Proposed Placing and Rights Issue

30th Apr 2009 07:29



PR 17/09

7.00am, Thursday 30 April 2009

 

NOT FOR RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES , AUSTRALIA, JAPAN OR SOUTH AFRICA.

30 April 2009

DSG international plc ("DSGi" or the "Group")

PROPOSED PLACING AND RIGHTS ISSUE AND RENEGOTIATION OF BANK FACILITIES

The Board of Directors of DSGi today announces a fully underwritten Placing and Rights Issue to raise gross proceeds of £310.6 million. In conjunction with this, the Board today announces the renegotiation to the terms of the Group's bank facilities and letters of credit.

Highlights

Proposed refinancing:

 

 

Current trading and prospects*:

In a difficult trading environment we continue to focus on margins. In the second half of the 2008/09 Financial Year (26 weeks to 18 April 2009):

	Total revenue change (translated into pounds sterling)		Total revenue change (in local currency)		Like for like growth
Division	(%)(1)		(%)(1)		(%)(1)
UK & Ireland
UK & Ireland Electricals	(10)		(11)		(12)
UK Computing	(14)		(14)		(14)
Nordics	2		(8)		(10)
Other International
Southern Europe	3		(14)		(15)
Central Europe	(6)		(24)		N/A
e-commerce	25		7		7
Total Group	(3)		(10)		(11)

Group gross margin percentage was up 0.1 per cent. compared to the same period in the prior financial year. In the 14 week period to 18 April 2009, the Group gross margin percentage was up 1 per cent. Compared to the same period in the prior financial year.

The Renewal and Transformation plan announced in May 2008, has already shown early progress and is driving 11 to 65 per cent. average gross profit uplift across the different formats of stores reformatted in the UK for the 22-week period ended 18 April 2009.

Cost savings of at least £95 million have been achieved in the 2008/09 Financial Year to date.

* For all definitions refer to "Current trading and prospects" section of the attached full announcement

John Browett, Chief Executive of DSGi, said

"The Renewal and Transformation plan is delivering and we remain extremely encouraged by the results. The continued rollout of the plan is essential to the success of DSGi's business and an integral part of DSGi achieving its medium terms target of 3-4% of return on sales. 

"We believe that the combination of the share issue and the amended bank facilities announced today strengthen the capital structure of the business and provide the group with the flexibility to invest in the Renewal and Transformation Plan at a faster pace that positions the Group to emerge from the consumer downturn in a stronger position. The refinancing also leaves us well placed to provide reassurance to our trade suppliers and their credit insurers with regard to the Group's capital position." 

Rothschild is acting as financial adviser and joint sponsor to DSGi with respect to the Placing and Rights Issue. Citi and JPMorgan Cazenove are acting as joint bookrunners and joint sponsors.

Analyst presentation

A meeting for analysts and investors will be hosted by John Browett, DSGi Chief Executive. The details of the meeting are as follows:

Venue: The Lincoln Centre, 18-19 Lincoln's Inn Fields

Date & Time : 30 April 2009 at 9:30a.m. (London time)

Registration will commence at 9:15 a.m. (London time)

Expected timetable

Each of the times and dates in the table below is indicative only and may be subject to change.

		2009
Expected publication of the prospectus		30 April 2009
Expected despatch of the prospectus		1 May 2009
Extraordinary General Meeting		10 am on 18 May 2009
Dealings in Placing Shares, fully paid, commence on the London Stock Exchange		19 May 2009
Dealings in New Shares, nil paid, commence on the London Stock Exchange		19 May 2009
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters		11.00 a.m. on 3 June 2009
Dealings in New Shares, fully paid, commence on the London Stock Exchange		by 8.00 a.m. on 4 June 2009

Notes:
Subject to certain restrictions relating to Shareholders with registered addresses outside the United Kingdom, details of which are set out in the prospectus.
The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by the Company with agreement of the Joint Bookrunners, in which event details of the new times and dates will be notified to the FSA, the London Stock Exchange and, where appropriate, Qualifying Shareholders and Placees.
References to times in this timetable are to London times unless otherwise stated.

This summary should be read in conjunction with the full text of this Announcement.

A prospectus containing details of the Placing and Rights Issue and the amendments to the bank facilities is expected to be posted to shareholders shortly and will be available on the Group's website, www.dsgiplc.com

Contacts

For further information, please contact:

DSG international plc:

David Lloyd-Seed, Group Director of Communications +44 (0)87 0850 3333

Mark Webb, Head of Media Relations +44 (0)87 0850 3333

Rothschild (Financial Adviser and Joint Sponsor):

Nigel Higgins  +44 (0)20 7280 5000

Majid Ishaq +44 (0)20 7280 5000

Nigel Himsworth +44 (0)20 7280 5000

Citi (Joint Bookrunner and Joint Sponsor):

David James +44 (0)20 7986 4000 

Andrew Seaton +44 (0)20 7986 4000 

Ian Hart +44 (0)20 7986 4000

J.P. Morgan Cazenove (Joint Bookrunner and Joint Sponsor):

John Muncey +44 (0)20 7588 2828

Jonathan Wilcox +44 (0)20 7588 2828

Luke Bordewich +44 (0)20 7588 2828

Brunswick Group:

Susan Gilchrist +44 (0)20 7404 5959

Shareholder enquires

If you have questions, please telephone the Shareholder Helpline on the numbers set out below. This Shareholder Helpline is available from 9.00 a.m. to 5.00 p.m. London time, Monday to Friday (except bank holidays). Calls to this number are charged at 10 pence per minute if calling from a BT landline; other telephone providers' charges may vary.

Shareholder Helpline telephone numbers

0871 664 0321 (inside the United Kingdom) or (+44) 20 8639 3399 (outside the United Kingdom)

Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in the prospectus and information relating to the Company's register of members and is unable to give advice on the merits of the Placing or the Rights Issue or provide financial, tax or investment advice.

A prospectus relating to the Placing and Rights Issue ("Prospectus") is expected to be published on 30 April 2009 and posted to Shareholders by 1 May 2009. The Prospectus will give further details of the placing shares ("Placing Shares"), the nil paid rights ("Nil Paid Rights"), the fully paid rights ("Fully Paid Rights") and the new ordinary shares ("New Shares") (together, the "Securities") to be offered pursuant to the Placing and Rights Issue.

