Pre-Annual General Meeting Information • Mar 22, 2013
Pre-Annual General Meeting Information
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If you are in any doubt about the action you should take, you are recommended immediately to seek your own financial advice from your stockbroker, bank manager, auditor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000. If you have sold or otherwise transferred all of your shares in Spirax-Sarco Engineering plc please pass this document and the accompanying documents (but not the personalised Form of Proxy) as soon as possible to the purchaser or transferee or to the agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee.
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The Notice convening the Annual General Meeting appears at the end of this document.
Forms of Proxy for use at the Annual General Meeting should be completed and returned to the Company's Registrar, Equiniti, Aspect House, Spencer Road, Lancing, BN99 6DA as soon as possible and, in any event, so as to arrive not less than 48 hours before the time of the Meeting. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so. Please refer to pages 12 to 13 for full details.
At the Annual General Meeting shareholders will be invited to vote on a resolution by resolution basis by way of a polled vote. The results will be announced instantaneously using the Equiniti 'Vote Now' polling system. Immediately after the Annual General Meeting, the results are also announced on the Group's website, www.spiraxsarcoengineering.com, and the London Stock Exchange.
Application will be made to the UK Listing Authority for the new Ordinary shares arising from the proposed share consolidation to be admitted to the Official List of the UK Listing Authority and to the London Stock Exchange for the new Ordinary shares to be admitted to trading on the London Stock Exchange's market for listed securities. It is expected that dealings in existing Ordinary shares will continue until 4.30 pm on Friday, 31st May 2013 and that admission of the new Ordinary shares will become effective and dealings for normal settlement will commence at 8.00 am on Monday, 3rd June 2013.
| Part | Heading | Page |
|---|---|---|
| Part I | Letter from the Chairman | 1 |
| Part II | Additional Information about the Special Dividend and Share Consolidation |
5 |
| Part III | Notice of Annual General Meeting | 8 |
| Expected Timetable | 2013 |
|---|---|
| Existing Ordinary shares marked ex-entitlement to the Final Dividend of 37.0p per existing Ordinary share |
Wednesday, 17th April |
| Record date for entitlement to the Final Dividend | 5.00 pm on Friday, 19th April |
| Latest time and date for receipt of Forms of Proxy from shareholders | 2.00 pm on Tuesday, 7th May |
| Annual General Meeting | 2.00 pm on Thursday, 9th May |
| Payment of Final Dividend by cheque or BACS | Friday, 17th May |
| Record date for entitlement to the Special Dividend of 100.0p per existing Ordinary share and the share consolidation |
5.00 pm on Friday, 31st May |
| Existing Ordinary shares marked ex-entitlement to the Special Dividend | Monday, 3rd June |
| Effective time and date of the share consolidation and the date CREST accounts credited with new Ordinary shares |
8.00 am on Monday, 3rd June |
| Commencement of dealings in new Ordinary shares | 8.00 am on Monday, 3rd June |
| Payment (where applicable) of fractional entitlements by cheque or CREST payment |
Monday, 17th June |
| Despatch (where applicable) of certificates for new Ordinary shares | Monday, 17th June |
| Payment of Special Dividend by cheque or BACS | Wednesday, 3rd July |
Notes:
(1) References to times in this Circular are to London time unless otherwise stated.
(2) If any of the above times or dates should change, the revised times and/or dates will be notified to shareholders by an announcement on the Regulatory Information Service.
(3) All events in the above timetable scheduled to take place after the Annual General Meeting in respect of the Special Dividend and the share consolidation are conditional on the approval by shareholders of Resolution 18 as proposed. The despatch of certificates for new Ordinary shares (where applicable) and the payment of the Special Dividend and fractional entitlements (where applicable) are conditional upon the new Ordinary shares being admitted to the Official List of the UK Listing Authority and being admitted to trading on the London Stock Exchange.
The Shareholder Helpline number is 0871 384 2200 (from within the UK) or +44 121 415 0283 (if calling from outside the UK). Calls to 0871 384 2200 are charged at 8p per minute (excluding VAT) plus network extras. Lines are open from 8.30 am to 5.30 pm (London time) Monday to Friday (except UK public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note that the Shareholder Helpline operators cannot provide advice on the merits of the share consolidation nor give financial, tax, investment or legal advice.
