Offer for Osprey Smaller Comp

RNS Number : 6404R

Manchester & London Inv Tst PLC

05 May 2009

 



OFFER FOR Osprey smaller companies income fund limited

Not for release, publication or distribution in whole or in part into ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE                                                                                         5 May 2009

RECOMMENDED offer by

Manchester & London investment trust plc

FOR

Osprey smaller companies income fund limited

Recommended Offer Summary

• The Boards of MLIT and Osprey are pleased to announce the merger of MLIT and Osprey to be effected by a recommended offer to be made by MLIT to acquire the entire issued and to be issued share capital of Osprey.

• The consideration will comprise New MLIT Shares, the number of which will be determined by reference to a formula based on the net assets per share of both MLIT and Osprey as at the date the Offer becomes unconditional as to acceptances. 

• Based on the Offer Illustration (see below for details) the recommended Offer values each Osprey Share at 98.6p and values the entire issued share capital of Osprey at approximately £10.4 million, based on the closing price of an MLIT Share on 27 April 2009 and represents a premium of approximately 18.7 per cent. to the closing price of 83p per Osprey Share on 26 March 2009, being the last Business Day prior to the announcement of a possible offer for Osprey.

• The Offer will be conditional on MLIT receiving such number of valid acceptances which, together with any other Osprey Shares acquired by MLIT, represent at least 50% of Osprey's issued share capital. Osprey Shareholders (some of whom are acting in concert with MLIT) have signed letters of intent to accept the Offer in respect of, 5,564,047 Osprey Shares representing approximately 52.7% of Osprey's issued share capital.  

• The MLIT Board believes that the proposed Offer could lead to the following benefits:

• a larger net asset base for the Enlarged Group which may provide more liquidity in       MLIT Shares;

• costs reductions and tax benefits across the Enlarged Group of approximately £351,000   per annum; 

• a UK shareholder in MLIT will be taxed on dividends at an effective rate of 25 per cent. and 0 per cent. for UK resident higher rate taxpayers and lower rate taxpayers, respectively.  Currently, Osprey Shareholders are taxed at a rate of 32.5 per cent. and 10 per cent. for UK resident higher rate taxpayers and lower rate taxpayers, respectively, on dividends received from Osprey.
  

• the larger size of the Enlarged Group may increase the probability that it can gain access to loan finance on more attractive terms than MLIT or Osprey can at present; and

• the potential utilisation of Osprey as an offshore dealing subsidiary of MLIT which may allow MLIT to utilise some of its historic tax losses (which are included in the estimation of the £351,000 per annum cost reductions referred to above).

• The merger of Osprey and MLIT by way of the Offer is a Class 1 Transaction and a Related Party Transaction under the Listing Rules, because of Osprey's size in relation to MLIT and because MLIT proposes to acquire 4,047,000 Osprey Shares (representing 38.3% of Osprey's issued share capital) from M&M, which is a substantial shareholder in MLIT. The merger is subject to shareholder approval at the General Meeting of MLIT.

• The Offer Document and an accompanying Prospectus Equivalent Document will be posted to Osprey Shareholders as soon as practicable and a circular containing notice of the General Meeting will be sent with a copy of the Prospectus Equivalent Document to MLIT shareholders.

Peter Stanley, Chairman of MLIT, said:

'The proposed merger provides Osprey Shareholders with the prospect of an increase in capital value and is intended to enable cost savings to be made for the benefit all shareholders in the Enlarged Group.  I regard the proposed merger as being good for shareholders of both MLIT and of Osprey.'

Enquiries:

Manchester & London Investment Trust PLC                                   Tel: [phone]

Peter Stanley

Osprey Smaller Companies Income Fund Limited                              Tel: [phone]

Richard Prosser

Midas Investment Management Limited (fund manager to MLIT and Osprey)

Mark Sheppard                                                                                        Tel: [phone]

Fairfax I.S. PLC (sponsor and adviser to MLIT)                                      Tel: [phone]

David Floyd, James King and Gillian McCarthy

Mazars Corporate Finance Limited (adviser to Osprey)                        Tel: [phone]

Robin Stevens, Graeme Duncan and Stephen Bullock

This summary should be read in conjunction with and is subject to, the full text of this Announcement (including its appendices) set out below. Appendix I sets out the conditions and further principal terms of the Offer. Appendix II of this Announcement contains details of the Formula Asset Value, Appendix III contains the sources and bases of certain information used in this summary and in the following Announcement. Appendix IV contains details of the letters of intent. Appendix V contains definitions of certain terms used in this summary and the following Announcement.

Neither this summary nor the full text of this Announcement constitutes or forms part of an offer to purchase or subscribe for any securities. The Offer will be made solely by the Offer Document  and accompanying Prospectus Equivalent Document and (in the case of MLIT Shares held in certified form) the Form of Acceptance, which together will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted.

A copy of this announcement and certain information published or otherwise made available by MLIT in connection with the recommended Offer is available at:

 http://www.manchesterandlondon.co.uk/investorRelations.php  

Not for release, publication or distribution in whole or in part into ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURisdiction

5 May 2009

RECOMMENDED offer by

Manchester & london investment trust plc

FOR

Osprey smaller companies income fund limited

1. Introduction

The MLIT Directors and the Osprey Directors are pleased to announce a merger to be effected by a recommended all share offer, to be made by MLIT, to acquire the entire issued and to be issued share capital of Osprey.

The merger of Osprey and MLIT by way of the Offer is a Class 1 Transaction and a Related Party Transaction under the Listing Rules, because of Osprey's size in relation to MLIT and because MLIT proposes to acquire 4,047,000 Osprey Shares (representing 38.3% of Osprey's issued share capital) from M&M, which is a substantial shareholder in MLIT.  The merger is subject to shareholder approval at a General Meeting to be convened by MLIT.

Certain Osprey Shareholders who have an aggregate interest in 5,564,047 Osprey Shares (representing 52.7% of Osprey's issued share capital) have signed letters of intent to accept the recommended Offer. Details of these persons, who include M&M, which is acting in concert with MLIT and their interests in Osprey Shares are set out in Appendix III. 

MLIT holds no Osprey Shares.

A copy of this announcement and certain information published or otherwise made available by MLIT in connection with the recommended Offer is available at:

 http://www.manchesterandlondon.co.uk/investorRelations.php

Information published or otherwise made available by Osprey in connection with the recommended Offer is available at:

www.elysiumfundman.com/content.asp?pageid=55

2. Background to and Reasons for the Offer

Both MLIT and Osprey are investment companies managed by Midas. The Boards of both MLIT and Osprey believe that the proposed merger, which is to be effected by offering New MLIT Shares to Osprey Shareholders in exchange for their Osprey Shares will result in the Enlarged Group enjoying an increased scale which in turn should lead to the following benefits:

• a larger net asset base for the Enlarged Group which may provide more liquidity in MLIT Shares;

• costs reductions across the Enlarged Group of approximately £351,000 per annum through economies of scale;

• the larger size of the Enlarged Group may increase the probability that it can gain access to loan finance on more attractive terms than MLIT or Osprey can at present; 

• a UK shareholder in MLIT will be taxed on dividends at an effective rate of 25 per cent. and 0 per cent. for UK resident higher rate taxpayers and lower rate taxpayers, respectively.  Currently, Osprey Shareholders are taxed at a rate of 32.5 per cent. and 10 per cent. for UK resident higher rate taxpayers and lower rate taxpayers, respectively, on dividends received from Osprey; and

• the potential utilisation of Osprey as an offshore dealing subsidiary of MLIT which may allow MLIT to utilise some of its historic tax losses (which are included in the estimation of the £351,000 per annum cost reductions referred to above). 

Midas was appointed as Osprey's investment manager on 18 June 2008 and since its appointment has concentrated on repositioning Osprey's portfolio into more liquid stocks to ensure that Osprey is better equipped to deal with and react effectively to the uncertain market. The changes made to Osprey's portfolio have also brought it substantially into line with the investment strategy adopted by MLIT which has been managed by Midas for many years. 

