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Pewt Securities Plc (PEWZ)

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Friday 20 November, 2015

Pewt Securities Plc

Publication of Circular and Announcement of Proposals

20 November 2015

PEWT Securities PLC (“PEWT Securities” or the “Company”)

Publication of Circular and Announcement of Proposals

PEWT Securities plc has today published a circular (the “Circular”) in connection with the proposals for the reconstruction and voluntary winding-up of PEWT Securities and for a Rollover Option for ZDP Shareholders. The Circular should be read in conjunction with the prospectus published today relating to PEWT Securities 2020 plc (the “Prospectus”).

The Existing ZDP Shares of PEWT Securities confer a right to receive a Final Capital Entitlement of 221.78p per Existing ZDP Share (approximately £49.8 million in total) on the winding up of PEWT Securities on 31 December 2015. At time of the 2014 reorganisation, the board of the Company’s parent, Premier Energy and Water Trust plc, announced its intention to consider the various options that may be available for refinancing the Existing ZDP Shares nearer to the planned winding-up of PEWT Securities, including the issuance by the Group of a follow-on zero dividend preference share, to allow ZDP Shareholders who wish to do so the opportunity to roll over their investment into a similar investment.

Further to this, the Board have today announced Proposals which allow ZDP Shareholders to elect to receive their Final Capital Entitlement of 221.78p per Existing ZDP Share upon the winding-up of PEWT Securities either:

  • in cash; or
  • to roll over some or all of their investment into New ZDP Shares to be issued by PEWT Securities 2020 plc (“PEWT Securities 2020”), a new subsidiary of the Parent formed for the purpose of the Proposals.

The latest time and date for receipt of Elections is 1.00 p.m. on 11 December 2015. If the number of New ZDP Shares which would be issuable pursuant to the Scheme as a result of giving full effect to Elections for the Rollover Option would exceed the Maximum Issue Size, then the number of New ZDP Shares issuable pursuant to the Scheme will be scaled back in the manner set out in the Circular.

A copy of the Circular and Prospectus will be submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM and on the Company's website: https://www.premierfunds.co.uk/investors/investments/investment-trusts/premier-energy-and-water-trust. Copies of the Circular and Prospectus, together with a Form of Election (for those ZDP Shareholders holding their Existing ZDP Shares in certificated form), will be sent to ZDP Shareholders of the Company today.

Capitalised terms used but not defined in this announcement have the meanings set out in the Circular dated 20 November 2015.

Enquiries:

Premier Fund Managers Limited
Nigel Sidebottom
James Smith
Claire Long
+ 44 (0) 1483 30 60 90
 
N+1 Singer
James Maxwell
Liz Yong
Tom Smale
+ 44 (0) 20 7496 3000

The following is a reproduction, without material adjustment, of the Chairman’s Letter to ZDP Shareholders which is contained within the Circular:

Dear ZDP Shareholder

Reconstruction and voluntary winding-up of PEWT Securities

  1. Introduction

As you will be aware, PEWT Securities is due to be wound up on 31 December 2015 and ZDP Shareholders repaid their Final Capital Entitlement of 221.78p per ZDP Share.

Your Board announced today proposals for an issue of New ZDP Shares and the opportunity for existing ZDP Shareholders to roll over their capital entitlement into New ZDP Shares.

The Proposals provide for a members’ voluntary liquidation of PEWT Securities and scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986. Under the Proposals, ZDP Shareholders may receive their Final Capital Entitlement upon the winding-up of PEWT Securities in cash or elect to roll over some or all of their investment into New ZDP Shares to be issued by PEWT Securities 2020, a new subsidiary of the Parent formed for the purpose of the Proposals. A rollover of an investment in the Existing ZDP Shares to the New ZDP Shares issued by PEWT Securities 2020 provides an alternative to the cash payment to which ZDP Shareholders are entitled upon a straight winding-up and will allow ZDP Shareholders who elect for the rollover to continue their investment in the Group. ZDP Shareholders who elect to roll over their investment into New ZDP Shares should not generally be treated as making a disposal for the purposes of UK taxation of chargeable gains as a result of doing so (as to which, please see the discussion at paragraph 2 of Part 5 of the Circular).

In addition to the Scheme, the Proposals also include a conditional Placing of further New ZDP Shares. The number of New ZDP Shares to be issued pursuant to the overall Issue is limited to the Maximum Issue Size, which is designed to protect New ZDP Shareholders by ensuring that the Cover on the New ZDP Shares as at Admission (calculated by reference to the Gross Assets as at 11 December 2015, the deadline for submission of Elections) is at least the Minimum Initial Cover. ZDP Shareholders seeking to roll over their investment into New ZDP Shares will be allocated New ZDP Shares in preference to any subscriptions from investors under the Placing. Accordingly, if there is sufficient demand for the Rollover Option from ZDP Shareholders, it is possible that no New ZDP Shares will be issued pursuant to the Placing.