A copy of the Prospectus when published will be available from the registered office of DSGi at Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7TG and at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ during usual business hours on any weekday (Saturdays, Sundays and Bank Holidays excepted) up to 3 June 2009.

This announcement is not a Prospectus but an advertisement and investors should not subscribe for any Securities referred to in this announcement except on the basis of the information contained in the Prospectus.

This announcement does not constitute an offer to sell, or a solicitation of an offer to subscribe for any Securities being issued in connection with the Placing and Rights Issue, in any jurisdiction in which such offer or solicitation is unlawful.

These materials are not for distribution, directly or indirectly, in or into the United States, Australia, Japan, or South Africa. These materials do not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States.

The Securities have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act") or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of any of the Securities in the United States.

The Securities have not been approved or disapproved by the US Securities and Exchange Commission, any state's securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Securities or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence.

The Placing Shares, the Nil Paid Rights, the Fully Paid Rights and the New Shares will not be registered under the securities laws of Australia, Japan or South Africa and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within such jurisdictions except pursuant to an applicable exemption from and in compliance with any applicable securities laws. There will be no public offer in any of Australia, Japan or South Africa.

Citi, J.P. Morgan Cazenove Limited, J.P. Morgan Securities Ltd., Rothschild, Barclays Bank PLC, BNP PARIBAS, HSBC Bank plc and RBS Hoare Govett Limited, each of which is authorised and regulated in the United Kingdom by the FSA, are acting exclusively for the Company and no one else in connection with the Placing and Rights Issue and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing and Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Placing and Rights Issue or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Citi, J.P. Morgan Cazenove Limited, J.P. Morgan Securities Ltd., Rothschild, Barclays Bank PLC, BNP PARIBAS, HSBC Bank plc and RBS Hoare Govett Limited by the FSMA, each of Citi, J.P. Morgan Cazenove Limited, J.P. Morgan Securities Ltd., Rothschild, Barclays Bank PLC, BNP PARIBAS, HSBC Bank plc and RBS Hoare Govett Limited accepts no responsibility whatsoever for, and makes no representation or warranty, express or implied, in relation to, the contents of this announcement (including its accuracy, completeness or verification) or any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Placing Shares, the Placing, the Nil Paid Rights, the Fully Paid Rights, the New Shares or the Rights Issue. Each of Citi, J.P. Morgan Cazenove Limited, J.P. Morgan Securities Ltd., Rothschild, Barclays Bank PLC, BNP PARIBAS, HSBC Bank plc and RBS Hoare Govett Limited accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability, whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of this announcement or any such statement.

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

The distribution of this announcement and/or the Prospectus and/or the Provisional Allotment Letters and/or the transfer of Placing Shares, Nil Paid Rights, Fully Paid Rights and/or New Shares into jurisdictions other than the United Kingdom may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Certain statements made in this announcement constitute forward-looking statements. Forward-looking statements can be identified by the use of words such as "may", "could", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "seek", "continue" or similar expressions and relate to, among other things, DSGi's results of operations, financial condition, liquidity, financial covenants, prospects, growth, strategies and the industries in which DSGi operates. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. Factors that might cause forward-looking statements to differ materially from actual results, include among other things, general economic conditions in the European Union, in particular in the United Kingdom, and in other countries in which DSGi has business activities or investments; the market position of DSGi or its subsidiaries; earnings, financial position, cash flows, liquidity, financial covenants, return on capital and operating margins of DSGi; anticipated investments and capital expenditures of DSGi; the impact of the Renewal and Transformation Plan; DSGi's relationship with its trade creditors; the inability of DSGi to hedge certain risks economically; and the potential exposure of DSGi to various types of market risks, such as foreign exchange rate risk, interest rate risk, liquidity risk and credit risk.

These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Company and are difficult to predict, that may cause actual results to differ materially from any future results or developments expressed or implied from the forward-looking statements.

These forward-looking statements speak only as of the date of this announcement. The information and opinions contained in this announcement are subject to change without notice and, subject to compliance with applicable law, DSGi assumes no responsibility or obligation to update publicly or review any of the forward-looking statements contained herein and expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in DSGi's expectations with regard thereto or any change in events, conditions or circumstances on which such statement is based.

Proposed Placing and Rights Issue 

1. Introduction

The Board of DSGi announces today a Placing and Rights Issue to raise gross proceeds of approximately £310.6 million of which approximately £100.0 million will be raised in the Placing and £210.6 million from the Rights Issue.

The Placing comprises in aggregate 333,333,333 Placing Shares. Placees will subscribe for the Placing Shares at a price of 30 pence per Placing Share. This represents a 20 per cent. discount to the closing price of 37.5 pence per Ordinary Share on 29 April 2009 (being the last business day before the announcement of the term of the Placing and Rights Issue).

The Rights Issue, is being made on the basis of 5 New Shares for each 7 Eligible Shares at 14 pence per New Share. The Issue Price represents:

a 40 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the Placing Price of 30 pence per Placing Share;

a 49 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the closing price of 37.5 pence per Ordinary Share on 29 April 2009 (being the last business day before the announcement of the Placing and Rights Issue);

a 48 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the closing price of 37.5 pence per Ordinary Share on 29 April 2009, as adjusted to take account of the Placing at 30 pence per Placing Share; and

a 63 per cent. discount to the closing price of 37.5 pence per Ordinary Share on 29 April 2009.

The Placing has been fully underwritten by Citigroup Global Markets U.K. Equity Limited and J.P. Morgan Securities Ltd. and the Rights Issue has been fully underwritten by Citigroup Global Markets U.K. Equity Limited, J.P. Morgan Securities Ltd. and the Joint Lead Managers on, and subject to, the terms of the Underwriting Agreement.

In addition, the Company has reached agreement with its lending banks with respect to amendments to the terms of the Company's Original Credit Facilities which are effective immediately. However, these amendments will lapse if the Placing and Rights Issue do not complete.

The Placing and Rights Issue are conditional on the passing by Shareholders of the Resolutions at an Extraordinary General Meeting of the Company being convened at 10.00 a.m. on 18 May 2009. 