The benefit of the expected cost reductions should be considered in the context of the reduction in the size of MLIT's and Osprey's funds in the current economic climate and the fact that many expenses do not change as a result of variations in the size of the portfolio and the number of MLIT Shares in issue, so that the increase in the size of the Enlarged Group's portfolio leads to lower expenses per share. However, this lasting benefit comes at the cost of the one-off expenses of the Offer and of terminating various contracts (see paragraph 7 below).  Osprey's expense ratio to net assets was 3.3 per cent. for the year ended 31 August 2008. By contrast, MLIT, which has a larger portfolio, had a total expense ratio to net assets of 0.8 per cent. for the year to 31 July 2008. MLIT expects this ratio to fall further as a result of the Acquisition.    

3. Terms of the Offer

Under the terms of the Offer, accepting Osprey Shareholders will receive New MLIT Shares as consideration for their Osprey Shares. The number of New MLIT Shares to be issued in respect of each Osprey Share will be determined by reference to a formula based on net assets per share of MLIT and Osprey as at the close of business on the date on which the Offer is declared unconditional as to acceptances. This formula is referred to as the 'FAV' or 'Formula Asset Value'. The calculation of the Formula Asset Values is described in Appendix II of this document and the conditions of the Offer are set out in Appendix I. 

Fractions of New MLIT Shares arising after calculation of each accepting Osprey Shareholder's entitlement will not be allotted to accepting Osprey Shareholders but will be aggregated and sold in the market for the benefit of MLIT. 

For illustrative purposes only, had the Calculation Date been 27 April 2009 (being the latest practicable date prior to the publication of this document):

• the FAV per MLIT Share would have been 301.9p and the FAV per Osprey Share would have been 105.2p (such Formula Asset Values having been calculated by reference to the respective net asset values per MLIT Share and per Osprey Share as at 27 April 2009);

• an accepting Osprey Shareholder would have been entitled to 348 New MLIT Shares for every 1,000 Osprey Shares held; and

• the Offer would have valued the entire issued share capital of Osprey at approximately £10.4 million and valued each Osprey Share at 98.6p, representing a premium of 18.7 per cent to the Closing Price of 83p per Osprey Share on 26 March 2009 (being the last business day prior to the announcement of the possible offer)

(the 'Offer Illustration').

On the basis of the Offer Illustration, acceptance of the Offer would have resulted in the issue of 3,677,509 New MLIT Shares, representing approximately 21 per cent. of the Enlarged Share Capital.  

The Osprey Shares will be acquired by MLIT, pursuant to the Offer, fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and any other interest of any nature whatsoever and together with all rights now or hereafter attaching thereto, including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid on or after the date of this announcement.

The New MLIT Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing MLIT Shares, including the right to receive all dividends and other distributions declared, made or paid on or after the date of this announcement in respect of the MLIT Shares. The New MLIT Shares may be issued in certificated or in uncertificated form.  

Application has been made to the UK Listing Authority for the New MLIT Shares to be admitted to the Official List and application will be made to the London Stock Exchange for the admission of the New MLIT Shares to trading on its market for listed securities. No application will be made for the New MLIT Shares to be admitted to listing or trading on any other stock exchange.

The availability of the Offer to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable legal or regulatory requirements.

4. Information on MLIT

MLIT is an investment company with a portfolio of investments, principally quoted on the main market of the London Stock Exchange, valued at approximately £36.3 million as at 31 March 2009. MLIT has a simple equity capital structure comprising ordinary shares listed on the Official List and traded on the main market of the London Stock Exchange. The Investment Manager endeavours to construct a balanced portfolio of holdings with an emphasis on achieving absolute returns and providing a reasonable income.

MLIT maintains a relatively small and focused portfolio seeking capital growth by investing the majority of its assets in a portfolio of approximately 25 to 40 securities. Midas, the Investment Manager of MLIT, endeavours to construct a balanced portfolio of holdings with an emphasis on achieving absolute returns and providing a reasonable income. The current portfolio includes UK and overseas equities and money market deposits. The MLIT Board adopts a policy permitting investment in any particular sector of the stock market in both the UK and overseas.

MLIT may borrow to gear the portfolio returns when the Investment Manager believes it is in MLIT Shareholders' interests to do so. Currently MLIT has no borrowings.

The success of MLIT's investment policy is illustrated by the growth in net assets per MLIT Share from the equivalent of 2.30p at 31 December 1981 to 304.3p as at 27 April 2009, a compound growth rate of 19.7 per cent per annum, which compares to a compound growth rate of 6.2 per cent. in the FTSE All Share Index over the same period.

The Closing Price of 283p per MLIT Share as at 27 April 2009 represented a discount of 7 per cent to the net asset value of 304p per MLIT Share as at that date (being the latest practicable date prior to the printing of this document). The MLIT Shares traded at an average discount of 6.6 per cent. over the 12 months ended 31 March 2009, which compares with the UK Growth sector size-weighted average discount of 9.8 per cent. over the same period. 

MLIT seeks to renew, at each annual general meeting, its authority to buy-back its own shares. Acquisitions under this authority will only be made at market prices below the prevailing net asset value per MLIT Share at the time of the buy-back. The MLIT Board continues to believe that share buy-backs can be a useful tool in enhancing MLIT Shareholder value, including, if the MLIT Board considers it to be appropriate, during the course of the Offer Period. A resolution will be proposed at the General Meeting to extend this power to 14.99 per cent. of the enlarged issued share capital of MLIT following the issue of the New MLIT Shares.

Additional information concerning MLIT and copies of announcements released in connection with the Offer are available at www.manchesterandlondon.co.uk/investorRelations.php

5. Information on Osprey

Osprey Smaller Companies Income Fund Limited is an authorised closed end investment scheme which was incorporated in Guernsey in 2002 with registered number 39892. Osprey has a simple equity capital structure comprising only ordinary shares, which are listed on the Official List and traded on the main market of the London Stock Exchange and listed and traded on the Channel Islands Stock Exchange. It is administered by Elysium Fund Management Limited ('Elysium') and has received investment advisory services from Midas since 18 June 2008.

The principal investment objective of Osprey is to provide shareholders with the opportunity for income and capital growth by investing primarily in mid and smaller capitalisation UK companies (being companies capitalised at less than £1 billion) and traded on the London Stock Exchange or AIM.

Midas has concentrated on repositioning the portfolio into more liquid stocks to ensure that Osprey is better equipped to deal with and react effectively to the uncertain market. As at 31 March 2009, Osprey had a portfolio of equity investments of which 78 per cent. comprised shares in the FTSE350, 21 per cent. were smaller capitalisation stocks traded on the London Stock Exchange's market for listed securities and some 1 per cent. in net cash deposits. 

The Closing Price of 86.5p per Osprey Share as at 27 April 2009 represented a discount of 20.2 per cent. to the net asset value of 108.4p per Osprey Share as at that date (being the latest practicable date prior to the commencement of the Offer Period). The Osprey Shares traded at an average discount of 22.1 per cent. over the 12 months ended 31 March 2009, which compares with the UK Smaller Companies sector size-weighted average discount of 16.5 per cent. over the same period.

Osprey's audited financial statements for the year ended 31 August 2008 showed net investment losses of £6.26 million (2007 - gains £4.65 million), income of £1.38 million (2007 - £1.71 million) and a net loss for the year of £6.27 million (2007 - profit £4.26 million). Its audited gross assets as at 31 August 2008 were £30.08 million and its net assets were £19.17 million, which amounted to 147.57p per Osprey Share. Osprey's unaudited interim results for the six months ended 28 February 2009 showed gross assets of £19.4 million and net assets of £10.77 million, which amounted to 102p per Osprey Share. The unaudited net asset value per Osprey Share on 27 April 2009 was 108.4p. 

 6. Proposals for Osprey, compulsory acquisition and cancellation of listing and trading

Once the Offer has become or is declared unconditional as to acceptances, and Osprey has become a subsidiary of MLIT, MLIT will seek to renegotiate the borrowings of Osprey and to terminate certain contracts for administrative and other services to which Osprey is a party. MLIT will seek to implement alternative, lower cost arrangements. The estimated termination costs of Osprey contracts are provided for in the FAV formula which means that, as a result, the economic burden of such termination costs will be borne by Osprey Shareholders rather than existing MLIT Shareholders.  

In addition, once the Offer has become or is declared unconditional, MLIT will seek to cancel the public quotation of Osprey Shares on the main market of the London Stock Exchange and the Channel Islands Stock Exchange so that the Enlarged Group bears the cost of having one quoted holding company rather than two. MLIT intends to seek shareholder approval to alter the articles of association of Osprey to allow it to become an offshore trading subsidiary of MLIT. This may also be tax efficient in the Enlarged Group context because of existing tax losses within MLIT. 