The Proposals are not conditional on the approval of ZDP Shareholders or Ordinary Shareholders of the Parent. The Proposals are conditional on the approval of the ordinary shareholder of PEWT Securities, which is the Parent, at the General Meetings. The Proposals are expected to proceed and the Circular is being sent to provide ZDP Shareholders with information regarding the Proposals and the Elections that may be made in respect of the Scheme.

Details of the action to be taken by ZDP Shareholders in relation to the Proposals are set out in Part 2 of the Circular. It is important that ZDP Shareholders read Part 2 carefully and, if they wish to make a full or partial election for New ZDP Shares, where their Existing ZDP Shares are held in certificated form, return their Forms of Election or, where their Existing ZDP Shares are held in uncertificated form, submit their transfer to escrow instruction via CREST (TTE Instruction) so as to be received no later than 1.00 p.m. on 11 December 2015.

Failure to return or submit a valid Form of Election or a TTE Instruction or the return or submission of a Form of Election or a TTE Instruction which is not validly completed will result in the relevant ZDP Shareholder being deemed to have elected for the Cash Option.

The attention of Shareholders is drawn to paragraph 2 of Part 5 of the Circular which sets out a general guide to certain aspects of current UK taxation law and HMRC published practice.

The Circular should be read in conjunction with the Prospectus relating to PEWT Securities 2020.

  1. Key features of the New ZDP Shares

The New ZDP Shares:

  • will have a repayment date of 30 November 2020 and will effectively rank as to capital in priority to the Ordinary Shares;
  • are designed to provide a pre-determined level of capital growth equivalent to a gross redemption yield of 4.75 per cent. per annum based on the issue price of a New ZDP Share of 100p; and
  • subject to the Group having sufficient assets at the time and assuming the Scheme is effective on 31 December 2015, will carry the right to be paid the 2020 Final Capital Entitlement of 125.6519p in cash on 30 November 2020.

The Issue Price will be 100 pence per New ZDP Share. Accordingly, if a ZDP Shareholder were to elect for the Rollover Option, where there is no scaling back, they would receive 2,217 New ZDP Shares for every  1,000 Existing ZDP Shares held on the Effective Date (entitlements to New ZDP Shares under the Scheme will be rounded down to the nearest whole number).

However, the number of New ZDP Shares that may be issued under the Issue is limited to the Maximum Issue Size. The Board has determined that the gearing to be provided to the Group by the New ZDP Shares will be less than the gearing currently provided to the Group by the Existing ZDP Shares. Accordingly, if a sufficient number of ZDP Shareholders were to elect for the Rollover Option, such ZDP Shareholders would be scaled back in accordance with paragraph 14 of Part 4 of the Circular and would receive part of their Final Capital Entitlement in cash. By way of example, and assuming that the Maximum Issue Size is achieved, if all ZDP Shareholders elect for the Rollover Option, each ZDP Shareholder will be scaled back to the extent that they would receive approximately 53.6 per cent. of their Final Capital Entitlement in New ZDP Shares and the remainder of their Final Capital Entitlement in cash.

On the assumption that (i) Gross Assets on 31 December 2015 are £75.9 million, which were the Gross Assets as at the Latest Practicable Date; and (ii) the Maximum Issue Size is achieved, then it is expected that following completion of the Scheme and the Placing, Gross Assets would need to fall by 31.0 per cent. in total, and 7.3 per cent. annually, in order for the New ZDP Shares not to receive their full 2020 Final Capital Entitlement of 125.6519p per New ZDP Share on 30 November 2020.

  1. Background to the Proposals

In August 2014, Shareholders approved proposals to extend the life of the Parent beyond its then-planned winding up date of 31 December 2015 and to implement a reorganisation of the Parent through a scheme of arrangement. The reorganisation became effective in September 2014, pursuant to which old zero dividend preference shares issued by the Parent were replaced with the Existing ZDP Shares issued by PEWT Securities, a subsidiary of the Parent which was formed for the purpose of the reorganisation.