(Registered in England No. 596337)
This Circular accompanies the Annual Report and the Audited Accounts of the Company for the year ended 31st December 2012.
The purpose of this Circular is to explain certain elements of the business to be conducted at the Annual General Meeting, including the ordinary resolutions (numbered 1 to 18) and the special resolutions (numbered 19 to 21).
You will find the Notice of Annual General Meeting of the Company, which is to be held at Spirax-Sarco Engineering plc, Charlton House, Cheltenham, Gloucestershire, GL53 8ER on 9th May 2013 at 2.00 pm, set out in Part III of this Circular on pages 8 to 10.
The receipt and consideration of the Company's Annual Report and Accounts.
In accordance with Section 439 of the Companies Act 2006 (the "2006 Act") your Board is asking for your approval of the Remuneration Report, as set out in the Company's Annual Report and Accounts for the year ended 31st December 2012.
The proposal recommended by the Directors to pay a final dividend of 37.0p per Ordinary share on 17th May 2013 to all shareholders on the register of members at 5.00 pm on 19th April 2013.
The proposal to re-appoint KPMG Audit Plc as the Company's auditor.
The proposal to authorise the Directors to fix the remuneration of KPMG Audit Plc.
Resolutions 6 to 15 deal with the election or re-election (as the case may be) of Directors in accordance with the requirements of the Company's Articles of Association and the UK Corporate Governance Code (Governance Code).
Dr Schoolenberg was appointed as a Director by the Board on 1st August 2012 and accordingly will retire from office but will offer herself for election.
The Governance Code provides for all directors of FTSE 350 companies to be subject to annual election by their shareholders. Accordingly, in keeping with the Board's aim of following best corporate governance practice, all members of the Board are standing for election or re-election.
Details of each of the Directors seeking election or re-election are set out below.
Bill Whiteley BSc, FCMA (64) joined the Group as an independent Non-Executive Director in 2002 and was appointed Chairman in 2009. Until his retirement in 2008 Mr Whiteley was Chief Executive of Rotork plc, where he had been a Director since 1984. He is Chairman of Brammer plc and Hill & Smith Holdings PLC and Senior Independent Director of Renishaw plc. Mr Whiteley has been awarded an honorary Doctorate of Engineering by The University of Bath. He is Chairman of the Nomination Committee.
Mark Vernon BSc (Hons) (60) joined the Group in 2003 as President of the Group's steam business in the US. Mr Vernon was appointed to the Board in 2006, became Chief Operating Officer in 2007 and Group Chief Executive in 2008. Mr Vernon is a Non‑Executive Director of Senior plc and, with effect from February 2013, Liqtech International, Inc. Mr Vernon has had a long career in industrial engineering, serving previously as Group Vice-President of Flowserve's Flow Control Business Unit, Group Vice-President of Durco International and President of Valtek International, a global controls business. He is a member of the Nomination Committee and Chairman of the Risk Management Committee.
Gareth Bullock MA (59) joined the Group as an independent Non-Executive Director in 2005. Mr Bullock has had a career in banking, having retired from the Board of Standard Chartered PLC in 2010, following roles in Technology and Operations, Strategy and North East Asia, he was most recently responsible for Africa, Middle East, Europe and the Americas as well as for the Risk function. He also currently serves as a Non-Executive Director of Tesco PLC and Global Market Group Ltd, and is a trustee of the British Council. He is Chairman of the Remuneration Committee, a member of the Audit and Nomination Committees and Senior Independent Director.
David Meredith FCMA, CGMA (53) joined the Group in 1988 as Group Accountant. Mr Meredith was appointed to the Board as Finance Director in 1992. He trained as an Accountant with Redman Heenan International, a specialist engineering group, and was appointed accountant at their Heenan Drives Limited subsidiary. Mr Meredith later joined English & American Reinsurance Company where he held finance positions prior to joining the Group. He is a member of the Risk Management Committee.