If MLIT receives acceptances under the Offer in respect of, and/or otherwise acquires, 90 per cent. or more of the Osprey Shares to which the Offer relates, MLIT intends to exercise its rights pursuant to the provisions of sections 336 to 338 (inclusive) of the Law which will entitle MLIT to compulsorily acquire the remaining Osprey Shares in issue.

It is then intended that Osprey would notify the Guernsey Financial Services Commission of its intention to deregister Osprey as a registered closed-ended investment scheme and the Osprey investments would be transferred up to MLIT and that Osprey would act as a dealing subsidiary going forward in the same manner as MLIT's current dealing subsidiaries, engaged in buying and selling financial instruments to hedge the short term risk of other positions, rebalance the portfolio's sector weightings or to take advantage of perceived takeover arbitrage situations. Osprey would then classify as a 'dealing' subsidiary as opposed to an investment company.

The cancellation of the Listing and trading of Osprey Shares would significantly reduce the liquidity and marketability of Osprey Shares which are not acquired under the Offer and their value may be materially and adversely affected as a consequence.

7. Effect of the Offer on MLIT

The terms of the Offer have been structured to achieve a merger on broadly equal terms with the shareholders of Osprey. Due to transaction costs there is an immediate reduction in the net asset value of the Existing MLIT Shares on completion of the Offer. The merger of MLIT with Osprey is expected to lead to one-off costs in relation to the Offer and the termination of contracts for administrative and other services, some of which will be charged to the Enlarged Group's profit and loss account and may have a negative impact on earnings for the current year.

However, these are expected to lead to savings of £351,000 per annum (as described below) some of which accrue over time and may not have a material effect on the short period remaining in this financial year, but are expected to enhance earnings per share in future financial periods.

MLIT's interim financial statements as at 31 January 2009 showed net assets per share of 311.4p. The pro forma effect of the Acquisition on this figure based on Osprey's interim balance sheet as at 28 February 2009 (for illustrative purposes only) is to reduce MLIT's net assets per share to 303.74p, representing a decrease of 2 per cent. as a result of the costs of the Offer.

8. Cost savings

Osprey's expenses amounted to £585,000 (excluding interest payable and similar charges) for the year ended 31 August 2008. These costs decreased by 7.7 per cent. to an annualised rate of £540,000 for the six months to 28 February 2009 (excluding one off costs of £204,000). Midas has been integral to a cost reduction programme and comparable expenses are currently running at an estimated annual rate of approximately £360,000, a reduction of 33.3 per cent. over the annualised rate for the half year to 28 February 2009.

The MLIT Directors anticipate that the merger of Osprey with MLIT will lead to further annual cost savings of £351,000. This excludes some potential further savings in the costs of dealing in investments and on the potential amalgamation of Osprey's and MLIT's portfolios.

These anticipated savings comprise a £136,000 reduction in administration fees and other costs, estimated annual tax savings of £127,000 arising from Osprey acting as an offshore dealing subsidiary; a net saving of £40,000 arising from the resignation of two directors, one of whom is expected to be appointed to the board of MLIT where he will be entitled to remuneration of £12,000 per annum and will replace a retiring MLIT director in due course.  The costs of maintaining Osprey's listed status (listing and broker's fees) which were £43,000 for the year ended 31 August 2008 and currently amount to approximately £48,000 per annum are intended to be saved as a result of the Enlarged Group having a single quoted holding company.

Termination costs of £195,000 will be incurred to cancel various contracts for administrative and other services in order to achieve these savings.

In aggregate the annual savings expected to arise as a result of the merger amount to approximately £351,000. After taking account of the non recurring termination costs of £195,000 which will be incurred, the net income available for distribution by way of dividends could be increased.

A substantial proportion of the above savings can be achieved following MLIT becoming Osprey's holding company, but the full benefit will only be achieved as and when MLIT obtains sufficient Osprey Shares to be able to secure the termination of Osprey's listing on the London Stock Exchange and the Channel Islands Stock Exchange which may require the passing of a special resolution at a general meeting of Osprey at which MLIT will vote in respect of its majority shareholding.

Further information about MLIT, including its audited accounts for the years ended 31 July 2006, 31 July 2007 and 31 July 2008 which have been filed with FSA, is available at www.manchesterandlondon.co.uk/investorrelations.php.

Note: The tax saving referred to above is based on the amount of tax which would have been saved if the dealing activities which had been conducted in the year ended 31 July 2008 by MLIT's two on-shore dealing subsidiaries had been conducted through Osprey. The dividends payable from Osprey to MLIT may be off-set against MLIT's brought forward unrelieved management expenses which could generate an aggregate saving over several years of approximately £654,000.  If the Offer lapses, MLIT could establish its own offshore dealing subsidiary to achieve similar tax savings.

The merger benefit statements in this paragraph do not constitute a profit forecast.

9. Directors and employees

Osprey has no employees

One of Osprey's directors, David Harris, has agreed to join the MLIT Board in the event of the Offer becoming wholly unconditional in all respects. David Harris is chief executive of InvaTrust Limited, which specialises in marketing issues relating to the investment and financial services industry. He writes articles regularly for the national and trade press on investment matters and is a regular commentator on Bloomberg TV. His other current directorships are F&C Managed Portfolio Trust plc, SDF Productions Ltd, Character Group plc, Aseana Properties Limited, COBRA Holdings PLC and Small Companies Dividend Trust plc.

Under the proposed terms of his appointment letter as a non executive director of MLIT Mr Harris would become entitled to remuneration of £12,000 per annum. 

10. Manchester & Metropolitan Investment Limited

Manchester & Metropolitan Investment Limited ('M&M') is the majority shareholder of MLIT with a shareholding representing 56.4 per cent. of the Existing MLIT Shares in issue. In addition, M&M has a substantial shareholding in Osprey representing 38.3 per cent. of its issued share capital and has undertaken to accept the Offer. As and when the Offer is declared unconditional, M&M will receive New MLIT Shares as consideration for its Osprey Shares. As described in paragraph 3 above, the number of such New MLIT Shares will be determined by reference to the FAVs of MLIT and of Osprey. If the FAV of each company is as set out in the illustration in paragraph 3 above, M&M would hold 9,280,932 MLIT Shares representing between 52.7 per cent. and 58.8 per cent. of the Enlarged Share Capital depending on the level of acceptances by other Osprey Shareholders.

The beneficial owners of M&M are also the owners of Midas which is the investment manager of both Osprey and MLIT. Mr Brian Sheppard, who is a director of M&M, owns 1,434 A ordinary shares of M&M and is the trustee of two trusts that hold, in aggregate, 1,091 A ordinary shares and 136 B ordinary shares of M&M representing 62.7 per cent. of its issued voting share capital.  

The purchase by MLIT of Osprey Shares from M&M pursuant to the Offer constitutes a transaction with a related party for the purpose of the Listing Rules. A resolution will be proposed at the General Meeting to approve the transaction for the purposes of the Listing Rules. The Directors (other than Brian Sheppard) consider, having consulted MLIT's financial adviser, Fairfax, that the terms of this transaction are fair and reasonable insofar as MLIT Shareholders are concerned.  

M&M and its associates (being the trustees of a Sheppard family trust which holds 4,430 MLIT Shares) have undertaken not to vote on the resolution to approve the Acquisition at the General Meeting.

11. MLIT General Meeting 

A circular will be posted to MLIT Shareholders as soon as practicable containing information about the proposed merger and notice of the General Meeting at which resolutions will be proposed to approve the acquisition of Osprey, increase MLIT's authorised share capital to £7,000,000, grant powers of allotment and permit the purchase by MLIT of up to 14.9% of its Enlarged Share Capital.

12. Conflicts of interest and recommendation

The Osprey Directors, who have been so advised by Mazars Corporate Finance Limited, consider the terms of the Offer to be fair and reasonable and recommend Osprey Shareholders to accept it.

In providing advice to the Osprey Board, Mazars Corporate Finance Limited has taken the Osprey Directors' commercial assessments into account.  

The Board, which has been so advised by Fairfax, considers the terms of the Acquisition and the changes to share capital, powers of allotment, variation to investment policy and Resolution 1 (the 'Resolution 1 Matters') to be fair and reasonable as far as MLIT Shareholders are concerned. In giving their advice, Fairfax has taken into account the commercial assessments of the Directors. The Board considers the Resolution 1 Matters and Resolution 2 (approving an increase in MLIT's authority to purchase its own shares) to be voted on at the General Meeting to be in the best interests of MLIT Shareholders as a whole.