The Group’s current capital structure is designed to provide ZDP Shareholders with a Final Capital Entitlement of 221.78p in cash per Existing ZDP Share on the planned winding-up date of PEWT Securities of 31 December 2015. To achieve this, the Articles provide for PEWT Securities to be wound up on 31 December 2015. On a winding-up, Shareholders’ entitlements, after payment of PEWT Securities’ creditors, are determined in accordance with the Articles as follows:

  1. first, there shall be paid to ZDP Shareholders an amount equal 151.39p per ZDP Share as increased with effect from and including 17 December 2009 on a daily basis at such compounded rate as results in a final entitlement on 31 December 2015 of 221.78p per ZDP Share; and
  2. secondly, the Parent, as the holder of all of the ordinary shares of PEWT Securities shall receive the surplus assets of PEWT Securities available for distribution.

Accordingly, the Group is committed to repaying the Final Capital Entitlement of the Existing ZDP Shares of approximately £49.8 million on 31 December 2015.

At the time of the 2014 reorganisation, the Board informed Shareholders that it was the Board’s intention to consider the various options that may be available for refinancing the Existing ZDP Shares nearer to the planned winding-up of PEWT Securities. The Board stated that it may consider the issuance by the Group of a follow-on zero dividend preference share at that time, to allow ZDP Shareholders who wish to do so the opportunity to roll over their investment into a similar investment for which the Board believed there would be sufficient demand.

Against this background, the Board requested the Group’s Manager, Premier Portfolio Managers Limited, and its financial adviser, N+1 Singer, to consult with certain of the Group’s ZDP Shareholders to ascertain their views. There was strong support for an option that would enable ZDP Shareholders to roll over all or some of their existing investment, in a tax efficient manner, into new zero dividend preference shares issued by the Group.

The purpose of the Circular is to explain the Proposals and the actions required to be taken in order for ZDP Shareholders to make their Election in respect of the Proposals. The Board, which has been advised by N+1 Singer, believes that the Proposals are in the best interests of Shareholders as a whole and of ZDP Shareholders as a class. In providing its advice, N+1 Singer has taken into account the commercial assessments of the Board.

ZDP Shareholders are recommended to make an Election for the Option(s) they would prefer in respect of their Existing ZDP Shares. The Form of Election need only be completed, or a TTE

Instruction submitted, as appropriate, by ZDP Shareholders who wish to make a full or partial election for New ZDP Shares pursuant to the Rollover Option. If ZDP Shareholders wish to receive the Cash Option, no action needs to be taken.

  1. The Proposals

4.1 Options available to ZDP Shareholders

Under the Proposals, PEWT Securities will be wound up on 31 December 2015. ZDP Shareholders

who are on the Register as at 5.00 p.m. on 11 December 2015 will be entitled to elect:

  1. to rollover some or all of their investment into New ZDP Shares issued by PEWT Securities 2020,
  2. a newly incorporated subsidiary of the Parent (the “Rollover Option”); and/or
  3. (ii) to receive cash in the liquidation in respect of all or part of their investment in PEWT Securities (the “Cash Option”).

ZDP Shareholders may make different Elections in respect of different parts of their holdings of Existing ZDP Shares, as suits their personal investment requirements.

The default option under the Scheme will be the Cash Option, meaning that a ZDP Shareholder who, in respect of all or part of his or her holding of Existing ZDP Shares, fails to submit a valid Form of Election or a valid TTE Instruction, as appropriate, by the due date or submits a Form of Election which has not been duly completed or an invalid TTE Instruction, will be deemed to have elected for the Cash Option in respect of such holding.

Subject to paragraph 9 of Part 4 of the Circular, Overseas Shareholders will be deemed to have elected for the Cash Option in respect of their entire holding of Existing ZDP Shares.

If the number of New ZDP Shares which would be issuable pursuant to the Scheme as a result of giving full effect to Elections for the Rollover Option would exceed the Maximum Issue Size, then the number of New ZDP Shares issuable pursuant to the Scheme shall be scaled back in the manner set out in paragraph 14 of Part 4 of the Circular.

4.2 Benefits of the Proposals

The Proposals offer ZDP Shareholders the option of receiving their Final Capital Entitlement in cash or, if they prefer, the opportunity to roll over all or part of their capital entitlement into New ZDP Shares issued by the Group. ZDP Shareholders who may be subject to UK capital gains tax or corporation tax on gains on their investment in PEWT Securities should generally be able to roll over their investment into PEWT Securities 2020 without crystallising an immediate charge to UK capital gains tax or corporation tax on gains (as to which, please see the discussion at paragraph 2 of Part 5 of the Circular).

The choice between the Options available under the Proposals will be a matter for each ZDP Shareholder to decide and will be influenced by their individual circumstances and investment objectives. ZDP Shareholders should, before making any Election, read carefully the information on the Options in the Circular and the accompanying Prospectus in relation to PEWT Securities 2020 and the New ZDP Shares.