Krishnamurthy Rajagopal FREng, CEng, FIET, FIMechE, FIE, FCMI, PhD (59) joined the Group as an independent Non-Executive Director in 2009. Dr Rajagopal is a Non-Executive Director of WS Atkins plc, Bodycote plc and e2v technologies plc. He also serves as Chairman of UMI3 Ltd. On completing his Doctorate in 1980, he became Manufacturing Systems Manager for Edwards High Vacuum (part of the BOC Group plc) before being appointed Operations Director. Dr Rajagopal was later appointed Managing Director of the Vacuum Technology Division, prior to being named Chief Executive of BOC Edwards in 1998 and Executive Director of the BOC Group plc in 2000. He retired from BOC Group plc in 2006. He is a member of the Audit, Nomination and Remuneration Committees.
Trudy Schoolenberg PhD (54) joined the Group in August 2012 as an independent Non-Executive Director. Dr Schoolenberg most recently served as Vice-President of Global Research & Development at Wartsila Oy, the world leader in land and marine power systems. Prior to that, she worked for 21 years for Royal Dutch Shell plc and held several senior management positions, including Deputy Site Manager and Production Manager of the Shell Pernis refinery in the Netherlands, the largest refinery in Europe, and also served as Head of Strategy for Shell Chemicals. Dr Schoolenberg is currently a Non-Executive Director of COVA, the agency responsible for maintaining the Dutch strategic oil and petrochemical reserves. She is a member of the Audit, Nomination and Remuneration Committees.
Clive Watson B Comm (Acc), ACA, CTA (55) joined the Group as an independent Non-Executive Director in 2009. Mr Watson is an Executive Director and Group Finance Director of Spectris plc. He held several tax and finance roles before joining Black & Decker in 1988 as Director of Tax and Treasury Europe, and was later appointed Vice-President of Business Planning and Analysis in the US. He then joined Thorn Lighting as Group Finance Director before working for Borealis as Chief Financial Officer and Executive Vice-President of Business Support. Mr Watson joined Spectris plc in 2006 as Chief Financial Officer. He is Chairman of the Audit Committee and a member of the Nomination and Remuneration Committees.
Neil Daws CEng, FIMechE (50) joined the Group in the UK in 1978. Mr Daws has wide manufacturing experience within the Group, having held positions in production and design engineering prior to being named as UK Supply Director. Mr Daws was appointed to the Board in 2003 and is now responsible for Asia Pacific and Supply, including the Company's Supply operations in the UK and France, together with the Group's health, safety and environmental matters. He is a member of the Risk Management Committee.
Nick Anderson BSc, MBA (52) joined the Group in 2011 as Director EMEA for the Group's steam specialties business and was appointed to the Board in March 2012. Mr Anderson has wide industry experience and worked for several subsidiaries of the Smiths Group plc. Prior to joining Spirax Sarco, he was Vice-President of John Crane Asia Pacific and, previously, President of John Crane Latin America based in Miami, Florida. Mr Anderson also held senior operations positions with Alcoa Aluminio in Argentina and the Foseco Minsep Group plc in Brazil before joining the Smiths Group plc. He is a member of the Risk Management Committee.
Jay Whalen BA, MBA (56) joined the Group in 1991 as President of Watson Marlow Inc. in the US and was appointed to the Board in March 2012. Mr Whalen was named Sales and Marketing Director of the global Watson Marlow pump business in 2002 and in 2010 was appointed to his current position of President, Watson Marlow Pumps. Prior to joining Watson-Marlow, Mr Whalen was Vice-President Operations for Harvard Apparatus. He is a member of the Risk Management Committee.
The Board has confirmed, following an external performance review conducted by Dr Tracy Long of Boardroom Review Limited, that all Directors standing for election or re-election continue to perform effectively and demonstrate commitment to their roles.
Resolution 16 renews the authority granted to the Directors to allot new shares in accordance with section 551 of the 2006 Act up to a nominal amount of £6,509,192 being 33.33% of the issued Ordinary share capital at 20th March 2013 (being the latest practicable date prior to publication of this Circular). This authority will expire on the date of the next Annual General Meeting or on 8th August 2014, whichever is the earlier. The Directors have no present intention of exercising this authority.