Mr Brian Sheppard, who is a Director and (through his investment in M&M) a significant shareholder of MLIT took no part in the Board's consideration of the Resolution 1 Matters and does not participate in the Board's recommendation to MLIT Shareholders to vote in favour of Resolution 1.

Accordingly, the Board recommends MLIT Shareholders to vote in favour of Resolution 1 to be proposed at the General Meeting, as they intend to do in respect of their own beneficial shareholdings (excluding those in which Mr Brian Sheppard is interested) amounting, in aggregate, to 16,750 shares, representing 0.1 per cent. of the Existing MLIT Shares.

Brian Sheppard and M&M, which are related parties for the purposes of the Listing Rules, have undertaken not to vote on Resolution 1 at the General Meeting and to take all reasonable steps to ensure that their associates will not vote on that Resolution. 

In addition, the MLIT Board unanimously recommends MLIT Shareholders to vote in favour of Resolution 2, approving an increase in MLIT's authority to purchase its own shares, to be proposed at the General Meeting, as they intend to do in respect of their own beneficial shareholdings (including those in which Mr Brian Sheppard is interested) amounting, in aggregate, to 7,892,029 shares, representing 56.6 per cent. of the Existing MLIT Shares.

13. Number of MLIT Shares and Osprey Shares in issue

MLIT has 13,946,338 ordinary shares of 25p each in issue with ISIN  GB0002258472. Osprey has 10,554,612 ordinary shares of 10p each in issue with ISIN GB0031797698.  This information is given in accordance with Rule 2.10 of the Takeover Code. 

14. General

The Offer Document, containing the full terms of the Offer, will be posted with the Prospectus Equivalent Document to Osprey Shareholders as soon as possible, but in any event, within 28 days of today's date. The conditions to the Offer are set out in Appendix I to this Announcement and, together with certain further terms of the Offer, will also be set out in full in the Offer Document and, in the case of certificated Osprey Shares, in the Form of Acceptance. In deciding whether to accept the Offer, Osprey Shareholders should rely on the information contained in, and follow the procedures described in, the Offer Document and, if applicable, the Form of Acceptance.

The availability of the Offer to Osprey Shareholders not resident in or citizens of the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are citizens or in which they are resident. Such persons should inform themselves about and observe any applicable legal or regulatory requirements of any such relevant jurisdiction. 

In particular, the Offer is not being made, directly or indirectly, in, into or from or by the use of the mails of or any means or instrumentality (including, without limitation, by means of facsimile transmission, telex, telephone, internet or other forms of electronic communication) of interstate or foreign commerce of, or by any facility of a national, state or other securities exchange of, any Restricted Jurisdiction, or in any other jurisdiction if to do so would constitute a violation of the relevant laws of such jurisdiction and the Offer, when made, will not be capable of acceptance by any such use, means, instrumentality or facility from or within any Restricted Jurisdiction where to do so would constitute a breach of any relevant securities laws of that Restricted Jurisdiction. Accordingly, copies of this Announcement are not being, and must not be, mailed or otherwise distributed or sent in or into or from any Restricted Jurisdiction or any such other jurisdiction. Doing so may render invalid any purported acceptance of the Offer.  MLIT will retain the right to permit the Offer to be accepted and any sale of any securities pursuant to the Offer to be completed if, in its sole discretion, it is satisfied that the transaction in question can be undertaken in compliance with applicable law and regulation.

Any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe any applicable legal or regulatory requirements. Further information in relation to overseas Osprey Shareholders will be set out in the Offer Document and in the Prospectus Equivalent Document.

This Announcement does not constitute, or form part of, an offer or an invitation to purchase or subscribe for any securities. The Offer will be made solely by way of the Offer Document, Prospectus Equivalent Document and, where appropriate, the related Form of Acceptance which together will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted.

Osprey Shareholders who accept the Offer may only rely on the Offer Document, the Prospectus Equivalent Document and, where appropriate, the related Form of Acceptance for all the terms and the condition of the Offer. In deciding whether or not to accept the Offer in relation to their Osprey Shares, Osprey Shareholders should rely only on the information contained, and procedures described, in the Offer Document, the accompanying Prospectus Equivalent Document and, where appropriate, the related Form of Acceptance. Osprey Shareholders are strongly advised to read the Offer Document being posted to them shortly, or in any event within 28 days of this Announcement, which contains important information with respect to the Offer.

Fairfax, which is authorised and regulated in the United Kingdom by the Financial Services Authority, has authorised this Announcement for the purposes of section 21 of FSMA. The principal place of business of Fairfax I.S. PLC is 46 Berkeley Square, London W1J 5AT. Fairfax is acting exclusively for MLIT and no one else in connection with the Offer and will not be responsible to anyone other than MLIT for providing the protections afforded to customers of Fairfax or for providing advice in relation to the Offer or any other matter referred to herein.

Fairfax and Mazars Corporate Finance Limited have given their respective written consents to the release of this Announcement containing references to their names in the form and context in which they appear.

Mazars Corporate Finance Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Osprey and no one else in connection with the Offer and will not be responsible to anyone other than Osprey for providing the protections afforded to customers of Mazars Corporate Finance Limited or for providing advice in relation to the Offer or any other matter referred to herein. The principal place of business of Mazars Corporate Finance Limited is Tower Bridge House, St Katharine's Way, London E1W 1DD. 

The directors of MLIT accept responsibility for the information contained in this document, save for the information for which the Osprey Directors accept responsibility in accordance with the following paragraph. Save as aforesaid, to the best of the knowledge and belief of the directors of MLIT (who have taken all reasonable care to ensure that such is the case) the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of Osprey, accept responsibility for the information contained in this document relating to Osprey, themselves and their immediate families, related trusts and connected persons. To the best of the knowledge and belief of the directors of Osprey (who have taken all reasonable care to ensure that such is the case) the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

This Announcement contains certain forward-looking statements with respect to (amongst other things) the financial condition, results of operations and business of the Osprey and certain plans and objectives of the MLIT Board. These forward-looking statements, without limitation, can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'Osprey', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'will', 'may', 'should', 'would', 'could' or other words of similar meaning. These statements are based on assumptions and assessments made by the MLIT Directors in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, and the factors described in the context of such forward-looking statements in this Announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements, which are not guarantees of future performance.  

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Announcement.  Osprey and MLIT assume no obligation to update or correct the information contained in this Announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.

The statements contained in this Announcement are made as at the date of this Announcement, unless some other time is specified in relation to them, and service of this Announcement shall not give rise to any implication that there has been no change in the facts set out in this Announcement since such date. Nothing contained in this Announcement shall be deemed to be a forecast, projection or estimate of the future financial performance of Osprey except where expressly stated.  

The attention of Osprey Shareholders is drawn to the fact that under the Code there are certain UK dealing disclosure requirements in respect of relevant securities during an offer period. An Offer Period was deemed to have commenced on (and including) 8 December 2008 when this Announcement was released.

The disclosure requirements are set out in more detail in Rule 8 of the Code. In particular, under the provisions of Rule 8.3 of the Code, if any person is, or becomes, 'interested' (directly or indirectly) in one per cent. or more of any class of 'relevant securities' of Osprey, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant transaction. This requirement will continue until the date on which the Offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the Offer Period otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Osprey, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Osprey by MLIT or Osprey, or by any of their respective 'associates' (within the meaning of the Code), must also be disclosed by no later than 12.00 p.m. (London time) on the Business Day following the date of the relevant transaction.  

A disclosure table giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. 

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. 

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8 of the Code, you should consult the Panel.  

If you are in any doubt as to the application of Rule 8 to you, please contact an independent financial adviser authorised under the Financial Services and Markets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number [phone]; fax: [phone].

This Announcement does not constitute, or form part of, an offer or invitation to purchase any securities.