Shareholders who are in any doubt as to the contents of the Circular or as to the action to be taken should immediately seek their own personal financial advice from their independent professional adviser authorised under the Financial Services and Markets Act 2000.

4.3 Features of the proposed capital structure and the New ZDP Shares

In planning the proposed capital structure of the Group, the Directors have had regard to the requirement to maintain a balance between, on the one hand, the objective of providing a competitive yield and security of repayment for the New ZDP Shareholders and, on the other hand, the objective of providing Ordinary Shareholders with a high level of income coupled with capital growth over the long-term.

The New ZDP Shares will be issued by PEWT Securities 2020, a newly formed subsidiary of the Parent. The number of New ZDP Shares that may be issued under the Issue is limited to the Maximum Issue Size. On the assumption that Gross Assets on 11 December 2015 are £75.9 million, which were the Gross Assets as at the Latest Practicable Date, and the Maximum Issue Size is achieved, then it is expected that following completion of the Scheme and the Placing there will be 26,684,796 New ZDP Shares in issue.

The ordinary shares of PEWT Securities 2020 are unlisted and are all held by the Parent. The New ZDP Shares will have a repayment date of 30 November 2020 and will effectively rank as to capital in priority to the Ordinary Shares (as is the case with the Existing ZDP Shares, holders of Ordinary Shares will be, in effect, entitled to the net revenue profits of the Group (including accumulated revenue reserves) in priority to the repayment of the 2020 Final Capital Entitlement). The objective of PEWT Securities 2020 is to repay the 2020 Final Capital Entitlement on the 2020 ZDP Repayment Date.

The New ZDP Shares are designed to provide a pre-determined level of capital growth equivalent to a gross redemption yield of 4.75 per cent. per annum based on the issue price of a New ZDP Share of 100p. The initial capital entitlement of 100p per New ZDP Share will be increased from Admission at a daily compound rate to the 2020 ZDP Repayment Date, being 30 November 2020 on which PEWT Securities 2020 is expected to be wound up. Subject to the Group having sufficient assets at the time and assuming the Scheme is effective on 31 December 2015, the 2020 Final Capital Entitlement of a New ZDP Share will be 125.6519p. The capital entitlement of the New ZDP Shares will rank behind the Group’s other liabilities but ahead of the capital entitlement of the Ordinary Shareholders (holders of Ordinary Shares being entitled to the net revenue profits of the Group in priority to the repayment of the 2020 Final Capital Entitlement).

The New ZDP Shares will be admitted to a standard listing on the Official List and traded on the London Stock Exchange’s main market for listed securities. Further information on the New ZDP Shares, including the rights attaching to them and certain undertakings given by the Group for the benefit of the New ZDP Shareholders, are set out in the Prospectus accompanying the Circular.

4.4 Intra-Group arrangements

PEWT Securities 2020 will not hold any of the Group’s portfolio of investments, which will continue to

be held by the Parent.

In order for PEWT Securities 2020 to have sufficient assets to repay the 2020 Final Capital Entitlement on the 2020 ZDP Repayment Date (or the accrued capital entitlement of New ZDP Shares at an earlier date, if required), the Parent and PEWT Securities 2020 have entered into arrangements whereby the assets of the Parent will effectively be made available to meet the repayment entitlements of the New ZDP Shares.

The Parent has entered into the New Undertaking Agreement with PEWT Securities 2020 by which the Parent has undertaken to contribute (by way of gift, capital contribution or otherwise) such amount as will result in PEWT Securities 2020 having sufficient assets to satisfy the then current capital entitlement or, as the case may be, the 2020 Final Capital Entitlement of the New ZDP Shares on the 2020 ZDP Repayment Date or any earlier winding up of PEWT Securities 2020. The Parent has also agreed to meet all of the running costs of PEWT Securities 2020.

The Parent has given certain undertakings for the benefit of PEWT Securities 2020 and the New ZDP

Shareholders whilst the Parent remains liable to make any payment under the New Undertaking Agreement.

In addition, pursuant to the New Undertaking Agreement, PEWT Securities 2020 has agreed to lend to the Parent all of the proceeds of the Placing (and any net proceeds pursuant to the ZDP Placing

Programme (further details of which are set out at paragraph 4.7 below)) and an amount equal to the value of the assets (other than the Rollover Option Undertaking described in paragraph 4.5 below) received by it from PEWT Securities pursuant to the terms of the Scheme.

The arrangements outlined above will effectively result in all of the Group’s net assets being available to meet the repayment entitlements of the New ZDP Shares. The repayment entitlements of the New

ZDP Shares will effectively rank in priority to the capital entitlement of the Ordinary Shares, although they will be subordinated to any bank borrowings the Group may incur (although it is the Parent’s policy not to employ any long-term gearing other than by way of the issue of zero dividend preference shares) and other creditors from time to time. As is the case with the Existing ZDP Shares, holders of Ordinary Shares will be entitled to the net revenue profits of the Group in priority to the repayment of the 2020 Final Capital Entitlement.