At the Annual General Meeting held in 2012, shareholders authorised the Directors to offer a scrip alternative to any dividend declared or paid in the period up to the date of the Annual General Meeting to be held in 2017, or, if earlier, 14th May 2017. A scrip alternative will not be offered for the financial year ended 31st December 2012, but the Directors consider it prudent to maintain the facility to provide this alternative for shareholders should circumstances alter so as to make a scrip alternative appropriate. In accordance with the Articles of Association, Resolution 17 will be proposed as an ordinary resolution to renew this authority for five years ending on the date of the Annual General Meeting to be held in 2018 or, if earlier, on 8th May 2018, although it is the Directors' intention to renew this authority annually.
The proposal recommended by the Directors for payment of a special dividend and share consolidation.
In light of the strong performance of the Group for the year ended 31st December 2012, and following the Board's review of the Group's balance sheet structure, the Board considers it appropriate to propose a special dividend to shareholders, in addition to the final dividend, and accordingly recommends a cash return to shareholders of approximately £78 million.
The proposed return of cash will be structured as a special dividend of 100.0p per existing Ordinary share and an associated consolidation of existing Ordinary shares on the basis of 26 new Ordinary shares for every 27 existing Ordinary shares. If shareholders approve the special dividend, it will be paid on 3rd July 2013 to those shareholders on the register of members at 5.00 pm on 31st May 2013, with an ex-entitlement date of 3rd June 2013.
As is common when an amount representing a significant proportion of the market capitalisation of a company is returned to shareholders, the Board recommends that the special dividend is combined with a share consolidation. The share consolidation is intended, so far as possible, to maintain the comparability of the Company's share price before and after the special dividend. The total amount of the special dividend is equivalent to approximately 4% of the market capitalisation of the Company as at 20th March 2013 (being the latest practicable date prior to the publication of this Circular).
The effect of the share consolidation will be to reduce the number of Ordinary shares in issue by approximately the same percentage. It is anticipated, therefore, that the market price of each Ordinary share should remain at a broadly similar level following the special dividend and the share consolidation.
Shareholders will still hold the same proportion of the Company's Ordinary share capital as before the share consolidation (subject to any fractional entitlements). Although the new Ordinary shares will have a different nominal value, they will carry equivalent rights under the Articles of Association to the existing Ordinary shares currently in issue. The payment of any fractional amounts arising from the share consolidation will be made separately on 17th June 2013 to the relevant shareholders.
If Resolution 18 is not passed, the special dividend will not be paid and the share consolidation will not take place. Further details about the special dividend and the share consolidation are set out in Part II of this Circular.
Resolution 19 renews the Directors' authority in accordance with section 561 of the 2006 Act to allot further shares for cash, pursuant to the authority granted by Resolution 16, without first being required to offer such shares to existing shareholders. If approved, the Resolution will authorise the Directors to issue shares in connection with a rights issue or open offer and otherwise to issue shares for cash, including the sale on a non pre-emptive basis of treasury shares for cash, up to a maximum nominal amount of £976,378, being 5% of the nominal value of the Company's issued Ordinary share capital on 20th March 2013 (being the latest practicable date prior to the publication of this Circular). In accordance with the Pre-emption Group's Statement of Principles, the Directors do not intend to issue more than 7.5% of the issued share capital of the Company for cash on a non pre-emptive basis in any rolling three year period without prior consultation with the shareholders. This authority will expire on the date of the next Annual General Meeting or on 8th August 2014, whichever is the earlier. The Directors have no present intention of exercising this authority.