  APPENDIX I 

Conditions of the Offer

The Offer is subject to the following conditions:

(i) valid acceptances being received (and not, where permitted, withdrawn) by not later than 1.00 p.m. on the first closing date (or such later time(s) and/or date(s) as MLIT may, subject to the rules of the Code, decide) in respect of not less than 50 per cent (or such lesser percentage as MLIT may decide) (or such lesser percentage as MLIT may decide) in nominal value of the Osprey Shares to which the Offer relates, provided that, unless agreed by the Panel, this condition will not be satisfied unless MLIT has acquired or agreed to acquire (pursuant to the Offer or otherwise), directly or indirectly, Osprey Shares carrying, in aggregate, over 50 per cent. of the voting rights then normally exercisable at general meetings of Osprey on such basis as may be required by the Panel (including for this purpose, to the extent (if any) required by the Panel, any voting rights attaching to any shares which are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of conversion or subscription rights or otherwise); and for this purpose (a) the expression 'Osprey Shares to which the Offer relates' shall be construed as those shares subject to the Offer but excluding any shares allotted on or after the date of the Offer or any shares that cease to be held in treasury on or after the date of the Offer; (b) shares which have been unconditionally allotted shall be deemed to carry the voting rights which they will carry on issue; and (c) valid acceptances shall be deemed to have been received in respect of Osprey Shares which are treated as having been acquired or contracted to be acquired by MLIT by virtue of acceptances of the Offer;

(ii) the passing at the General Meeting of MLIT (or at any adjournment thereof) of resolutions to approve: the Acquisition, an increase in MLIT's authorised share capital and the MLIT Directors' powers of allotment;

(iii) the UK Listing Authority agreeing to admit the New MLIT Shares to the Official List of the UK Listing Authority and (unless the Panel otherwise agrees) such admission becoming effective in accordance with the Listing Rules of the UK Listing Authority and (b) the London Stock Exchange agreeing to admit the New MLIT Shares to trading on its market for listed securities and (unless the Panel otherwise agrees) such admission becoming effective in accordance with its admission and disclosure standards;

(iv)     no government or governmental, quasi-governmental, supranational, statutory or regulatory body, or any court, institution, investigative body, association, trade agency or professional or environmental body or (without prejudice to the generality of the foregoing) any other person or body in any jurisdiction (each, a 'Relevant Authority') having decided to take, instituted, implemented or threatened any action, proceedings, suit, investigation or enquiry or enacted, made or proposed any statute, regulation or order or otherwise taken any other step or done anything, and there not being outstanding any statute, legislation or order, that would or might reasonably be expected to (in any case to an extent which is material in the context of Osprey or MLIT, as the case may be):

(a) directly or indirectly restrict, restrain, prohibit, delay, impose additional conditions or obligations with respect to or otherwise interfere with the implementation of the Offer or the acquisition of any Osprey Shares by MLIT or any matters arising therefrom or require amendment to the terms of the Offer;

(b) result in a limit or delay in the ability of MLIT, or render MLIT unable, to acquire some or all of the Osprey Shares;

(c) require, prevent, delay or affect the divestiture by MLIT or Osprey of all or any portion of their respective businesses, assets or property or of any Osprey Shares or other securities in Osprey or impose any limitation on the ability of either of them to conduct their respective businesses or own their respective assets or properties or any part thereof;

(d) impose any limitation on the ability of MLIT to acquire or hold or exercise effectively, directly or indirectly, all rights of all or any of the Osprey Shares (whether acquired pursuant to the Offer or otherwise) or to exercise voting or management control over MLIT;

(e) make the Offer or its implementation or the proposed acquisition of Osprey or of any Osprey Shares or any other shares or securities in, or control of, Osprey, illegal, void or unenforceable in or under the laws of any jurisdiction;

(f) otherwise adversely affect any or all of the businesses, assets, prospects or profits of MLIT or Osprey or the exercise of rights of shares in Osprey;

and all applicable waiting periods during which such Relevant Authority could institute, implement or threaten any such action, proceedings, suit, investigation, enquiry or reference or otherwise intervene having expired, lapsed or been terminated;

(v)    all authorisations, orders, grants, consents, clearances, licences, permissions and approvals ('Authorisations'), in any jurisdiction, reasonably considered necessary or appropriate by MLIT for or in respect of the Offer, the proposed acquisition of any shares or securities in, or control of, Osprey by MLIT or the carrying on of the business of Osprey or MLIT, the issue of the New MLIT Shares or any matters arising therefrom being obtained in terms reasonably satisfactory to MLIT from all appropriate Relevant Authorities or (without prejudice to the generality of the foregoing) from any persons or bodies with whom Osprey or MLIT has entered into contractual arrangements (in each case where the absence of such Authorisation would have a material adverse effect on MLIT) and such authorisations, orders, grants, consents, clearances, licences, permissions and approvals remaining in full force and effect and there being no intimation of any intention to revoke or not to renew the same and all necessary filings having been made, all appropriate waiting and other time periods (including extensions thereto) under any applicable legislation and regulations in any jurisdiction having expired, lapsed or been terminated and all necessary statutory or regulatory obligations in any jurisdiction in respect of the Offer or the proposed acquisition of Osprey by MLIT or of any Osprey Shares or any matters arising therefrom having been complied with;

(vi)    since 28 February 2009 (being the date to which the last interim report of Osprey was made up) and save as announced publicly and in each case delivered to a Regulatory Information Service or otherwise fairly disclosed in writing to MLIT by or on behalf of Osprey prior to 5 May 2009 (being the date upon which the Offer was announced), Osprey not having:

(a) issued or agreed to issue or authorised or proposed the issue of additional shares of any class or issued or authorised or proposed the issue of or granted securities convertible into or rights, warrants or options to subscribe for or acquire such shares or convertible securities or redeemed, purchased or reduced or announced any intention to do so or made any other change to any part of its share capital;

(b) recommended, declared, paid or made or proposed to recommend, declare, pay or make any dividend, bonus or other distribution;

(c) authorised or proposed or announced any change in its share or loan capital;

(d) issued or authorised or proposed the issue of any debentures or (other than by operation of any rate of interest applying to such indebtedness or liability) incurred or increased any indebtedness or liability (actual or contingent) which in any case is material in the context of Osprey;

(e) disposed of or transferred, mortgaged or encumbered any asset or any right, title or interest in any asset or entered into or varied any contract, commitment or arrangement (whether in respect of capital expenditure or otherwise) which is of a long term or unusual nature or which involves or could involve an obligation of a nature or magnitude which is material or is otherwise than in the ordinary course of business or could reasonably be regarded as restricting the business of Osprey or MLIT or authorised, proposed or announced any intention to do so;

(f) entered into, or varied the terms of, any contract or agreement with any of the directors of Osprey;

(g) taken or proposed any corporate action or had any legal proceedings started or threatened against it for its winding-up, dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction which in any case is material in the context of Osprey;

(h) waived or compromised any claim other than in the ordinary course of business which is material in the context of Osprey;

(i) made any amendment to its memorandum or articles of association or other incorporation documents;

(j) been unable or admitted that it is unable to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

(k) entered into any contract, commitment or agreement or passed any resolutions with respect to any of the transactions, matters or events referred to in this condition (vi);

(vii)    since 28 February 2009 (being the date to which the last interim report of Osprey was made up) and save as announced publicly and in each case delivered to a Regulatory Information Service or otherwise fairly disclosed in writing to MLIT by or on behalf of Osprey prior to 5 May 2009 (being the date upon which the Offer was announced):

(a) no litigation, arbitration, prosecution or other legal proceedings having been instituted, announced or threatened or become pending or remained outstanding by or against Osprey or to which Osprey is or may become a party (whether as plaintiff, defendant or otherwise) which in any case is material in the context of Osprey;

(b) no contingent or other liability of Osprey having arisen or become apparent or increased which in any case is material in the context of Osprey;

(c) no adverse change or deterioration having occurred in the business, assets, financial or trading position, profits or prospects of Osprey which in any case is material in the context of Osprey; and

(d) no investigation by any Relevant Authority having been threatened, announced, implemented or instituted or remaining outstanding which in any case is material in the context of Osprey; and

(viii)     MLIT not having discovered that:

(a) any business, financial or other information concerning Osprey publicly disclosed at any time by Osprey, either contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and which was not subsequently corrected before 5 May 2009 by disclosure either publicly or otherwise to MLIT to an extent which in any case is material in the context of Osprey; or 

(b) Osprey is subject to any liability, actual or contingent, which is not disclosed in the interim report and accounts of Osprey for the six months ended 28 February 2009.