The terms of the agreements referred to above are summarised in paragraph 9 of Part 8 of the Prospectus. The provisions of the articles of association of PEWT Securities 2020 are summarised in paragraph 4 of Part 8 of the Prospectus. The rights attached to the New ZDP Shares are also summarised in Part 3 of the Circular.

4.5 Operation of the Scheme

If the Scheme proceeds, before any assets are transferred to PEWT Securities 2020 under the Scheme or set aside to pay ZDP Shareholders who have or are deemed to have elected for the Cash Option, the Liquidators will set aside sufficient assets in the Liquidation Fund to meet all estimated current and future, actual and contingent liabilities and costs which PEWT Securities has agreed to pay.

After provision for liabilities (if any) as described above has been made in the Liquidation Fund, the assets of PEWT Securities will be appropriated into two pools, the ZDP Cash Pool and the ZDP Rollover Pool, at the Effective Date. The appropriation of the assets of PEWT Securities will be on the basis of the value attributable to Elections for the Cash Option and the value attributable to Elections for the Rollover Option. The remaining assets of PEWT Securities will form part of the Liquidation Fund.

The only material asset of PEWT Securities is the Existing Undertaking Agreement, by which the Parent has undertaken to contribute (by way of gift, capital contribution or otherwise) such amount as will result in PEWT Securities having sufficient assets to satisfy the then current or, as the case may be, Final Capital Entitlement of the Existing ZDP Shares on 31 December 2015 or any earlier winding up of PEWT Securities. PEWT Securities has no material liabilities other than the Final Capital Entitlement of ZDP Shareholders.

Accordingly, the split of assets into the Liquidation Fund, Cash Pool and Rollover Pool will be achieved by way of terminating and restating the Existing Undertaking Agreement, as at the Effective Date, such that the undertaking contained therein is split into two new undertakings:

  1. an undertaking from the Parent to contribute such amount as will result in PEWT Securities having sufficient assets to satisfy the aggregate Final Capital Entitlements of all those ZDP Shareholders electing for the Cash Option and all other liabilities of PEWT Securities (the “PEWT Securities Undertaking”); and
  2. an undertaking from the Parent to contribute such amount as will result in PEWT Securities having sufficient assets to satisfy the aggregate Final Capital Entitlements of all those ZDP Shareholders electing for the Rollover Option (the “Rollover Option Undertaking”).

On the Effective Date, the Liquidators will transfer the assets in the ZDP Rollover Pool (the only material asset of which is expected to be the Rollover Option Undertaking) to PEWT Securities 2020. In consideration for such transfer, New ZDP Shares will be issued fully paid at a subscription price of 100p to ZDP Shareholders with “A” rights who have elected for New ZDP Shares.

The transfer of the ZDP Rollover Pool will be carried out in accordance with the terms of the Transfer Agreement. Further details of the Transfer Agreement are set out in paragraph 1 of Part 5 of the Circular. The terms of the Rollover Option Undertaking provide that PEWT Securities shall be entitled to assign the Rollover Option Undertaking to PEWT Securities 2020 in connection with the Scheme. Further details of the Rollover Option Undertaking are set out in paragraph 9 of Part 8 of the Prospectus.

The ZDP Cash Pool (the only material asset of which is expected to be the PEWT Securities Undertaking) will be used to pay the Final Capital Entitlements of ZDP Shareholders with “B” rights who have elected, or are deemed to have elected, for the Cash Option.

Any remaining assets of PEWT Securities in the Liquidation Fund will be paid in cash to the Parent as holder of the ordinary shares of PEWT Securities.

4.6 The Maximum Issue Size and the Placing

The maximum number of New ZDP Shares that may be issued under the Issue is the Maximum Issue Size.

If the number of New ZDP Shares which would be issuable pursuant to the Scheme as a result of giving full effect to Elections for the Rollover Option would exceed the Maximum Issue Size, then the number of New ZDP Shares issuable pursuant to the Scheme shall be scaled back in the manner set out in paragraph 14 of Part 4 of the Circular.

To the extent that Elections for the Rollover Option under the Scheme do not require such maximum number of New ZDP Shares to be issued to ZDP Shareholders, it is intended that the excess may be issued pursuant to the Placing.

N+1 Singer will use its reasonable endeavours to procure subscribers for the balance of New ZDP Shares up to the Maximum Issue Size. No commission will be paid by the Group to any placee in connection with the Placing, which is not underwritten.