2. Background to and reasons for the Placing and Rights Issue

DSGi is one of Europe's largest specialist electrical and computing retailers and operates from more than 1,300 stores in the UK, Ireland and 14 other European countries using a number of established brands, which include Currys and PC World in the UK and Elkjøp in the Nordic region. DSGi also operates a growing internet retail business through websites such as PIXmania, which operates in 26 countries, Dixons.co.uk and other websites using the Group's retail brands.

DSGi's objective is to provide customers with an unbeatable combination of value, choice and service through a full service retail model across a wide range of sales channels as well as by the provision of product support services. The Group benefits from a leading position in a number of the countries in which it operates, and management believes that DSGi derives competitive advantage from its: full-service customer offer, including store networks, internet operations, delivery and installation and after-sales services; scale in purchasing and supply chain; established supplier relationships; and strong management team.

Following John Browett joining DSGi as Chief Executive in December 2007, management conducted a strategic review of the business and established the Renewal and Transformation plan described below in order to improve the performance of the business, better address customer needs and improve returns for Shareholders.

The plan, announced in May 2008, has already shown early progress:

63 stores have so far been reformatted in the UK and the Nordic region;

11 to 65 per cent. average gross profit uplift across the different formats of stores reformatted in the UK for the 22-week period ended 18 April 2009;

management continues to be confident that the targeted three to four year payback on reformatted stores will be achieved (equivalent to 25 to 33 per cent. cash return on investment per annum);

turn around of the Italian business is showing progress;

over 20,000 colleagues in the UK have completed the first phase of the new service training programme; and

cost savings of at least £95 million have been achieved in the 2008/09 Financial Year to date.

The Board believes that the implementation of this plan is essential to the future success of DSGi's business as well as its ability to achieve its target of 3 to 4 per cent. return on sales in the medium term and accordingly is in the best interests of Shareholders. The plan to date is achieving success despite being implemented during one of the most difficult consumer and retail environments of recent decades.

This difficult consumer and retail environment has placed significant pressure on the Group's sales, profits and cash flows and as a result, management is currently assuming negative like-for-like revenue for the Group (excluding stores reformatted under the Renewal and Transformation plan and the internet) until the second half of the 2010/11 Financial Year. This, together with the cost of restructuring the Company, higher finance costs and pressures on working capital due to structural changes to the credit environment, has contributed to an increase in the Group's indebtedness.

Against this background, DSGi has today announced a Placing and Rights Issue to raise gross proceeds of £310.6 million, as well as amendments to its credit facilities, which are effective immediately (but such amendments will lapse if the Placing and Rights Issue does not complete), in order to provide the Group with:

the financial resources and flexibility to invest in the Renewal and Transformation plan at a pace that positions the Group to emerge from the consumer downturn in a stronger position;

a strengthened capital base which has allowed the Group to secure revised debt financing arrangements (which will revert to the Original Credit Facilities if the Placing and Rights Issue do not complete) in order to provide the Group with financial headroom; and

a stronger financial base to provide comfort to the Group's trade suppliers and their credit insurers with regard to the Group's working capital position.

Financing the Renewal and Transformation plan

The strategic review of DSGi's business and its operations carried out by management identified that much more could be done to meet customers' needs better. The shopping experience in DSGi's stores did not match that of the best of DSGi's international competitors, and DSGi had not taken sufficient action to address the development of growing competition from internet e-tailers and mass merchants.

Following this review, a Renewal and Transformation plan was set out on 15 May 2008. Progress on the Renewal and Transformation plan to date has been encouraging, in spite of the recent deteriorating macroeconomic conditions and worsening consumer confidence in the UK. As at 18 April 2009, the reformatted stores were outperforming the rest of the UK store portfolio when taken as a whole. In addition, action is being taken to reduce costs, improve stock turn and simplify processes across the Group. Given the promising results of the Renewal and Transformation plan to date, the Board proposes that the plan be implemented more widely.

A summary of each of the five key elements of the Renewal and Transformation plan and progress made to date is set out in paragraph 5 below.

Providing the Group with a stronger capital base

The Company and its lending banks with immediate effect have revised the terms of the Company's Original Credit Facilities pursuant to the Amended Revolving Credit Facility Agreement and Amended Letter of Credit Facilities Agreements. If the Placing and Rights Issue do not proceed these amendments will lapse and the Amended Credit Facilities will revert to the Original Credit Facilities. Under the Amended Credit Facilities, the borrowing limit of £400 million available under the Original Revolving Credit Facility and its maturity date of October 2011 remain the same as does the aggregate amount available under the Original Letter of Credit Facilities. The principal amendments are:

the maturity date of the Amended Letter of Credit Facilities has been extended by approximately 16 months to 31 December 2010;

the interest margin has been increased;

additional guarantees are required to be given by certain subsidiaries of the Company;

the financial covenants have been amended and a new capital expenditure covenant added;

additional mandatory prepayment events have been included in the Amended Revolving Credit Facility Agreement; and

additional representations, covenants and events of default have been included.

The Company believes that these amendments will provide it with significant covenant and liquidity headroom under these facilities throughout the period of the amended agreements. The amended agreements also include restrictions on the Company in relation to share or bond buybacks and dividends as well as certain restrictions on capital expenditure, including with respect to the Renewal and Transformation plan. However, management does not believe such restrictions on capital expenditure will affect the implementation of the Renewal and Transformation Plan. Further details on the dividend restrictions are set out in paragraph 6 below. 

The Group's £300 million 6.125 per cent. Guaranteed Bonds, which mature in November 2012 and are not subject to any financial covenant tests, will remain in place. 

Working capital funding

Over recent years DSGi has typically aimed to match stock inflows and outflows to achieve zero paid days stock on average over the financial year. This reflects the fact that DSGi's short-term working capital funding is typically a balance of funding through credit facilities and supplier credit. To manage their credit exposure from supplying products to DSGi and other retailers in the sector, suppliers in most developed markets have utilised credit insurance. Credit insurers have reduced the cover available in the retail sector, and starting in the second half of 2008 to a significant extent for suppliers of DSGi. If suppliers are unwilling or unable to take credit risk themselves or find alternative credit sources, they may choose to take actions that could have a detrimental impact on DSGi. Management has spent considerable time discussing this issue with a majority of its suppliers and believe they continue to be supportive of the Group. In addition, although as of the date of the prospectus its payment terms with suppliers have not changed, in certain cases, it has made early payments to suppliers outside their terms to deal with issues arising as a result of changes to the credit insurance market. Management believes that its strengthened capital base following completion of the Placing and Rights Issue should reduce the need for any such further payments.