MLIT reserves the right to waive all or any of conditions (iv) to (viii) (inclusive) above, in whole or in part. Conditions (ii) to (viii) above must be fulfilled or waived (where possible) within 21 days after the later of the first closing date of the Offer and the date on which condition (i) is fulfilled (or in each case such later date as the Panel may agree), failing which the Offer will lapse. MLIT shall be under no obligation to waive or treat as satisfied any of conditions (iv) to (viii) (inclusive) by a date earlier than the latest date specified above for the satisfaction thereof notwithstanding that the other conditions of the Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment.

If MLIT is required by the Panel to make an offer for Osprey Shares under the provisions of Rule 9 of the Code, MLIT may make such alterations to the conditions as are necessary to comply with the provisions of that Rule.

If the Offer lapses it will cease to be capable of further acceptance. Osprey Shareholders who have accepted the Offer and MLIT shall then cease to be bound by acceptances delivered on or before the date on which the Offer lapses.

APPENDIX II

CALCULATION OF THE FORMULA ASSET VALUES

For the purpose of this Appendix II, each of Osprey and MLIT is, unless the context otherwise requires, referred to as the 'Relevant Company'. Each of the FAV per Osprey Share and the FAV per MLIT Share shall be calculated as at the close of business on the Calculation Date (being the date on which the Offer becomes or is declared unconditional as to acceptances) and shall be the amount in pence which is the result of the following formula, rounded to four decimal places (with 0.00005p being rounded upwards):

FAV per share of the Relevant Company = A - B

                                                                               C

where 'A' is the aggregate of:

(i) the value of those investments of the Relevant Company which are listed, traded, quoted or dealt in on a recognised stock exchange or on AIM, a market of the London Stock Exchange, calculated by reference to the bid quotations or, if not available, prices or the last trade prices for those investments as at the close of business on the Calculation Date as derived from the relevant exchange's recognised method of publication of prices for such investments (any CFD accounts containing cash and positions to be valued using the statement from the independent CFD administrator as at the close of business on the Calculation Date);

(ii)    the value of those investments of the Relevant Company which are dealt in or traded on any publicly-available exchange or market (including any 'over the counter' market but excluding any exchange or market referred to in sub-paragraph A(i) above), calculated by reference to the average of the daily average of the prices marked for such investments on each of the five business days up to and including the Calculation Date on which there were dealings or trading in such investments as derived from the relevant market's recognised method of publication of prices for such investments;

(iii)    the value of those investments of the Relevant Company which are units in unit trust or shares in open-ended investment companies, calculated by reference to the prices or, in the case of units or shares in respect of which cancellation and bid prices are quoted, the lower of the cancellation and bid prices quoted as at the close of business on the Calculation Date by the manager of the relevant unit trust or open-ended investment company for holdings of the size held by the Relevant Company (and, for the avoidance of doubt, any such investments which are listed, traded, quoted or dealt in on a recognised stock exchange shall be valued under this sub-paragraph (iii) and not under sub-paragraph A(i) above);

(iv)    the value of those traded uncovered options and futures contracts to which the Relevant Company is a party as at the close of business on the Calculation Date which are traded on a stock, commodities, financial futures or other securities exchange, calculated by reference to the official middle-market closing prices on the Calculation Date as derived from the relevant exchange's recognised method of publication of prices for such traded options and futures contracts;

(v)    the value of traded call options contracts to which the Relevant Company is a party as at the close of business on the Calculation Date which are traded on a stock held in the portfolio of the Relevant Company shall be valued at zero unless the premium is still due in which case the position will be valued at the premium value due;

(vi)    the value of those investments of the Relevant Company which have unexpired call options sold against an underlying stock held in the portfolio of the Relevant Company shall be valued at the strike price of the call if the bid price of the investment is above the strike price as at the close of business on the Calculation Date;

(vii)    the value of all other investments of the Relevant Company, calculated as being their fair realisable values as at the close of business on the Calculation Date as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert);

(viii)    the amount as at the close of business on the Calculation Date of any sums due from debtors (including, for this purpose, any dividends or distributions receivable on investments quoted ex-dividend or ex-distribution on the Calculation Date and any interest accrued on any debt securities as at the Calculation Date and any recoverable tax credit in relation thereto, but excluding any dividend, distribution or interest not yet received which has been taken into account in the value of any of the investments referred to in sub-paragraphs A (i) to (vii) (inclusive) above or is unlikely to be received), cash and deposits with or balances at banks, bills receivable and any money market instruments of the Relevant Company (together with, in each case, any accrued interest at that date less an accrual for any associated tax) and the fair realisable value of any other tangible assets of the Relevant Company not otherwise accounted for in sub-paragraphs A (i) to (vii) (inclusive) above, less any provision for diminution of value which may be appropriate in respect of any of sub-paragraphs A (i) to (vii) (inclusive) above (including provisions for bad or doubtful debts), in each case as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert); and

(ix)    in the case of the FAV per MLIT Share only, (a) the value of its Wimbledon debentures will be valued at £110,000 which was the last valuation as provided by the All England Lawn Tennis Ground plc; and (b) the value of its outstanding claim for VAT and interest repayable from HM Customs which shall be valued at £45,017.23.

'B' is the aggregate of:

(i)    in respect of each Relevant Company, the principal amounts as at the close of business on the Calculation Date of any outstanding borrowings plus any accrued but unpaid interest, commitment fees and other charges up to and including that date and the higher of any premiums or penalties payable on either early or final repayment if required;

(ii)    the cost of closing as at the close of business on the Calculation Date any open foreign exchange or other forward purchase or sale contract to which the Relevant Company is a party on that date (save to the extent otherwise taken into account in calculating the FAV per share of the Relevant Company);

(iii)    in the case of the FAV per Osprey Share only, the cost of termination as at the close of business on the Calculation Date of any investment advisory (Midas have agreed that no termination fee will be due in the event the Offer becomes unconditional), advisory, custody and administrative arrangements in force on that date, including, but not limited to, any compensation or other payments to be made to any investment manager, investment adviser, administrator, secretary, director or employee of Osprey, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;

(iv)    in the case of the FAV per Osprey Share only, the cost of terminating as at the close of business on the Calculation Date any other contracts or arrangements whatsoever in force on that date to which Osprey is a party, but excluding, for the purpose of this sub-paragraph B (iv), any investment management, advisory and administrative arrangements in force at the close of business on the Calculation Date;

(v)    the total cost of any dividend or other distribution of the Relevant Company declared on or before the Calculation Date, so far as not previously paid;

(vi)    in the case of the FAV per Osprey Share only, the costs, expenses and fees of any independent expert appointed in connection with determining the Formula Asset Values (of either/or both Relevant Companies), as well as any additional accrued but unpaid costs and expenses to the Relevant Companies arising directly as a result of and specifically in connection with the appointment of an independent expert and the performance of its function, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;

(vii)    the aggregate of the amount of any Panel on Takeovers and Mergers fees or UK Listing Authority fees to be borne equally by each Relevant Company in respect of the Offer (including any VAT chargeable);

(viii)    the amount of all stamp duty or stamp duty reserve tax as may be payable by MLIT in respect of the transfer of the Osprey Shares pursuant to the Offer (assuming full acceptance of the Offer), as estimated by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert) to be borne equally by each Relevant Company;

(ix)    the aggregate of the amount of all accrued but unpaid professional, advisory, legal and other fees and other advertising costs and expenses incurred by the Relevant Company in connection with the Offer, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief including all such fees, costs and expenses relating to or in connection with the determination of the Formula Asset Values (excluding any amounts arising under sub-paragraph B (vi) above) but excluding for the purpose of this sub-paragraph B (ix) all stamp duty and stamp duty reserve tax already provided for in accordance with sub-paragraph B (viii) above, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;

(x)    the aggregate of the amount of any accrued but unpaid professional, advisory, legal and other fees and advertising and other costs and expenses whatsoever incurred by the Relevant Company otherwise than in connection with the Offer, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief; and

(xi)    an amount which fully reflects all other liabilities and obligations of the Relevant Company whatsoever, including a fair provision for any contingent liabilities (including any additional liabilities to taxation, whether or not deferred, and any liabilities arising on liquidation) or losses (including disputed claims), as at the close of business on the Calculation Date determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert); and

'C' is the aggregate of:

(i)    the number of shares in the Relevant Company in issue as at the close of business on the Calculation Date.