Resolution 20 renews the Directors' authority to make market purchases of its own Ordinary shares as permitted by the 2006 Act. The maximum aggregate number of Ordinary shares which may be purchased would be 7,521,733, which represent approximately 10% of the new Ordinary shares in issue immediately after the share consolidation or, if Resolution 18 is not passed, a maximum of 7,811,031 existing Ordinary shares which represent approximately 10% of the Company's existing Ordinary share capital as at 20th March 2013 (being the latest practicable date prior to publication of this Circular). The minimum price (excluding expenses) which may be paid for each share purchased under this authority is 25 25/26p or, if Resolution 18 is not passed, 25.0p. The maximum price (excluding expenses) which may be paid for a share purchased under this authority is an amount equal to the higher of 5% above the average of the middle market quotations of the Company's Ordinary shares as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to be purchased and that stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003. This renewed authority will expire on the date of the next Annual General Meeting or on 8th August 2014, whichever is the earlier.
The share repurchases made to date under the authorities granted by shareholders have enhanced pre-exceptional earnings per share to the benefit of all shareholders. The Board believes that it would be appropriate to have the option to use a proportion of the Company's cash resources to make further market repurchases of Ordinary shares.
The Company will only exercise the authority granted by the proposed Resolution where the Board reasonably believes that repurchasing its shares will increase earnings per share of the Ordinary shares in issue after the purchase and, accordingly, is in the best interests of shareholders generally.
The number of options and Performance Share Plan awards to subscribe for equity shares that are outstanding at 20th March 2013 is 1,227,282, being 1.57% of the issued Ordinary share capital at that date. If the authority to purchase the Company's Ordinary shares were exercised in full, these options would represent 1.81% of the Company's issued Ordinary share capital if Resolution 18 is passed and, if Resolution 18 is not passed, these options would represent 1.74% of the Company's issued Ordinary share capital. The Company has no warrants to subscribe for equity shares that are outstanding at 20th March 2013.
The 2006 Act permits certain listed companies to hold shares in treasury, as an alternative to cancelling them, following a purchase of own shares by the company. Shares held in treasury may subsequently be cancelled, sold for cash or used to satisfy share options and share awards under share plans. Once held in treasury, the company is not entitled to exercise any rights, including the right to attend and vote at meetings in respect of the shares. Further, no dividend or other distribution of the company's assets may be made to the company in respect of the treasury shares.
Any shares purchased by the Company pursuant to the authority conferred by Resolution 20 will either be cancelled and the number of shares reduced accordingly or, if the Directors think fit, they may be held as treasury shares. As at 20th March 2013, the Company held no Ordinary shares in treasury. This authority will expire on the date of the next Annual General Meeting or on 8th August 2014, whichever is the earlier.
I must stress that your Directors have no present intention of exercising this authority.
Resolution 21 seeks approval, subject to the Company's Articles of Association, for the Company to call general meetings (other than Annual General Meetings) on 14 clear days' notice. The notice period required by the 2006 Act for general meetings of the Company is 21 days unless shareholders approve a shorter notice period, which cannot however be less than 14 clear days. Annual General Meetings will continue to be held on at least 21 clear days' notice. Resolution 21 seeks the approval required by the 2006 Act, which will be effective until the Company's next Annual General Meeting, when it is intended that a similar resolution will be proposed. In order to be able to call a general meeting on less than 21 clear days' notice, the Company must make a means of electronic voting available to all shareholders for that meeting. The flexibility offered by Resolution 21 will be used when, taking into account the circumstances, the Directors consider this appropriate in relation to the business of the meeting and in the interests of the Company and the shareholders as a whole.
Whether or not you are able to attend the Meeting, please complete and return the enclosed Form of Proxy so as to reach the Registrars not less than 48 hours before the time for the Meeting. Completion and return of a Form of Proxy will not prevent you from attending and voting in person at the Meeting if you so wish.
Your Directors believe that all the proposals to be considered at the Annual General Meeting will promote the success of the Company and are in the best interests of the Company and its shareholders as a whole and recommend shareholders to vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings which amount in aggregate to 255,029 shares (as at 20th March 2013) representing approximately 0.33% of the existing issued share capital of the Company.
Yours faithfully
Bill Whiteley Chairman
The Group has performed very well over the last few years, substantially growing underlying profit whilst undertaking considerable capital expenditure and making significant investment in research and development and acquisition. Cash generation has also been strong. Having reviewed the Group's balance sheet structure during the year, the outlook for the Group remains strong. The Board believes the Group has significant resources to fund forecast capital expenditure and research and development. The Board is therefore recommending a special dividend to shareholders of 100.0p per existing Ordinary share, in addition to the final dividend of 37.0p per existing Ordinary share.
