Terms used in this announcement but which are otherwise undefined shall have the same meanings as set out in the Circular.  This announcement and the summary of the Capital Reduction and Proposed Return of Capital should be read in conjunction with the Circular.

Details of the Capital Reduction, Proposed Return of Capital and Notice of Extraordinary General Meeting

Introduction

Since admission to AIM in 2016, the Company has suffered from limited liquidity in the Ordinary Shares and the share price has remained at a significant discount to the Company's net asset value ("NAV"). Consequently, on 14 February 2022, the Company announced its strategy to make targeted asset sales in an orderly manner over a period of two to three years (if not sooner). The Board stated that it was committed to maximising returns and delivering value to Shareholders and expected that a minimum of two returns of capital would be made to Shareholders.

As detailed in the Company's Half-year Report released on 7 December 2022, the Board continues to progress the Company's divestment programme with a view to returning capital to Shareholders. The Directors believe that one of the fairest and most efficient ways of returning cash to Shareholders is by creating B Shares whereby the Company will be able to make successive bonus issues of redeemable B Shares to Shareholders and to redeem them shortly thereafter without further action being required by Shareholders.

The Company is now well placed to commence the first return of capital directly to Shareholders in March 2023, ensuring that the Company adheres to the timeline envisaged in its divestment programme. The Circular gives further details of how capital can be returned and seeks Shareholder approval for the Resolutions to be proposed at an Extraordinary General Meeting to be held on 15 February 2023 to enable this and subsequent capital returns.

Subject to the passing of the Resolutions at the Extraordinary General Meeting and successful application for reporting fund status as detailed below, the Board expects that the first Return of Capital of not less than £30 million, being £1.03 per Ordinary Share (such figure being the proposed minimum quantum of the Return of Capital (i.e. £30 million) divided by the total number of Ordinary Shares in issue at the relevant record date), will take place in March 2023.

Further announcements will be made by the Company in due course.

Background

In the Half-year Report, the Company announced that approximately 60 per cent of the Company's property portfolio by value had been sold since the announcement of the divestment strategy in February 2022 and whilst the challenging macroeconomic backdrop referenced in the Half-year Report has continued to impact the broader property investment market, the Company has continued to achieve a number of sales.

Since September 2022, a further four properties (710 Aztec West, Bristol; Elizabeth House, Staines; Building K3, Kents Hill Business Park; and 36 Great Charles Street, Birmingham) have been sold at an aggregate value of £13.96 million. The Company's cash balance as at the date of this announcement is approximately £32.6 million.

In addition, contracts have been exchanged to sell the Company's remaining property in Birmingham (Somerset House, Temple Street), which is expected to complete in February 2023, for a consideration of £15.18 million. Subject to the timing of the first Return of Capital and completion of the sale of Somerset House, the first Return of Capital is expected to be for a minimum of £30 million and up to approximately £46 million.

In addition, the Board anticipates that, subject to market conditions, the Group's remaining three properties, two in Pavilion Drive, Northampton and Concorde Park in Maidenhead, should generate proceeds of approximately £19 million, which it is intended will be distributed to Shareholders as soon as reasonably possible after the last property sale. As announced on 7 December 2022, it is the Board's intention to liquidate all of the Group's remaining assets before the end of the Company's current financial year, so long as there remain interested buyers at respectable pricing levels. Further updates will continue to be made to Shareholders in due course, as and when appropriate.

Reduction of Capital

Resolution 1 to be proposed at the Extraordinary General Meeting, if approved, will approve the reduction of the Company's stated capital from £44,147,091 to £4,414,709.10  by cancelling and extinguishing capital to the extent of £1.36 (being the reduction in stated capital of £39,732,381.90 divided by the 29,215,555 Ordinary Shares in issue) on each issued fully paid up ordinary share of no par value each in the Company, with the resulting reduction moneys being credited to a special reserve of the Company, the 'capital redemption reserve' (the "Capital Reduction").

In accordance with the Jersey Companies Law, the Capital Reduction will be supported by a solvency statement to be made by the Directors in advance of the Extraordinary General Meeting, which will be available for inspection by Shareholders at the Company's registered office from the date of its execution.

The Capital Reduction shall in no way affect the validity of Shareholders' existing share certificates or CREST holdings.

The Directors will apply the capital redemption reserve created by the Capital Reduction, as well as the Company's retained earnings reserve, to make successive bonus issues of redeemable B Shares in order to return capital to the Shareholders, further details of which are set out below. 

Return of Capital through B Share Issues

Resolutions 2, 3 and 4 relate to the B Share issues to enable the Company to distribute cash from the proceeds of its disposals to the Shareholders through issues of B Shares (the "B Share Issues").

If Resolution 1 is duly passed, the Shareholders will have approved the reduction of the Company's issued share capital and the crediting of the resulting moneys to a newly formed special reserve of the Company. The Company's objective in so reducing its capital is to create additional distributable reserves to enable the Company to distribute cash from the proceeds of its disposals to Shareholders.

In order to enable the Directors to create B Shares, the Company's Articles will need to be amended to include a New Article 167 (B Shares). Resolution 2 would amend the Articles to insert New Article 167, Resolution 3 permits the Directors to capitalise reserves and Resolution 4 will provide the authority to allot such B Shares.