Notes:

1.    For the purpose of the above calculations, the value of any investments, other assets or liabilities denominated or valued in currencies other than sterling shall be converted into sterling at the closing mid-point spot rate of exchange between sterling and such other currencies in London as at the close of business on the Calculation Date as published in the Financial Times or, failing which, as certified by Midas (acting as an expert and not as an arbitrator).

2.    In the case of sub-paragraphs A(i), (ii), (iii), (iv), (v) and (vi) above, if there has been any general suspension of trading on the relevant stock, commodities, financial futures or other securities exchange or market, or if it was closed for business on the Calculation Date, the value of the relevant investments, traded options or futures contracts shall be taken as at the close of business on the immediately preceding date on which there was trading on such exchange or market, provided that such date is not more than seven days prior to the Calculation Date and save that, if there has been a material adverse change in the financial position of any such underlying investment, traded option or futures contract since the date by reference to which its value is calculated but prior to the close of business on the Calculation Date, a fair provision (as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert)) shall be made to take account of such adverse change in the value of the relevant investment, traded option or futures contract.

3.    Subject to note 2 above, in the case of sub-paragraphs A (i) to (vi) (inclusive) above:

(i)    where any such investment, traded option or futures contract is subject to restrictions on transfer or a suspension of dealings or if no such published or quoted prices are available in respect of any such investment, traded option or futures contract, in each case as at the close of business on the Calculation Date, the value of such investment, traded option or futures contract will be calculated as at the close of business on the Calculation Date in accordance with sub-paragraph A (vii) above; and

(ii)    where any such investment, traded option or futures contract is, at the close of business on the Calculation Date, subject to any right of any person to acquire the same or any obligation on the Relevant Company to dispose of the same, whether as a result of the Offer being made or becoming or being declared unconditional or otherwise, at a price more or less than would otherwise be determined in accordance with sub-paragraphs A (i) to (vi) (inclusive) above, such investment, traded option or futures contract shall be valued at such greater or lesser price unless such right or obligation is unconditionally and irrevocably waived or lapses prior to the calculation of the FAV per share of the Relevant Company otherwise being agreed or determined.

4.    Subject to note 5 below, with regard to sub-paragraphs A (vii) and (viii) above, the Company Secretary of MLIT and Elysium and, if appointed, any independent expert shall have regard, inter alia, to the following when determining the value of any investment or other asset (which shall be calculated on the basis of a notional sale by a willing seller to a willing buyer, without regard to any additional value that might be attributed to such investment or other asset by any special category of potential purchaser):

(i)    the existence or exercise of any pre-emption rights or obligations in respect of such investment or other asset or any other restrictions on the transfer or disposal of the same which may exist or which may arise as a consequence of the proposed acquisition by MLIT of Osprey or any Osprey Shares or of the transfer of such investment or other asset to any party or of the winding up of Osprey;

(ii)    the terms and volumes of any recent dealings in, and marketability of, such investment or other asset; and

(iii)    the amount of any bona fide offer to acquire such investment or other asset which may be made by any person and brought to the attention of the Company Secretary of MLIT and Elysium or, if appointed, any independent expert.

5.    With regard to sub-paragraphs A (vii) and (viii) above, the Company Secretary of MLIT and Elysium and, if appointed, any independent expert shall, except in the case of debtors and tangible assets, be bound by the actual amount of cash items and, in the case of debtors and tangible assets, shall adopt the accounting policies used by the Relevant Company in its latest audited financial statements.

6.    If any liability referred to in sub-paragraphs B(i) to (xi) (inclusive) above has not been determined by the date on which the calculations and adjustments otherwise necessary to determine the FAV per share of the Relevant Company have been made, there shall be included in 'B' such amount in respect of any such liability as shall be considered to be an appropriate estimate by agreement between the Company Secretary of MLIT and Elysium (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert).

7.    In agreeing any fair realisable value (in the case of sub-paragraphs A (vii) and (viii) above) or estimating or determining the amount of any liabilities, obligations or losses (in the case of sub-paragraphs B(viii) or B(xi) above), or in making any determination under notes 2 and 6 above, the Company Secretary of MLIT and Elysium shall act as experts and not as arbitrator and any such determination shall be final and binding on all persons and neither of them shall be under any liability to any person by reason thereof or by reason of anything done or omitted to be done by them for the purposes thereof or in connection therewith.

8.The independent expert referred to herein shall be a member of the London Investment Banking Association (not connected with any of the parties providing advice to Osprey or MLIT in connection with the Offer) selected by the Company Secretary of MLIT and Elysium or, in default of such selection within 14 days after the Calculation Date, by the chairman for the time being of the London Investment Banking Association on the application of either the Company Secretary of MLIT or Elysium. Such member shall act as an expert and not as an arbitrator and his determination shall (subject to any agreement to the contrary between MLIT and Osprey) be final and binding on all persons and such member shall not be under any liability to any person by reason of his appointment or by anything done or omitted to be done by him for the purposes of such appointment or in connection therewith.

9. The Osprey Directors shall be invited to prepare the calculation of the FAV per Osprey Share for review and approval by the Company Secretary of MLIT on behalf of MLIT. The MLIT Directors shall be invited to prepare the calculation of the FAV per MLIT Share for review and approval by Elysium on behalf of Osprey. In the event of a dispute regarding the calculation of the FAV per Osprey Share or the FAV per MLIT Share, such dispute shall be determined by a chartered accountant selected by agreement between MLIT and Osprey or, in default of such agreement within 14 days after the Calculation Date, selected by the President for the time being of the Institute of Chartered Accountants in England and Wales, which chartered accountant shall act as an expert and not as an arbitrator and whose determination shall (subject to any agreement to the contrary between MLIT and Osprey) be final and binding on all persons, provided that such chartered accountant shall (subject to any agreement to the contrary between MLIT and Osprey) be bound by any values of investments or other assets or any quantification of liabilities, obligations or losses agreed between the Company Secretary of MLIT and Elysium or otherwise agreed between MLIT and Osprey or determined by a decision of any independent expert referred to in this Appendix II in respect of any investment or other asset valued by him or any liability, obligation or loss quantified by him. In the absence of any such dispute, such calculation approved by, or on behalf of, MLIT or Osprey, as the case may be, shall be final and binding on all persons.

10. Notwithstanding note 9 above, if either of the calculations of the FAV per Osprey Share or the FAV per MLIT Share has not been so prepared and delivered to the Company Secretary of MLIT or Elysium for their respective approval by the date seven days after the Calculation Date or (whether or not such delivery has been so made) a final determination of either the FAV per Osprey Share or the FAV per MLIT Share has not been made by the date 14 days after the Calculation Date, then, pending such final determination, a provisional calculation of the FAV per Osprey Share or the FAV per MLIT Share (as the case may be) shall be prepared by MLIT and The Company Secretary of MLIT on the basis of such information as is available to them (and after making such assumptions as they consider appropriate). In that event, an initial consideration, equal to 85 per cent of the New MLIT Shares would be due as consideration under the Offer were the provisional calculation referred to above correct, rounded down to the nearest whole New MLIT Share, shall be issued to the persons entitled thereto on the prescribed settlement date in respect of the Offer within seven days after the final determination referred to above has been approved or determined in accordance with note 9 above and such approval or determination has been notified to MLIT (but not earlier than the prescribed settlement date).

11.     Notwithstanding any of the above provisions, in the event that the valuation of any investment or other asset of the Relevant Company in accordance with any of such provisions, or the amount of any deduction made in accordance with sub-paragraphs B (i) to (xi) (inclusive) above, is, in the opinion of the Company Secretary of MLIT and Elysium, incorrect or unfair they may, if they so agree, adopt an alternative method of valuation or deduction, as the case may be.

Appendix III

Bases and Sources

In this Announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:

The basis for the statement relating to tax saving arising from the use of Osprey as an offshore dealing subsidiary is a comparison of (i) the average tax paid by the MLIT Group in relation to trading (dealing) by UK resident subsidiaries for the financial year to 31 July 2008 and (ii) the tax which would have been paid if such dealing had been conducted by Osprey and the profits paid to MLIT as a dividend.

Midas, as the investment manager of both MLIT and Osprey, is shown as the source of certain financial information. Midas has details of the MLIT and Osprey investment portfolios and utilises market information from Trustnet, Proquote and the London Stock Exchange to derive valuation information for their investments. Information from Midas is also used to calculate net asset values which are announced each month.