In management's view the reduction in credit insurance capacity, at least in part, represents a structural rather than temporary change. Whilst this reduction may have a negative impact on payment terms for DSGi, management believes that this will be partially offset by improvements the Group is making in its stock management and stockturn over the medium term.

The impact of the current economic downturn on financial performance, together with the cost of restructuring the Company, higher finance costs and pressures on working capital due to structural changes to the credit environment, has contributed to an increase in the Group's indebtedness. The Group has already identified a number of opportunities to mitigate the impact of these developments including the closure of loss-making stores, the reduction of stock levels within the Group and the suspension of dividend payments. However, the continued uncertainty over the economic outlook has made it necessary for the Group to take steps to improve the capital structure of the Group to sustain the business through the current economic cycle.

The Group's credit facilities, together with an adequate capital structure, are therefore vital to give comfort to DSGi's suppliers (and their credit insurers, where appropriate).

3. Use of proceeds

The Directors intend that an amount equivalent to the net proceeds of the Placing and Rights Issue will be used to invest in the Renewal and Transformation plan and to support the Group's working capital requirements. To comply with the terms of entering into the Amended Revolving Credit Facility and Amended Letter of Credit Facilities, the net proceeds of the Placing and Rights Issue will be used to prepay and/or cash collateralise, but not cancel, these facilities. The amount available to the Company under these facilities will remain unchanged following the Placing and Rights Issue.

4. Current trading and prospects

4.1 Performance during the second half of the 2008/9 Financial Year to 18 April 2009

In the second half of the 2008/09 Financial Year (26 weeks to 18 April 2009), total Group revenue, as compared to the same period in the prior financial year was down 3 per cent., down 10 per cent. in local currencies and down 11 per cent. on a like-for-like basis. Group gross margin percentage was up 0.1 per cent. compared to the same period in the prior financial year. Group gross margin percentage in the 14 weeks to 18 April 2009 was up 1.1 per cent. compared to the same period in the prior financial year.

In the second half of the 2008/09 Financial Year (26 weeks to 18 April 2009):

	Total revenue change (translated into pounds sterling)		Total revenue change (in local currency)		Like for like growth
Division	(%)(1)		(%)(1)		(%)(1)
UK & Ireland
UK & Ireland Electricals	(10)		(11)		(12)
UK Computing	(14)		(14)		(14)
Nordics	2		(8)		(10)
Other International
Southern Europe	3		(14)		(15)
Central Europe	(6)		(24)		N/A
e-commerce	25		7		7
Total Group	(3)		(10)		(11)

(1) All percentages calculated against the same period in the prior financial year.

As of 7 March 2009, the net financial indebtedness of the Group was £502.6 million which included £295.1 million drawn down under the Group's revolving credit facility and £13.0 million outstanding under overdraft facilities. Drawdowns under the Group's credit facilities and the Group's net indebtedness level vary significantly over the course of the financial year owing to the seasonal nature of the business and the related uneven cycle of payments and receipts. The Group's indebtedness level is also impacted by, among other things, quarterly rent payment dates in the UK (and, to a lesser extent, rent payment dates in other jurisdictions), trading patterns, payments to suppliers, patterns of inventory holdings, timing of receipts from customers and timing of spend on major capital and restructuring projects. 

The Group's net debt position at 7 March 2009 and its expected year end net debt position is higher than was anticipated by management. Management believes this is primarily due to:

structural changes in the trade supplier credit environment which have limited DSGi's ability in the 2007/08 Financial Year to repeat historical deferrals of payments of between approximately £130 million - £150 million that previously occurred over its prior financial year end;

one-off early settlement payments to trade suppliers of approximately £40 million - £80 million to assist them in managing their risk;

the decision to delay the sale and lease back of the Jönköping distribution centre in Sweden in the short term; and

interest and hedging costs being approximately £30 million higher than anticipated due to the significant movements in foreign exchange rates.

4.2 Forecast of underlying profit for the year ending 2 May 2009

The Directors forecast that, in the absence of unforeseen circumstances, underlying profit before tax of DSGi for the 52 weeks ending 2 May 2009 will be not less than £42 million and underlying profit before tax less losses before tax from businesses to be closed (Markantalo and PC City Sweden) will be not less than £30 million. The Directors estimate that the Group will have losses before tax from businesses to be closed and net non-underlying charges before tax in the range of £195 million to £215 million over the same period.

4.3 Analysis of non-underlying items

As a result of a significant proportion of these charges relating to asset write offs and business impairments, the incremental cash outflows related to those non-underlying charges is expected to be significantly less than the charges themselves and in the range of £35 million to £55 million, with the majority of this having already been incurred in the 2008/09 Financial Year.

An explanation of how the Group defines underlying and non-underlying performance measures will be set out in the prospectus.

4.4 Settlement of dispute with HMRC

As announced on 27 February 2009, DSGi has been in a dispute with HMRC regarding certain intra group trading arrangements in the years 1997 to 2005. DSGi has reached an agreement in principle with HMRC regarding settlement of this dispute as well as certain other matters. The settlement amount agreed in principle exceeds the provision currently held and therefore a non-underlying income tax charge of £52.7 million is expected to be recorded in the annual accounts for the 2008/09 Financial Year. The key elements of the agreement in principle are such that a small proportion of the liability is not currently payable and the remainder will be offset against the income tax receivable which the Group holds on its balance sheet such that no cash payment is to be made in respect of this offset. The income tax receivable, which represents income tax paid in excess of that due, amounted to £58.8 million at the last audited balance sheet date of 3 May 2008.