ZDP Shareholders seeking to roll over their investment into New ZDP Shares will be allocated New ZDP Shares in preference to any subscriptions from investors under the Placing.

A summary of the placing agreement entered into among the Parent, the Manager, PEWT Securities 2020 and N+1 Singer is set out in paragraph 9 of Part 8 of the Prospectus.

4.7 The Placing Programme

Following completion of the Scheme (and any Placing), and pursuant to the ZDP Placing Programme, the directors of PEWT Securities 2020 may issue New ZDP Shares to satisfy demand for the New ZDP Shares and to grow the assets of the Group.

No issuance of New ZDP Shares will be permitted which would result in:

  1. in respect of the period to 31 March 2016 (and only to the extent that the Maximum Issue Size has not been exceeded at the relevant time pursuant to the Scheme, the Placing and any previous issues under the ZDP Placing Programme), those New ZDP Shares in issue immediately thereafter having a Cover of not less 1.45 times immediately following the issue; and
  2. in respect of all other issues, a reduction in Cover from the level immediately prior to the issue unless a minimum Cover of 1.8 times post the issue is maintained.

Further details of the ZDP Placing Programme are set out in the Prospectus accompanying the Circular.

4.8 The General Meetings and winding-up of PEWT Securities

The implementation of the Proposals requires the passing of the Resolutions at the First General Meeting and the Second General Meeting. Neither ZDP Shareholders nor Ordinary Shareholders are entitled to attend or vote at either General Meeting. The Parent, as the holder of all of the ordinary shares in the capital of PEWT Securities, shall be the only person entitled to attend and vote at the General Meetings. The Parent has indicated its intention to vote in favour of the Resolutions at each General Meeting and so it is expected that the Proposals will be implemented.

At the First General Meeting, special resolutions will be proposed to: (i) re-classify the rights attaching to the Existing ZDP Shares such that those ZDP Shareholders who elect, or are deemed to elect, to rollover into New ZDP Shares will hold shares with “A” rights giving them the right to receive New ZDP

Shares on a winding-up of PEWT Securities and those ZDP Shareholders who elect, or are deemed to elect, to receive cash will hold Existing ZDP Shares with “B” rights giving them the right to receive cash on the winding-up of PEWT Securities; (ii) authorise the implementation of the Scheme by the Liquidators including an application to delist the Existing ZDP Shares from the Official List of the UK

Listing Authority; and (iii) amend the Articles for the purposes of the implementation of the Scheme. The amendments to the Articles are set out in full in the Appendix to the Circular.

The First General Meeting has been convened for 10.00 a.m. on 21 December 2015 to be held at the offices of Stephenson Harwood LLP. Neither ZDP Shareholders nor Ordinary Shareholders may attend or vote at the First General Meeting.

At the Second General Meeting, special resolutions will be proposed to: (i) wind up PEWT Securities voluntarily; (ii) appoint the Liquidators; and (iii) confer certain powers on the Liquidators.

The Second General Meeting has been convened for 9.00 a.m. on 31 December 2015 to be held at the offices of Stephenson Harwood LLP. Neither ZDP Shareholders nor Ordinary Shareholders may attend or vote at the Second General Meeting.

4.9 Dealings in Existing ZDP Shares and Reclassified Shares

It is advised that the last day for trading in the Existing ZDP Shares on the London Stock Exchange for normal settlement (in order to enable settlement prior to the Record Date) will be 8 December 2015. As from 24 December 2015, dealings shall be for cash settlement only and, in the case of certificated Existing ZDP Shares, will only be registered if documents of title are delivered immediately.

The Record Date, being the date for determining which ZDP Shareholders are entitled to participate in the Scheme, is 5.00 p.m. on 11 December 2015. Application for the amendment of the Official List to reflect the Reclassified Shares will be made, and it is expected that such amendment will become effective, and that dealings in such Shares will commence, at 8.00 a.m. on 30 December 2015. For the purposes of dealings in the Reclassified Shares, all ZDP Shareholders will be treated as certificated holders. It is expected that dealings on the London Stock Exchange in the Reclassified Shares will be suspended at 8.00 a.m. on 31 December 2015.

If ZDP Shareholders dispose of their Existing ZDP Shares otherwise than through the London Stock Exchange, they must make their own arrangements with the other parties concerned as regards entitlement under the Scheme.