Payment of the special dividend is conditional on shareholder approval of Resolution 18, as set out in the Notice of Annual General Meeting, being passed and becoming unconditional. Resolution 18 (which includes the approval of the share consolidation) is conditional on the new Ordinary shares being admitted to the Official List of the UK Listing Authority and being admitted to trading on the London Stock Exchange. The special dividend is payable to shareholders who are on the register of members at 5.00 pm on 31st May 2013 and is expected to be paid to shareholders (including CREST shareholders) on 3rd July 2013 by cheque or BACS (where there is an existing dividend mandate).
Existing dividend mandates to bank or building society accounts given in relation to dividends paid in respect of existing Ordinary shares will continue to apply to the new Ordinary shares.
The total amount of the special dividend is equivalent to approximately 4% of the market capitalisation of the Company at the close of business on 20th March 2013 (being the latest practicable date prior to the publication of this Circular). The effect of the share consolidation will be to reduce the number of Ordinary shares in issue by approximately the same percentage, with the result that shareholders will receive 26 new Ordinary shares for every 27 existing Ordinary shares held at the special dividend record date.
The purpose of the share consolidation is to seek, as far as possible, to ensure that the market price of each Ordinary share is maintained at a broadly similar level following the special dividend and the share consolidation. It is common UK practice for the payment of a significant special dividend by a company to be combined with a share consolidation.
Although following the share consolidation each shareholder will hold fewer new Ordinary shares than the number of existing Ordinary shares held before, each shareholder's shareholding as a proportion of the total number of new Ordinary shares in the capital of the Company in issue will be the same before and immediately after the share consolidation, save in respect of fractional entitlements. Although the new Ordinary shares will have a different nominal value, they will carry the same rights as currently attach to existing Ordinary shares under the Articles of Association of the Company.
The share consolidation will replace every 27 existing Ordinary shares of 25.0p each with 26 new Ordinary shares of 25 25/26p each. If an individual shareholding is not exactly divisible by 27, the share consolidation will generate an entitlement to a fraction of a new Ordinary share. Fractions of new Ordinary shares will not be allotted to shareholders; instead the shares representing the fractions of new Ordinary shares will be aggregated and sold for the best price reasonably obtainable on behalf of the shareholders entitled to the fractions as soon as practicable after the share consolidation. The net proceeds of the sale, after the deduction of the expenses of the sale, will be distributed in due proportion among the relevant shareholders, except that any individual entitlements of less than £3.00 will be retained by the Company. Only shareholders with a holding of existing Ordinary shares that are not exactly divisible by 27 will be left with an entitlement to a fraction of a new Ordinary share. Payment of fractional entitlements (where applicable) is expected to be despatched on Monday, 17th June 2013 by CREST payment or by cheque. CREST shareholders will receive their fractional entitlement payment via their CREST accounts. Non-CREST shareholders, regardless of whether they have an existing mandate to a bank or building society account, will receive a cheque for their fractional entitlement (where applicable).
Shareholders who hold fewer than 27 existing Ordinary shares will still have their shareholding consolidated, and their shareholding will be dealt with in accordance with the procedure for fractional entitlements to new Ordinary shares described above.
For purely illustrative purposes, examples of the effect of the share consolidation and the special dividend are set out below:
| No. of existing Ordinary shares |
No. of new Ordinary shares |
Fractional entitlement* |
Special dividend |
|---|---|---|---|
| 1 | 0 | 0.96 | £1 |
| 20 | 19 | 0.26 | £20 |
| 25 | 24 | 0.07 | £25 |
| 50 | 48 | 0.15 | £50 |
| 80 | 77 | 0.04 | £80 |
| 100 | 96 | 0.30 | £100 |
| 1,000 | 962 | 0.96 | £1,000 |
* The fractional entitlement represents the fraction of a new Ordinary share which will be sold on behalf of shareholders as soon as practicable after the share consolidation. The net proceeds of the sale will be despatched to shareholders thereafter or, in the case of individual entitlements of less than £3.00, retained by the Company.