5. Update on Renewal and Transformation plan

The five key elements of the Renewal and Transformation plan are as follows:

a. Focus on the customer: Providing better value, choice and service to customers DSGi has implemented a series of innovations aiming to address customer needs more effectively, including:

over 20,000 colleagues in Currys and PC World completing a comprehensive service training programme to provide improved in-store service and to help customers choose the most suitable mix of products, services, and accessories to meet their needs;

improvements to the logistics infrastructure (including home delivery and product installation) and after-sales service, for example through the introduction of Currys' next day delivery in three-hourly time slots;

enhancements to The TechGuys support services business, resulting in an increase in the annual sales of services in PC World;

improvements to product ranges across all of DSGi's UK and Italian store brands in order to provide customers wider and clearer choices of products at competitive prices; and

incentive and remuneration schemes for UK store colleagues being adapted as new store formats are rolled out in order to support improvements in customer service.

b. Transform the Business: Improving the in-store retail operations of the business through better service, product range and store format

Renewed store formats have been trialled in the UK in Currys and PC World, combining upgrades in product range and in-store service with improved physical layout, display and in-store communication, to offer a significantly improved customer experience.

As at 7 March 2009, in the UK, 13 Currys superstores, 4 CurrysDigital stores, 41 PC World superstores and one trial combined Currys and PC World store have been reformatted, and a new format Currys Megastore has been opened.

The Board believes that this transformation is working across all the new store formats, with average gross profit uplifts across the different formats of UK stores of between 11 per cent. and 65 per cent. for the 22-week period ended 18 April 2009.

On the basis of the gross profit uplifts achieved to date, and taking into account the investment and costs involved in reformatting stores, DSGi plans to roll out these renewed formats across the UK, to capture the benefits of a superior customer experience as rapidly as possible.

The Group expects capital expenditure to be between £160 million and £170 million for the 2009/10 Financial Year and to be between £185 million and £200 million for the 2010/11 Financial Year. This expenditure includes that connected with the roll out of reformatted stores in the UK and the Nordic region and, to a lesser extent, new formats in the Nordic region. Such reformats comprise between 140 and 150 stores in the 2009/10 Financial Year between 210 and 215 in the 2010/11 Financial Year. As DSGi has previously stated, the average cash payback on the total capital investment spent on reformatting stores in the UK and Ireland is targeted to be 3 to 4 years, which is equivalent to a cash return on investment of 25 per cent. to 33 per cent.

c. Focus the portfolio on winning positions: Exploiting the potential in DSGi's market-leading electrical and computing retail operations in the UK & Ireland, the Nordic region and Greece and DSGi's strong and growing internet presence in Europe, introducing a programme to reduce losses and turn around DSGi's operations in Italy and reviewing DSGi's businesses in Spain and Central Europe.

DSGi is the leading electrical and computing retailer in the UK, Ireland, the Nordic region and Greece by market share. DSGi is continuing to invest in these businesses in order to retain these market-leading positions despite the economic downturn. In the Nordic region, management is implementing a plan to eliminate the losses incurred by the operations of PC City in Sweden and Markantalo in Finland which will involve the closure of existing stores or conversion to other brands in the Group.

In Italy, the first stage of a comprehensive turnaround plan is being implemented, involving store closures, cost reductions, improved stock management and the integration of PC City within UniEuro. Management estimates that approximately €60 million to €75 million of cash in total over the next three financial years will be required before the Italian store portfolio can begin to achieve profitability.

A strategic review of PC City in Spain has resulted in a decision to restructure that business. A programme is being put in place to reduce costs and to minimise cash outflow until the Spanish market recovers. Management believes that following the implementation of the restructuring, PC City's underlying cash losses in Spain will be materially reduced over the next two years.

Management is continuing to review its strategic options for the Central European business.

d. Win on the internet: Utilising the skills within PIXmania and exploiting the Group-wide multi-channel opportunity.

DSGi has already achieved over £1 billion of sales over the internet across Europe in the 2008/09 Financial Year to date and management is aiming to achieve a return of 2-3 per cent. per annum on internet sales in the medium term. The PIXmania e-merchant platform is a leading internet sales engine for electrical and computing products in Europe. Management believes that there are benefits to the Group as a whole which can be achieved through leveraging the PIXmania e-merchant platform across its brands and as a result, this platform is expected to be rolled out to Dixons.co.uk during the course of the 2009/10 Financial Year. This will provide customers with improved functionality, easier navigation, better product information and "accessory attachment", which is the display of relevant bundles of goods near a core product. In addition, system changes will be made so that PIXmania can benefit from access to DSGi's logistics infrastructure, particularly in the UK, enabling it to reduce its cross border stock and pricing risk on sales of products.

e. Reduce costs: Simplifying the business to allow DSGi to improve the shopping experience for customers, making it easier for staff to perform their roles and reducing costs for the Company.

DSGi is focused on re-engineering the operational processes within the Group in order to reduce costs for the Company, improve the service provided to customers, and assist colleagues in operating the business effectively.

Cost savings of at least £95 million have been achieved in the 2008/09 Financial Year to date.

Management believes that there remains a significant opportunity for productivity improvements within the Group and are targeting these improvements to deliver £50 million per annum in cost savings in each of the next 4 years through efficiency initiatives in logistics, services, head office administration and in-store processes, such as ensuring that the Group gets deliveries and repairs right first time.

Process improvement initiatives have already contributed to reductions in levels of stock held by the Group of between 15 and 20 per cent. year-on-year in local currencies when measured by total value of stock held across the Group at the end of each week from 10 January 2009 to 18 April 2009. Management believes that there is an opportunity to reduce stock by approximately £80-£130 million over the medium term through: improved forecasting and ordering accuracy; range improvements; optimised store deliveries; improvements to store display; better allocation of store stock; in store fulfilment processing for faster delivery-to-shelf; improved handling of returns; and a new clearance policy incorporating dynamic pricing. 

6. Dividends and dividend policy

The Board believes that DSGi's existing financial resources should be used to ensure liquidity and to invest in the Renewal and Transformation plan, which is showing early and encouraging signs of delivering changes in DSGi's performance. Accordingly, in addition to implementing the Placing and Rights Issue and renegotiating DSGi's credit facilities to provide financial flexibility, the Board has decided not to pay a dividend for the 2008/09 Financial Year.