4.10 Share certificates and payment of cash entitlements

Certificates will not be issued in respect of Reclassified Shares. Existing certificates in respect of Existing ZDP Shares will cease to be of value for any purpose, and any existing credit of Existing ZDP Shares in any stock account in CREST will be cancelled, following the despatch to ZDP Shareholders of share certificates in respect of the New ZDP Shares issued under the Scheme (or, in the case of ZDP Shareholders previously holding their Existing ZDP Shares in uncertificated form, the appropriate stock accounts in CREST of such ZDP Shareholders are credited with their respective entitlements to New ZDP Shares) or, as the case may be, their cash entitlements.

If the Scheme becomes effective, cheques in respect of the Final Capital Entitlements due to ZDP Shareholders holding their Existing ZDP Shares in certificated form who have elected or are deemed to have elected for the Cash Option are expected to be despatched by the Receiving Agent on 8 January 2016. All ZDP Shareholders who hold their Existing ZDP Shares in CREST will receive payment of their cash entitlement through the CREST system.

All documents and remittances despatched to or from ZDP Shareholders or their appointed agents in connection with the Scheme and liquidation of PEWT Securities will be despatched at Shareholders’ own risk and no acknowledgement will be issued for receipt of Forms of Election or TTE Instructions.

4.11 Overseas Shareholders

ZDP Shareholders who are Overseas Shareholders will not receive a Form of Election and will (unless the Directors determine otherwise) receive their Final Capital Entitlement in cash in respect of their entire holding of Existing ZDP Shares unless they have satisfied the Directors that it is lawful for New ZDP Shares to be issued to them under any relevant overseas laws and regulations.

4.12 Taxation

The attention of ZDP Shareholders is drawn to paragraph 2 of Part 5 of the Circular which sets out a general guide to certain aspects of current UK taxation law and HMRC published practice.

  1. Costs of the Proposals

On the assumption that (i) the Gross Assets on 11 December 2015 are £75.9 million, which were the Gross Assets as at the Latest Practicable Date, (ii) the number of Existing ZDP Shares in issue as at the Effective Date is 22,446,099, which is the number of Existing ZDP Shares in issue as at the date of the Circular, and (iii) all ZDP Shareholders are eligible to, and do, elect for the Rollover Option, then the costs of implementing the Proposals are expected to be approximately £484,000 (equivalent to approximately 1.82 per cent. of the Net Asset Value as at the Latest Practicable Date). These costs will be borne by the Parent and so will effectively be borne by the Ordinary Shareholders.

If the Proposals are not implemented, the costs of the Proposals will, in any event, be borne by the Parent and so will effectively be borne by the Ordinary Shareholders.

  1. Conditions to the Proposals

The Scheme which provides for, and which will effect, the Rollover Option, is conditional upon:

  1. the passing of the Resolutions to be proposed at the First General Meeting (or any adjournment thereof) and upon any conditions of such Resolutions being satisfied and the passing of the Resolutions to be proposed at the Second General Meeting (or any adjournment thereof);
  2. the UK Listing Authority agreeing to admit to the standard segment of the Official List the Reclassified Shares and the London Stock Exchange agreeing to admit the Reclassified Shares to trading on its main market for listed securities, and, subject only to allotment thereof, the New ZDP Shares to be issued pursuant to the Issue also being agreed to be so admitted; and
  3. the Minimum Issue Size being achieved.

The Parent, as the holder of all of the ordinary shares in the capital of PEWT Securities, shall be the only person entitled to attend and vote at the General Meetings. The Parent has indicated its intention to vote in favour of the Resolutions at each General Meeting and so it is expected that the Proposals will be implemented.

  1. Certain considerations relating to the Proposals

The implementation of, and an Election for one or more Options under, the Proposals carry with them certain considerations for ZDP Shareholders as described below:

  • ZDP Shareholders will need to consider the tax consequences of the Proposals, based on their particular circumstances. As described in paragraph 2 of Part 5 of the Circular, UK resident ZDP Shareholders who elect for, or who are deemed to elect for the Cash Option (including as a result of scaling back of elections under the Scheme), will generally be treated as a making a disposal of their Existing ZDP Shares and may incur a tax liability as a result. Similarly, ZDP Shareholders who elect to roll over some or all of their entitlement into New ZDP Shares may incur tax liabilities on any subsequent disposal of their New ZDP Shares. Shareholders who are in any doubt as to the tax consequences of the Proposals should seek independent professional advice. ZDP Shareholders who elect to roll over their investment into New ZDP Shares should not generally be treated as making a disposal for the purposes of UK taxation of chargeable gains as a result of doing so;
  • elections for New ZDP Shares may be subject to scaling back under the Scheme. This may result in ZDP Shareholders receiving part of their Final Capital Entitlements under the Scheme in cash rather than in New ZDP Shares;
  • the default option under the Scheme is for a ZDP Shareholder to receive the Final Capital Entitlement in cash. ZDP Shareholders making no Election under the Scheme will therefore receive cash;
  • the New ZDP Shares are designed to be held over the long-term and may not be suitable as shortterm investments. There can be no guarantee that any appreciation in the value of the Group’s investments will occur and investors may not get back the full value of their investment. The past performance of the Group is not a guide to the future performance of the Group. On the assumption that (i) Gross Assets on 31 December 2015 are £75.9 million, which were the Gross Assets as at the Latest Practicable Date; and (ii) the Maximum Issue Size is achieved, then it is expected that following completion of the Scheme and the Placing, Gross Assets would need to fall by 31.0 per cent. in total, and 7.3 per cent. annually, in order for the New ZDP Shares not to receive their full 2020 Final Capital Entitlement of 125.6519p per New ZDP Share on 30 November 2020;
  • there can be no guarantee that the investment objective of the Parent will be achieved. A failure to meet the investment objective may have a material adverse effect on the ability of the Parent to meet its obligations under the New Undertaking Agreement and thereby on the ability of PEWT Securities 2020 to pay the 2020 Final Capital Entitlement in full on the 2020 ZDP Repayment Date; and
  • the ability of PEWT Securities 2020 to pay such amounts is dependent on it having sufficient cash resources to meet such obligation and therefore on the Parent meeting its obligation under the New Undertaking Agreement to contribute such funds to PEWT Securities 2020 so as to ensure PEWT Securities 2020 has sufficient assets at the relevant time.
  1. Action to be taken

Details of the action to be taken by ZDP Shareholders in relation to the Proposals are set out in Part 2 of the Circular.

It is important that ZDP Shareholders read Part 2 carefully and, if they wish to make a full or partial election for New ZDP Shares, where their Existing ZDP Shares are held in certificated form, return their Forms of Election or, where their Existing ZDP Shares are held in uncertificated form, submit their TTE Instructions so as to be received no later than 1.00 p.m. on 11 December 2015.

Failure to return or submit a Form of Election or a TTE Instruction or the return or submission of a Form of Election or a TTE Instruction which is not validly completed will result in the relevant ZDP Shareholder being deemed to have elected for the Cash Option.

  1. No recommendation

The Board considers that the Proposals set out in the Circular are in the best interests of Shareholders as a whole and of ZDP Shareholders as a class. However, the Directors make no recommendation to ZDP Shareholders as to whether or not they should elect to receive New ZDP Shares or cash under the Scheme. The benefits of the Options under the Scheme to ZDP Shareholders will depend on their own personal, financial and tax circumstances and their investment objectives. Accordingly, you are recommended to read carefully all the information in the Circular and in the Prospectus before making any election. The choice between the Options is a matter for each ZDP Shareholder to decide.

ZDP Shareholders in any doubt as to the action they should take should consult an appropriately qualified independent adviser, authorised under the Financial Services and Markets Act 2000, without delay.

Yours faithfully

Geoffrey Burns

Chairman

Expected timetable of principal events

Publication of Prospectus of PEWT Securities 2020 plc 20 November 2015
Latest time and date for receipt of the Forms of Election or TTE Instructions from ZDP Shareholders 1.00 p.m. on 11 December 2015
Record Date for entitlement to the Scheme 5.00 p.m. on 11 December 2015
Latest time and date for commitments under the Placing 5.00 p.m. on 18 December 2015
Announcement of the results of the Elections 14 December 2015
Announcement of the results of the First General Meeting of PEWT Securities 21 December 2015
Date from which dealings in Existing ZDP Shares should only be for cash settlement and immediate delivery of documents of title 24 December 2015
Reclassification of Existing ZDP Shares into Reclassified Shares 8.00 a.m. on 30 December 2015
Dealings in Reclassified Shares suspended 8.00 a.m. on 31 December 2015
Announcement of the results of the Second General Meeting of PEWT Securities 31 December 2015
Publication of the results of the Scheme and the Placing 31 December 2015
If the Scheme becomes unconditional:
Scheme Effective Date 31 December 2015
Cancellation of the Existing ZDP Shares from the Official List 8.00 a.m. on 4 January 2016
Admission and commencement of dealings in New ZDP Shares of PEWT Securities 2020 (ISIN GB00BYP98L62) 8.00 a.m. on 4 January 2016
CREST stock accounts expected to be credited in respect of New ZDP Shares As soon as practicable after 8.00 a.m. on 4 January  2016
Despatch of share certificates in respect of New ZDP Shares 8 January 2016
Consideration expected to be despatched to ZDP Shareholders who elect or are deemed to elect for the Cash Option 8 January 2016

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