Following the share consolidation and assuming no further shares are issued between the date of this Circular and the share consolidation becoming effective, the Company's issued Ordinary share capital will comprise 75,217,337 new Ordinary shares. No change in the total aggregate nominal value of the Company's issued share capital will occur, it will still be approximately £19,527,578.
If the share consolidation is approved pursuant to Resolution 18, the Company will send holders of certificated existing Ordinary shares new share certificates in respect of the new Ordinary shares. The new share certificates will be sent on Monday, 17th June 2013 by pre-paid first class post, at the risk of the relevant holder of Ordinary shares, to the registered address of that holder or, in the case of joint holders, to the holder whose name appears first in the register of members.
Share certificates for existing Ordinary shares will no longer be valid and should be destroyed once the new certificate is received.
Shareholders who hold their entitlement in uncertificated form through CREST will have their CREST accounts adjusted to reflect their entitlement to new Ordinary shares. The existing ISIN (GB0008347048) (SEDOL 0834704) will be disabled as at 4.30 pm on 31st May 2013 with the new Ordinary shares of 25 25/26p under ISIN (GB00B946ZZ62) (SEDOL B946ZZ6) commencing at 8.00 am on 3rd June 2013.
If the share consolidation is approved pursuant to Resolution 18, trading in new Ordinary shares on the London Stock Exchange is expected to commence on an ex-dividend and post-consolidation basis at 8.00 am on 3rd June 2013.
If shareholders do not approve Resolution 18, including the share consolidation, then the special dividend will not be paid. The Board considers that the special dividend should be accompanied by the share consolidation in order to seek, so far as possible, to ensure that the market price of each Ordinary share will remain at a broadly similar level following the special dividend and share consolidation. The Board has therefore approved payment of the special dividend subject to the conditions of the share consolidation taking place and the new Ordinary shares being admitted to the Official List of the UK Listing Authority and being admitted to trading on the London Stock Exchange. However, subject to the passing of Resolution 3, the final dividend of 37.0p per existing Ordinary share will still be paid even if the special dividend and the share consolidation are not approved.
Participants in the ESOP will receive both the final dividend and the special dividend. Participants' existing Ordinary shares held in the ESOP will be subject to the share consolidation.
The Trustee of the ESOP will be communicating directly with participants in respect of their voting intentions and explaining the effect of the share consolidation on the participants' shares in the ESOP.
Participants in the Option Schemes and the PSP are not entitled to receive either the final dividend or the special dividend, unless they exercise their option or their PSP award vests prior to the record date for entitlement to the final dividend or special dividend respectively, and they still hold any resulting Ordinary shares on such date. Unvested PSP awards and outstanding options granted under the Option Schemes will not be adjusted as a result of the share consolidation.
The following summary is intended as a general guide only and is based only on current UK tax law and HM Revenue and Customs practice as at the date of this Circular. It relates only to certain limited aspects of the UK taxation treatment of the special dividend and the share consolidation for shareholders who are individuals or corporate shareholders and who are resident in the UK for UK tax purposes, who are the absolute beneficial owners of their Ordinary shares and who hold them as investments. Shareholders who are in any doubt about their tax position or who are not resident in the UK or who are resident in any jurisdiction other than the UK (whether or not also resident in the UK) or who are subject to tax in any jurisdictions other than the UK, should take appropriate independent advice without delay as other UK or foreign tax law considerations may apply.
An individual shareholder who is resident or ordinarily resident in the UK for UK tax purposes should generally be entitled to a tax credit equal to one-ninth of the dividend he or she receives. The dividend received plus the related tax credit (the "gross dividend") will be part of the individual shareholder's total income for UK income tax purposes and will be regarded as the top slice of that income. However, in calculating the individual shareholder's liability to income tax in respect of the gross dividend, the tax credit (which equates to 10% of the gross dividend) is set off against the tax chargeable on the gross dividend.
A shareholder who is liable to income tax at the basic rate will be subject to tax on the gross dividend at the rate of 10%. The tax credit will therefore satisfy in full the shareholder's liability to income tax on the gross dividend.