The Amended Revolving Credit Facility Agreement and the Amended Letter of Credit Facilities Agreements prohibit payments of dividends to Shareholders by the Company in respect of the 2008/09 Financial Year and the 2009/10 Financial Year. The same agreements allow the Company to pay a dividend in respect of the 2010/11 Financial Year, provided that it does not exceed one half of the retained profits for that year available for distribution to Shareholders, that there is no default under the Amended Credit Facilities and that certain financial covenant thresholds are met. 

Subject to the above, the Board aims to resume dividend payments when possible and appropriate, consistent with a sustained recovery in DSGi's operational and financial performance.

7. Details of the Placing

The Company has examined a number of options for raising equity and has concluded that the Placing and Rights Issue allow existing Shareholders to participate in the Rights Issue on a pre-emptive basis while providing the Group with the flexibility to raise the desired quantum of equity capital.

Placees will subscribe for the Placing Shares at a Placing Price of 30 pence per Placing Share. The Placing comprises in aggregate 333,333,333 Placing Shares (representing approximately 19 per cent. of DSGi's existing ordinary share capital) and will therefore raise gross proceeds of £100.0 million. The Placing Shares will represent approximately 9 per cent. of the Company's issued Ordinary Shares immediately following completion of the Placing and Rights Issue.

The Placing Price represents a 20 per cent. discount to the closing price of 37.5 pence per Ordinary Share on 29 April 2009 (being the last business day before the announcement of the Placing and Rights Issue). The discount was determined following discussions with both existing and potential new shareholders. The Placing is subject to Shareholder approval.

The Placing is conditional upon, amongst other things, fulfilment of the following conditions:

a. the passing without amendment of the Resolutions;

b. the Underwriting Agreement not having been terminated in accordance with its terms prior to Placing Admission; and 

c. Placing Admission becoming effective.

Applications will be made for the Placing Shares to be admitted to listing on the Official List and to trading on the London Stock Exchange's Main Market. It is expected that Placing Admission will become effective and dealings in the Placing Shares will commence at 8.00 a.m. on 19 May 2009, being the first business day following the passing of the Resolutions.

The Placing Shares will, when issued and fully paid, rank pari passu in all respects with the Ordinary Shares, including the right to receive all dividends or other distributions declared, made or paid after the date of their issue. The Placees will be able to participate in the Rights Issue in respect of their Placing Shares in the same manner as Qualifying Shareholders.

The Placing is fully underwritten by Citi Global Markets U.K Equity Limited and J.P. Morgan Securities Ltd., pursuant to, and subject to, the terms of the Underwriting Agreement. 

8. Principal terms of the Rights Issue

Pursuant to the Rights Issue it is proposed that 1,504,125,429 New Shares be issued by way of a rights issue to Qualifying Shareholders (other than, subject to certain exceptions, to Shareholders with a registered address, or who are located, in the United States or one of the Excluded Territories) and Placees at 14 pence per New Share, payable in full on acceptance by no later than 11.00 a.m. on 3 June 2009. The Rights Issue is expected to raise gross proceeds of approximately £210.6 million. The Issue Price represents:

a 40 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the Placing Price of 30 pence per Placing Share;

a 49 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the closing price of 37.5 pence per Ordinary Share on 29 April 2009 (being the last business day before the announcement of the Placing and Rights Issue);

a 48 per cent. discount to the theoretical ex-rights price of an Ordinary Share, when calculated by reference to the closing price of 37.5 pence per Ordinary Share on 29 April 2009, as adjusted to take account of the Placing at 30 pence per Placing Share; and

a 63 per cent. discount to the closing price of 37.5 pence per Ordinary Share on 29 April 2009.

The Rights Issue will be made on the basis of:

5 New Shares at 14 pence per New Share for every 7 Eligible Shares

held by Qualifying Shareholders at the close of business on the Record Date or for which Placees subscribe pursuant to the Placing.

Entitlements to New Shares will be rounded down to the nearest whole number and fractional entitlements will not be allotted to Shareholders but will be aggregated and sold in the market for the benefit of the Company. Holdings of Existing Shares in certificated and uncertificated form and holdings under different designations will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue.

The Rights Issue is fully underwritten by Citigroup Global Markets U.K. Equity Limited, J.P. Morgan Securities Ltd. and the Joint Lead Managers pursuant to, and subject to the terms of, the Underwriting Agreement. The principal terms of the Underwriting Agreement will be set out in the prospectus.

The Rights Issue will result in 1,504,125,429 New Shares being issued (representing approximately 85 per cent. of the existing issued share capital and 42 per cent. of the enlarged issued share capital immediately following completion of the Placing and Rights Issue).

The Rights Issue is conditional, amongst other things, upon:

(i)  the Underwriting Agreement having become unconditional in all respects save for the condition relating to Admission and not having been terminated in accordance with its terms;

(ii)  Admission becoming effective by not later than 8.00 a.m. on 19 May 2009 (or such later time and date as may be agreed pursuant to the Underwriting Agreement may agree); and

(iii)  the passing without amendment of the Resolutions.

The New Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued Ordinary Shares, including the right to receive dividends or distributions made, paid or declared after the date of their issue. Application will be made to the UK Listing Authority and to the London Stock Exchange for the New Shares to be admitted to the Official List and to trading on the London Stock Exchange. It is expected that Admission will occur and that dealings in the New Shares (nil paid) on the London Stock Exchange will commence at 8.00 a.m. on 19 May 2009.

9. Structure of the Placing and Rights Issue

The Placing and Rights Issue has been structured in a way that is expected to have the effect of realising distributable reserves approximately equal to the net proceeds of the Placing and Rights Issue less the par value of the Placing Shares and New Shares issued by the Company. The Company and the Newco Subscriber have agreed to subscribe for ordinary shares in Newco. Monies received from Placees subscribing for Placing Shares pursuant to the Placing, and from Qualifying Shareholders, Placees or renouncees taking up New Shares under the Rights Issue, after deducting expenses and commissions, shall be paid to an account with the Receiving Agent which has been set up specifically for the purpose. These proceeds will be used by the Newco Subscriber to subscribe for certain redeemable preference shares in Newco.