The assumptions on which the Offer Illustration is based are:

• full acceptance of the Offer;

• that the other conditions of the Offer are satisfied; and

• that the FAV is calculated as described in this document, but for illustrative purposes, treating references to the Calculation Date as references to 27 April 2009.

The information about net asset values as at 27 April 2009 has been is unaudited and has not been reported on by an accountant.

The sources of the information used to calculate the FAV are unaudited company records of MLIT and Osprey and portfolio valuations.

The statements concerning cost savings in paragraph 8 above have been derived from internal financial accounting records and estimates in relation to future costs, supported by third party quotes.  The information has been compiled from several sources including fee agreements and third party quotes, published charges (eg Panel and UK Listing Authority), is the source of estimates of the costs of the Offer.

The prices of Osprey Shares on a particular date are derived from the Closing Price for that date. 

  APPENDIX IV

Letters of intent

Certain major Osprey Shareholders had signed letters of intent (which were not legally binding) to accept the Offer in respect of 5,564,047 Osprey Shares owned by them or under their discretionary management representing 52.7 per cent. of its issued share capital as follows:

Name                                                                                                  Osprey Shares                           %

Manchester & Metropolitan Investment Limited*                          4,047,000                           38.3%

Brewin Dolphin Ltd                                                                                  541,030                             5.1%

Philip J Milton & Company Plc                                                               476,025                             4.5%

Cenkos Channel Islands Nominee Company Ltd                                193,000                             1.8%

Rathbone Investment Management Limited                                        159,100                              1.5%

Adam & Company Investment Management Ltd                               147,872                              1.4%

 Total                                                                                                       5,564,047                             52.7%    

*Manchester & Metropolitan Investment Limited is acting in concert with MLIT, as is Fairfax which holds 17,249 Osprey Shares (0.16% of the Osprey Shares in issue). Accordingly the total holding by parties acting in concert with MLIT is 4,064,249 Osprey Shares (38.5% of the Osprey Shares in issue).

In addition to the Osprey Shares held in funds under discretionary management shown above, Rathbone Investment Management Limited and Brewin Dolphin Ltd which held 50,000 and 115,081 Osprey Shares respectively on behalf of advisory clients stated their intention to advise such clients to accept the Offer in respect of such 165,081 Osprey Shares representing 1.6 per cent. of Osprey's issued share capital.

APPENDIX V

Definitions

The following definitions apply throughout this Announcement unless the context requires otherwise: 

 

'Act' or 'Companies Act'	the Companies Act 2006 (as amended);
'Acquisition'	the proposed acquisition of Osprey by MLIT pursuant to the Offer;
'Admission'	admission of the New MLIT Shares to the Official List and to trading on the London Stock Exchange’s market for listed securities becoming effective in accordance with the Listing Rules and the Admission Standards respectively;
'Admission Standards'	the admission and disclosure standards for companies published from time to time by the London Stock Exchange;
'AIM'	the AIM market operated by the London Stock Exchange;
'Business Day'	a day (other than a Saturday, Sunday or public holiday) when clearing banks are open for business in the City of London;
'Calculation Date'	the close of business on the date on which the Offer becomes or is declared unconditional as to acceptances;
'certificated' or 'in certificated form'	a share which is not in uncertificated form (that is, a share not in CREST);
'Channel Islands Stock Exchange'	Channel Islands Stock Exchange, LBG;
'Circular'	the circular to be addressed to MLIT Shareholders  summarising the background to and reasons for the Offer and convening the General Meeting to, amongst other things, approve the Acquisition;
'Closing Price'	the closing middle market quotation of a share on the relevant date as derived from the Daily Official List;
'Code' or 'City Code'	the City Code on Takeovers and Mergers (as amended or interpreted from time to time by the Panel);
'CREST'	the relevant system (as defined in the Regulations) in respect of which Euroclear is the operator (as defined in the Regulations);
'Daily Official List'	the daily official list of the London Stock Exchange;
'Elysium'	Elysium Fund Management Limited;
'Enlarged Group'	MLIT and its subsidiary undertakings on completion of the Acquisition;
'Euroclear'	Euroclear UK & Ireland Limited, the operator of CREST;
'Fairfax'	Fairfax I.S. PLC, financial adviser and sponsor to MLIT;
'FAV per MLIT Share'	the formula asset value, calculated in accordance with the formula set out in Appendix II of this document, attributable to each MLIT Share in issue as at the close of business on the Calculation Date;
'FAV per Osprey Share'	the formula asset value, calculated in accordance with the formula set out in Appendix IIof this document, attributable to each Osprey Share in issue as at the close of business on the Calculation Date;
'Form of Acceptance'	the form of acceptance and authority for use by Osprey Shareholders in connection with the Offer;
'Formula Asset Values'	the FAV per Osprey Share and the FAV per MLIT Share;
'General Meeting'	the general meeting of MLIT to be convened to vote on the Resolutions;
'Investment Manager' or 'Midas'	Midas Investment Management Limited;
'Law'	the Companies (Guernsey) Law, 2008 (as amended)
'Listing Rules'	the Listing Rules of the UK Listing Authority made pursuant to section 74 of the Financial Services and Markets Act 2000;
'London Stock Exchange'	London Stock Exchange plc;
'M&M'	Manchester & Metropolitan Investment Ltd;
'Mazars' or Mazars Corporate  Finance'	Mazars Corporate Finance Limited;
'MLIT'	Manchester & London Investment Trust plc;
'MLIT Directors' or 'MLIT Board'	the directors of MLIT
'MLIT Shareholders'	holders of MLIT Shares;
'MLIT Shares'	the ordinary shares of 25p each in the capital of MLIT;
'New MLIT Shares'	the MLIT Shares to be issued pursuant to the Offer;
'Offer'	the offer being made by MLIT to acquire the entire issued and to be issued share capital of Osprey on the terms and subject to the conditions set out in this document and the Form of Acceptance (including, where the context so requires, any subsequent waiver, revision, variation, extension or renewal of such offer) and any election available in connection with it;
'Offer Document'	this document;
'Offer Illustration'	the illustrative calculations based on the assumptions set out therein as set out in Appendix III of this document;
'Offer Period'	the period commencing on the posting of the Offer Document until whichever of the following shall be the latest: (i) the first closing date, (ii) the date on which the Offer becomes unconditional in all respects and (iii) the date on which the Offer lapses;
'Official List'	the Official List of the UK Listing Authority;
'Osprey'	Osprey Smaller Companies Income Fund Limited;
'Osprey Board' or 'Osprey Directors'	the board of directors of Osprey;
'Osprey Shareholders'	registered holders of Osprey Shares;
'Osprey Shares'	the existing unconditionally allotted or issued and fully paid (or credited as fully paid) ordinary shares of 10p each in the capital of Osprey and any further shares which are unconditionally allotted or issued fully paid or credited as fully paid after the date of this document and before the date on which the Offer ceases to be open for acceptance (or such earlier date as MLIT may, subject to the Code, decide) but excluding any such shares held or which become held in treasury;
'Panel'	the Panel on Takeovers and Mergers;
'Prospectus Equivalent Document'	the prospectus to be published in respect of MLIT and the New MLIT Shares;
'Regulations'	the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755);
'Regulatory Information Service'	any information service authorised from time to time by the UK Listing Authority for the purpose of dissemination of regulatory announcements by the Listing Rules of the UK Listing Authority;
'Resolutions'	the resolutions to be proposed at the General Meeting (and set out in the notice of General Meeting contained in the Circular) to approve the Acquisition and the increase in MLIT’s issued share capital and to authorise the MLIT Directors to allot the New MLIT Shares;
'Restricted Jurisdiction'	the United States, Canada, Australia, the Republic of South Africa or Japan;
'UK' or 'United Kingdom'	United Kingdom of Great Britain and Northern Ireland;
'UKLA' or 'UK Listing Authority'	the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000;
'uncertificated' or 'in uncertificated form'	a share or shares recorded on the register of members as being held in uncertificated form in CREST and title to which, by virtue of the Regulations, may be transferred by means of CREST;
'United States' or 'US'	the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia and all other areas subject to the jurisdiction of the United States of America;
'US Person'	a US person as defined in Regulation S under the US Securities Act;
'US Securities Act'	the US Securities Act of 1933 (as amended) and the rules and regulations promulgated under that act;
'Wholly Unconditional Date'	the date on which the Offer becomes or is declared unconditional in all respects.

 

END

 

 

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