to the Rights Issue, or any other matters referred to herein. MORE TO FOLLOW This information is provided by RNS The company news service from the London Stock Exchange IR LIMRTMMTBMPR

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Costain Group (COST)

Thursday, 21st November 2024

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