The Company will allot and issue the Placing Shares and New Shares to those persons entitled thereto in consideration of the Newco Subscriber transferring its holdings of ordinary shares and redeemable preference shares in Newco to the Company on the satisfaction of certain conditions. Accordingly, instead of receiving cash as consideration for the issue of the Placing Shares and the New Shares, at the conclusion of the Placing and Rights Issue the Company will own the entire issued share capital of Newco whose only asset will be its cash reserves, which will represent an amount approximately equivalent to the net proceeds of the Placing and Rights Issue. The Company will be able to utilise this amount by redeeming the various classes of redeemable preference shares it will hold in Newco or alternatively, during any interim period prior to such redemption, by procuring that Newco lends the monies it holds to the Company.

The Company may elect to implement the Placing and Rights Issue without using the structure described above if it deems it to be in the Company's interests to do so.

10. Extraordinary General Meeting

The Extraordinary General Meeting will be held on 18 May 2009 at 10.00 a.m. at the offices of J.P. Morgan, 60 Victoria Embankment, London. A Form of Proxy will be enclosed with the prospectus.

The Extraordinary General Meeting is being held for the purpose of considering and, if thought fit, passing three Resolutions.

 (i) The first resolution, which is an ordinary resolution, will grant the Directors authority to allot the Placing Shares and the New Shares for the purposes of the Placing and Rights Issue. This authority will expire at the end of the Company's next annual general meeting.

(ii) If the first resolution is passed, the second resolution, which is a special resolution, will empower the Directors to allot on a non-preemptive basis, to the extent applicable, the Placing Shares and the New Shares in connection with the Placing and Rights Issue. This power will expire at the end of the Company's next annual general meeting.

(iii) The third resolution, which is an ordinary resolution, will approve the terms of the Placing (including the discount at which the Placing Shares are being issued).

11. Action to be taken in respect of the Rights Issue

If you are a Qualifying Non-CREST Shareholder, other than, subject to certain exceptions, a Shareholder with a registered address in the United States or one of the Excluded Territories, you will be sent a Provisional Allotment Letter giving you details of your Nil Paid Rights by post on or about 18 May 2009. If you are a Qualifying CREST Shareholder, you will not be sent a Provisional Allotment Letter. Instead, Qualifying CREST Shareholders (other than, subject to certain exceptions, those with registered addresses in the United States or one of the Excluded Territories) will receive a credit to their appropriate stock accounts in CREST in respect of the Nil Paid Rights as soon as practicable after 8.00 a.m. on 19 May 2009. It is expected that the Placing Shares and Nil Paid Rights to be issued to Placees will be credited to the CREST account of one or more of the Joint Bookrunners as agent for such Placees.

If you sell or have sold or otherwise transferred all of your Ordinary Shares held (other than ex-rights) in certificated form before 19 May 2009, please forward the prospectus and any Provisional Allotment Letter, if and when received, at once to the purchaser or transferee or the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee, except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to, the United States and the Excluded Territories.

If you sell or have sold or otherwise transferred all or some of your Ordinary Shares (other than ex-rights) held in uncertificated form before the Ex-Rights Date, a claim transaction will automatically be generated by Euroclear UK which, on settlement, will transfer the appropriate number of Nil Paid Rights to the purchaser or transferee.

If you sell or have sold or otherwise transferred only part of your holding of Ordinary Shares (other than ex-rights) held in certificated form before the Ex-Rights Date, you should refer to the instruction regarding split applications to be contained in the prospectus and in the Provisional Allotment Letter.

The latest time and date for acceptance and payment in full in respect of the Rights Issue is expected to be 11.00 a.m. on 3 June 2009, unless otherwise announced by the Company. The procedure for acceptance and payment will be set out in the prospectus and, in respect of Qualifying Non-CREST Shareholders other than, subject to certain exceptions, Shareholders with a registered address in the United States or one of the Excluded Territories, in the Provisional Allotment Letter.

For Qualifying Non-CREST Shareholders, other than, subject to certain exceptions, Shareholders with a registered address, or located, in the United States or one of the Excluded Territories, the New Shares will be issued in certificated form and will be represented by definitive share certificates, which are expected to be despatched by no later than 11 June 2009 to the registered address of the person(s) entitled to them.

For Qualifying CREST Shareholders, (other than, subject to certain exceptions, those with registered addresses in the United States or one of the Excluded Territories) the Registrars will instruct CREST to credit the stock accounts of Qualifying CREST Shareholders with their entitlements to New Shares. It is expected that this will take place by 8.00 a.m. on 4 June 2009.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsor regarding the action to be taken in connection with the prospectus and the Rights Issue.

If you are in any doubt as to the action you should take, you should immediately seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the FSMA or, if you are outside the United Kingdom, by another appropriately authorised independent financial adviser.

  

DEFINITIONS

The following expressions have the following meaning unless the context otherwise requires:

2007/08 Financial Year	the 53 weeks ended 3 May 2008
2008/09 Financial Year	the 52 weeks ending 2 May 2009
2009/10 Financial Year	the 52 weeks ending 1 May 2010
2010/11 Financial Year	the 52 weeks ending 30 April 2011
Admission	the admission of the New Shares (nil paid and fully paid) to the Official List becoming effective in accordance with the Listing Rules and the admission of such shares (nil paid and fully paid) to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with the Admission and Disclosure Standards
Amended Credit Facilities	the Amended Revolving Credit Facility and the Amended Letter of Credit Facilities
Amended Letter of Credit	the amended letter of credit facilities made available pursuant to the
Facilities	Amended Letter of Credit Facilities Agreements
Amended Letter of Credit	the letter of credit facilities agreements dated 29 March 2005 and
Facilities Agreements	26 February 2007 (each as amended from time to time)
Amended Revolving Credit	the revolving credit facility entered into pursuant to the Amended
Facility	Revolving Credit Facility Agreement
Amended Revolving Credit	the amended revolving credit facility agreement dated 13 October 2006 (as amended from time to time)
Board	the board of directors of the Company
business day	a day (excluding Saturdays and Sundays or public holidays in England and Wales) on which banks generally are open for business in London for the transaction of normal business
Certificated or In certificated form	where a share or other security is not in uncertificated form
Citi	Citigroup Global Markets Limited or Citigroup Global Markets U.K. Equity Limited, or both of them, as the context requires
Company	DSG international plc
CREST	the relevant system, as defined in the CREST Regulations (in respect of which Euroclear UK is the operator as defined in the CREST Regulations)
CREST sponsor	a CREST participant admitted to CREST as a CREST sponsor
CREST sponsored member	a CREST member admitted to CREST as a sponsored member
Directors	the Executive Directors and Non-Executive Directors
DSGi	the Company or the Group, as the context may require
Eligible Shares	the Existing Shares together with the Placing Shares for which Placees have subscribed
EU or European Union	the European Union
Euroclear UK	Euroclear UK & Ireland Limited, the operator of CREST
Ex-Rights Date	the date following which the Ordinary Shares trade ex-rights, being 19 May 2009
Excluded Territories and each an Excluded Territory	the Commonwealth of Australia, its territories and possessions, Japan and the Republic of South Africa
Existing Shares	the Ordinary Shares in issue as at the Record Date
Extraordinary General Meeting	the extraordinary general meeting of DSGi to be held at the offices of J.P. Morgan, 60 Victoria Embankment, London on Monday, 18 May 2009 at 10.00 a.m.
Financial Services Authority or FSA	the Financial Services Authority of the United Kingdom
Form of Proxy	the form of proxy to be used at the Extraordinary General Meeting
FSMA	the Financial Services and Markets Act 2000, as amended
Fully Paid Rights	rights to acquire the New Shares, fully paid
Group or DSGi Group	the Company and its subsidiaries from time to time
HMRC	HM Revenue & Customs
Issue Price	14 pence per New Share
Joint Bookrunners	Citigroup Global Markets U.K. Equity Limited and J.P. Morgan Cazenove Limited
Joint Lead Managers	Barclays Bank PLC, BNP PARIBAS, HSBC Bank plc, and RBS Hoare Govett Limited
Joint Sponsors	Citigroup Global Markets Limited, J.P. Morgan Cazenove Limited and N.M. Rothschild & Sons Limited
Joint Underwriters	Citigroup Global Markets U.K. Equity Limited and J.P. Morgan Securities Ltd.
Letter of Credit Facilities	the letter of credit facilities agreements dated (i) 29 March 2005, as
Agreements	amended by an amendment and restatement agreement dated 24 June 2008 and an amendment letter dated 27 March 2009 and (ii) 26 February 2007, as amended by an amendment and restatement agreement dated 24 June 2008 and an amendment letter dated 27 March 2009
Listing Rules	the Listing Rules made by the FSA under Part VI of the FSMA
London Stock Exchange	London Stock Exchange plc
Newco	Springway (Jersey) Limited
Newco Subscriber	J.P. Morgan Cazenove Limited or a third party to whom the rights and obligations of J.P. Morgan Cazenove Limited (as subscriber for shares in Newco) are novated
New Shares	the 1,504,125,429 Ordinary Shares to be allotted and issued pursuant to the Rights Issue
Non-CREST Shareholder	a Shareholder who does not hold their Ordinary Shares in CREST
Nordic region	Norway, Sweden, Denmark (including Greenland and the Faroe Islands), Finland and Iceland
Official List	the Official List of the FSA pursuant to Part VI of the FSMA
Ordinary Shares or Shares	the ordinary shares of 2.5 pence each in the share capital of the Company (including, if the context requires, the Placing Shares and/or New Shares)
Original Credit Facilities	the Original Revolving Credit Facility and the Original Letter of Credit Facilities
Original Letter of Credit Facilities	the letter of credit facilities made available pursuant to the Letter of Credit Facilities Agreements
Original Revolving Credit Facility	the revolving credit facility made available pursuant to the Revolving Credit Facility Agreement
Overseas Shareholders	Shareholders with registered addresses outside the United Kingdom or who are citizens or residents of countries outside the United Kingdom
Placees	those persons who have agreed to subscribe for Placing Shares
Placing	the placing of Placing Shares
Placing Admission	the admission of the Placing Shares to the Official List becoming effective in accordance with the Listing Rules and the admission of such shares to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with the Admission and Disclosure Standards
Placing Price	30 pence per Placing Share
Placing Shares	the 333.3 million new Ordinary Shares which are the subject of the Placing
pounds sterling or £	the lawful currency of the United Kingdom
Provisional Allotment Letter	the renounceable provisional allotment letter expected to be sent to Qualifying Non-CREST Shareholders in respect of the New Shares to be provisionally allotted to them pursuant to the Rights Issue
Qualified Institutional Buyer or QIB	has the meaning given in Rule 144A under the US Securities Act
Qualifying CREST Shareholders	Qualifying Shareholders holding Ordinary Shares in uncertificated form in CREST
Qualifying Non-CREST Shareholders	Qualifying Shareholders holding Ordinary Shares in certificated form
Qualifying Shareholders	holders of Ordinary Shares on the register of members of the Company at the Record Date
Receiving Agent	Capita Registrars
Record Date	close of business on 15 May 2009
Registrars	Capita Registrars
Resolutions	the resolutions to be proposed at the Extraordinary General Meeting in connection with the Placing and Rights Issue
Rights	rights to the New Shares pursuant to the Rights Issue
Rights Issue	the proposed issue by way of rights of New Shares to Qualifying Shareholders and Placees and, in the case of Qualifying Non-CREST Shareholders, in the Provisional Allotment Letter
Rothschild	N.M. Rothschild & Sons Limited
SEC or US Securities and Exchange Commission	the US government agency having primary responsibility for enforcing the federal securities laws and regulating the securities industry/stock market
Shareholder	a holder of Ordinary Shares
stock account	an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited
uncertificated or in Uncertificated form	recorded on the relevant register of the share or security concerned as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
Underwriting Agreement	the placing and rights issue underwriting and sponsors' agreement dated 30 April 2009 between the Company, the Joint Sponsors, the Joint Bookrunners, the Joint Underwriters and the Joint Lead Managers relating to the Placing and Rights Issue
United Kingdom or UK	the United Kingdom of Great Britain and Northern Ireland
United States or US	the United States of America, its territories and possessions, any state of the United States and the District of Columbia
US Securities Act	the United States Securities Act of 1933, as amended

ENDARIEBLBXKZBZBBQ

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