If Resolutions 2, 3 and 4 are passed, the Company will have a mechanism to enable it to return cash to Shareholders by the Directors capitalising amounts standing to the credit of the Company's reserves and then applying the resulting amounts for the purpose of fully paying up the appropriate number of B Shares by way of transfer of such sum or sums to the Company's stated capital account for the B Shares. Such B Shares would then be issued to Shareholders on the basis of one new B Share for each Ordinary Share held at the record date for the relevant B Share Issue and, shortly thereafter, redeeming them and cancelling them. For the avoidance of doubt, notwithstanding any B Share Issues, Shareholders' holdings of Ordinary Shares in the Company will not be impacted and the total number of Ordinary Shares in the Company in issue will not change.

Following the redemption and cancellation of the B Shares, the redemption proceeds will be sent to Shareholders, either through CREST to uncertificated Shareholders, via BACS to certificated Shareholders who have lodged a BACS mandate with the Registrars or via cheque to certificated Shareholders who have not lodged a BACS mandate with the Registrars. No cheques will be dispatched to any Shareholder from whom the Registrars have received notification of multiple instances of returned mail.

Further details of the B Share Issues are set out below.

The structure of the B Share Issues should result in the majority of UK taxpayers receiving their cash proceeds on redemption of the B Shares as capital. Part III of the Circular sets out a summary guide to certain potential tax consequences for Shareholders who are UK residents for tax purposes.

Returning cash to Shareholders via B Share Issues

The advantages of returning capital via B Share Issues rather than via a tender offer are that:

·    it reduces costs for the Company, as there should be no need to prepare further circulars to give effect to future Returns of Capital, as is the case with tender offers, and no need for the Company to engage a broker to undertake the tender on its behalf. Details of each Return of Capital would be notified to Shareholders through an announcement through a Regulatory Information Service (a copy of which would be posted to Shareholders);

·    all Shareholders will automatically participate in the redemption process and they would be treated equally;

·    subject to the Resolutions relating to the Capital Reduction and the B Share Issues being passed at the Extraordinary General Meeting, Shareholders would not be required to take any further action to give effect to future Returns of Capital; and

·    there would be greater certainty for the Company regarding the rate of returns of capital to Shareholders (unlike tender offers, capital returns under the B Share Issues would be mandatory and would apply to all Shareholders on a pro rata basis).

However, for some Shareholders, there may be some disadvantages in returning capital via the B Share Issues relating to the timing and mandatory nature of the scheme. Unlike a tender offer, Shareholders will not be given a choice as to whether or not to participate in a Return of Capital and, for those Shareholders who hold Ordinary Shares in the Company through a number of different vehicles, they would not be given the choice as to which of their vehicles should participate in a Return of Capital. This could potentially lead to adverse tax consequences for certain Shareholders as they may not be able to structure their returns in the most tax efficient manner.

Taxation of the B Share Issues

Each redemption of B Shares should be treated as a disposal by the Shareholder of their B Shares for UK tax purposes. This may, subject to the Shareholder's individual circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of UK taxation of capital gains (for individual Shareholders) or corporation tax on chargeable gains (for corporate Shareholders).

Furthermore, Shareholders participating in the B Share Issues are advised to consider their investment objectives and their own individual financial and tax circumstances. Shareholders who are in any doubt as to their tax position should seek advice from their own professional adviser.

To mitigate the risk of disposal proceeds from the B Share Issues being taxed as offshore income gains, the Company will be making the necessary application for reporting fund status shortly.

The Directors have been advised that, as a consequence of the implementation of the proposed B Share Issues, the Company is likely to be treated as an "offshore fund" for the purposes of the Taxation (International and Other Provisions) Act 2010. Under this legislation, any gain arising on the sale, disposal or redemption of an interest in an offshore fund will be taxed at the time of such sale, disposal or redemption as income and not as a capital gain. This does not apply, however, where an offshore fund is accepted by HMRC as a "reporting fund" throughout the period during which interests in the Company have been held.

The Company will be applying for reporting fund status shortly for the current and subsequent accounting periods during which the Company is an offshore fund.

A reporting fund must report to each United Kingdom tax resident Shareholder such Shareholder's share of the income of the offshore fund each year. This will be taxable in the hands of the Shareholder as income (and, subject to what is said below regarding offshore funds that invest more than 60 per cent. of their assets in debt and debt-like investment) as a dividend, regardless of whether or not it is distributed to the Shareholder.

To mitigate the risk of disposal proceeds being taxed as offshore income gains, the Company will be making the necessary application for reporting fund status. The Company is expected to be accepted as a reporting fund for as long as it meets all of the qualifying conditions until notice is given to HMRC that it intends to leave the regime or HMRC excludes it from participation.

Whilst it is currently expected that the Company will be accepted as a reporting fund by HMRC, if for any reason following confirmation from HMRC that is not the case, which would result in the proposed B Share Issues being treated as income rather than capital, the Directors may look to pursue alternative ways of returning cash to Shareholders.

Further details on reporting fund status are set out under the sub-heading "The Company" in the section "United Kingdom Taxation" in Part III of the Circular (Taxation). This section also contains further information generally regarding taxation on the redemption of B Shares.

Further information on the B Shares

No share certificates would be issued in relation to the B Shares and the B Shares would not be listed or traded on any exchange.

The B Shares would be non-transferable and would have limited rights.

Given the very short period of time for which any B Share would be in issue, it is unlikely that any dividends would become payable on the B Shares. The rights and restrictions attached to the B Shares are set out in New Article 167, which is set out in Part II of this Circular.

Recommendation

The Board believes that the Resolutions and the implementation of both the Capital Reduction and the B Share Issues are in the best interests of the Company and the Shareholders as a whole.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting, as all of the Directors holding Ordinary Shares intend so to do in respect of their beneficial shareholdings.