To the extent that the gross dividend falls above the threshold for the higher rate of income tax but below the threshold for the additional rate of income tax, the shareholder will be subject to tax on the gross dividend at the rate of 32.5%. This means that the tax credit will satisfy only part of the shareholder's liability to income tax on the gross dividend and the shareholder will have to account for income tax equal to 22.5% of the gross dividend (which equates to approximately 25% of the dividend received).
To the extent that the gross dividend falls above the threshold for the additional rate of income tax, the shareholder will be subject to tax on the gross dividend at the rate of 37.5% (the additional rate being reduced as from 6th April 2013). This means that the tax credit will satisfy only part of the shareholder's liability to income tax on the gross dividend and the shareholder will have to account for income tax equal to 27.5% of the gross dividend (which equates to approximately 30.6% of the dividend received).
Shareholders within the charge to UK corporation tax which are "small companies" (for the purposes of UK taxation of dividends) will not generally be subject to tax on dividends from the Company.
Other shareholders within the charge to UK corporation tax will not be subject to tax on dividends from the Company so long as the dividends fall within an exempt class and certain conditions are met.
Taxpayers resident in the UK who are not liable to UK tax on dividends from the Company (whether an individual or a company) will not be entitled to claim payment of the tax credit in respect of those dividends.
There is no UK withholding tax on dividends.
It is expected that for the purposes of UK taxation on chargeable gains, the share consolidation will be treated as follows:
Under the provisions of Chapter 1 of Part 13 of the Income Tax Act 2007 (for income tax purposes) and Part 15 of the Corporation Tax Act 2010 (for corporation tax purposes), HM Revenue and Customs can, in certain circumstances, counteract tax advantages arising in relation to certain transactions in securities. The Company has not sought clearance on behalf of shareholders in respect of the special dividend and the share consolidation in relation to the applicability of these provisions.
The Shareholder Helpline number is 0871 384 2200 (from within the UK) or +44 121 415 0283 (if calling from outside the UK). Calls to 0871 384 2200 are charged at 8p per minute (excluding VAT) plus network extras. Lines are open from 8.30 am to 5.30 pm (London time) Monday to Friday (except UK public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note that the Shareholder Helpline operators cannot provide advice on the merits of the share consolidation nor give financial, tax, investment or legal advice.
Notice is hereby given that the fifty-sixth Annual General Meeting of Spirax-Sarco Engineering plc will be held at Spirax-Sarco Engineering plc, Charlton House, Cheltenham, Gloucestershire, GL53 8ER on 9th May 2013 at 2.00 pm to consider and, if thought fit, to pass Resolutions 1 to 18 inclusive as ordinary resolutions and Resolutions 19 to 21 inclusive as special resolutions.
That:
(a) the Directors be given power (subject to the passing of Resolution 16), to allot equity securities (as defined in section 560 of the 2006 Act) for cash pursuant to the authority conferred on them by that Resolution under section 551 of the 2006 Act and to allot equity securities as defined in section 560(3) of the 2006 Act, (sale of treasury shares) for cash, in either case as if section 561 of the 2006 Act did not apply to the allotment, but this power shall be limited:
and so that the Directors may make such exclusions or other arrangements as they consider expedient in relation to treasury shares, fractional entitlements, record dates, shares represented by depositary receipts, legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange or any other matter; and
(f) all existing authorities for the Company to make market purchases of Ordinary shares are revoked, except in relation to the purchase of shares under a contract or contracts concluded before the date of this Resolution and which has or have not yet been executed.
That a general meeting, other than an Annual General Meeting, may be called on not less than 14 clear days' notice.
By order of the Board Registered Office:
Charlton House Cirencester Road Cheltenham Glos. GL53 8ER
A J Robson General Counsel and Company Secretary 21st March 2013
Registered in England No. 596337
In this connection, CREST members and, where applicable, their CREST sponsor or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
Spirax-Sarco Engineering plc Charlton House Cirencester Road Cheltenham Gloucestershire GL53 8ER UK
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