-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, A6nUDQgE8DbOzA9J1u1E7eO6Eiaz3pwHu2W8xZyjmsL/n3aPHSxCMicS4AVyf02Y JjXO0cEA6KIYF6JZQopxwQ== 0000950109-94-001867.txt : 19941017 0000950109-94-001867.hdr.sgml : 19941017 ACCESSION NUMBER: 0000950109-94-001867 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19941003 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANHOME INC CENTRAL INDEX KEY: 0000093542 STANDARD INDUSTRIAL CLASSIFICATION: 5190 IRS NUMBER: 041864170 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09267 FILM NUMBER: 94552757 BUSINESS ADDRESS: STREET 1: 333 WESTERN AVE CITY: WESTFIELD STATE: MA ZIP: 01085 BUSINESS PHONE: 4135623631 FORMER COMPANY: FORMER CONFORMED NAME: STANLEY HOME PRODUCTS INC DATE OF NAME CHANGE: 19820513 8-K 1 8-K 10/03/94 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: October 14, 1994 Date of earliest event reported: October 3, 1994 STANHOME INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 0-1349 04-1864170 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 333 WESTERN AVENUE, WESTFIELD, MASSACHUSETTS 01085 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (413) 562-3631 Total Number of Pages Contained Herein: 88 Index to Exhibits to this Form 8-K is on Page: 6 ITEM 2. Acquisition or Disposition of Assets. (a) On October 3, 1994, Stanhome plc, a wholly-owned subsidiary of Stanhome Inc., declared its offer, publicly announced September 1, 1994 and formally made on September 9, 1994, to be unconditional in all respects and unlimited as to the acquisition of fifteen million two hundred thirty-nine thousand seven hundred and forty-six (15,239,746) ordinary shares of five (5) pence each of Lilliput Group plc, a public limited company organized and existing in the United Kingdom ("Lilliput"), with its principal place of business located at Skirsgill, Penrith, Cumbria CA11 0DP. The tendered amount of said shares constitutes sixty-five and forty-nine hundredths percent (65.49%) of all the allotted, called up and fully paid shares of capital stock of Lilliput (the "Shares") and is being acquired by Stanhome from the assenting Lilliput Shareholders and their nominees, trustees or custodians (collectively referred to as the "Sellers"). Between September 1, 1994 and September 30, 1994, Stanhome additionally purchased in the open market six million six hundred seventy-four thousand two hundred and nineteen (6,674,219) of the Shares on the London Stock Exchange, which number of Shares represented twenty-eight and sixty-eight hundredths percent (28.68%) of all the Shares. The remaining one million three hundred fifty-five thousand four hundred and fifty-five (1,355,455) of the Shares constitute five and eighty-three hundredths percent (5.83%) of all the Shares and are owned by the non-assenting Lilliput Shareholders. With the intention of acquiring one hundred percent (100%) of the Shares, Stanhome has offered to acquire such remaining Shares. Stanhome has also offered to pay for the surrender of thirty-nine thousand nine hundred and thirty-eight (39,938) options capable of being exercised under the Lilliput Savings-Related Share Option Scheme and five hundred and ninety thousand (590,000) options capable of being exercised under the Lilliput Executive Share Option Scheme (collectively referred to as the "Options") pursuant to applicable law of the United Kingdom. Consideration for the Shares being acquired by Stanhome in connection with its declared offer of one hundred and sixty (160) pence per share -2- consists of a payment totaling (Pounds)24,383,594 in cash to be made at the closing currently scheduled for October 21, 1994 and allocated among the Sellers according to their percentage equity interests. Consideration for the Shares acquired by Stanhome in the open market totals (Pounds)10,609,772. Consideration for the acquisition of the remaining Shares and the surrender of the Options, assuming acceptance by all of the respective option holders, will total (Pounds)2,340,990. The principle followed in determining the amount of the consideration to be paid per Share was a business judgment as to the value of Lilliput's existing assets and income potential based on its historic business and its future interrelationship with Stanhome's business. It is anticipated that the aggregate total of (Pounds)37,334,356 of cash consideration for all of the Shares and the Options will be provided by short term bank loans from a group of banks. To date Stanhome has borrowed (Pounds)9,000,000 from Banca Popolare di Milano-London Branch and (Pounds)1,620,000 from Mellon Bank, N.A.-London Branch. The balance of the borrowings to fund the acquisition will be sourced by means of facilities Stanhome has with banks under short term loan arrangements and in amounts yet to be determined. (b) Lilliput manufactures and distributes collectibles and other gift- ware products. Its business is primarily the manufacturing and marketing of high quality, hand-painted miniature cottages sold under the "Lilliput Lane" brand name, and to a lesser extent the marketing of other collectible giftware products. Lilliput's business is carried on by Lilliput and its subsidiaries through retail outlets in the United Kingdom and the U.S. and through export to some 48 countries. In general, the assets of Lilliput consist of its plant and real property, machinery and equipment, inventories, product designs and mold making systems, accounts receivable, cash and cash equivalents, rights under various copyrights and trademarks, customer and collectors' club member lists, and goodwill. Stanhome Inc. intends for Lilliput to continue to use such assets in its business. -3- Item 7. Financial Statements and Exhibits. Listed below are the financial statements, pro forma financial information and exhibits to be filed as a part of this report. (a) Financial statements of businesses acquired. It is impracticable at this time to provide the required financial statements of the business acquired. The required financial statements will be filed under cover of Form 8-K/A as soon as practicable, but not later than December 17, 1994 which is 60 days after the report on this Form 8-K must be filed. (b) Pro forma financial information. It is impracticable at this time to provide the required pro forma financial information relative to the business acquired. The required pro forma financial information will be filed under cover of Form 8-K/A as soon as practicable, but not later than December 17, 1994 which is 60 days after the report on this Form 8-K must be filed. (c) Exhibits. Recommended Cash Offer announced September 1, 1994 and made on September 9, 1994 by Goldman Sachs International on behalf of Stanhome for Lilliput; Form of Acceptance in respect of the Recommended Cash Offer made on September 9, 1994 by Goldman Sachs International on behalf of Stanhome for Lilliput; Notice of Unconditional Acceptance of Recommended Cash Offer made on September 9, 1994 dated as of October 3, 1994; Notice to Non-Assenting Shareholders and related Letter dated as of October 11, 1994; Notice and Recommended Cash Offer to the holders of options under the Lilliput Savings-Related Share Option Scheme made on October 11, 1994; Form of Acceptance and Surrender relating to the Proposal by Stanhome made to the holders of options under the Lilliput Savings-Related Share Option Scheme; -4- Notice and Recommended Cash Offer to the holders of options under the Lilliput Executive Share Option Scheme made on October 11, 1994; and Form of Acceptance and Surrender relating to the Proposal by Stanhome made to the holders of options under the Lilliput Executive Share Option Scheme. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STANHOME INC. ------------------------------- (Registrant) Date: October 14, 1994 /s/ G. William Seawright ------------------------------- G. William Seawright, President and Chief Executive Officer -5- EXHIBIT INDEX
Reg. S-K Item 601 8-K Page No. - -------- ------------ 2(a) Recommended Cash Offer announced 7 September 1, 1994 and made on September 9, 1994 by Goldman Sachs International on behalf of Stanhome for Lilliput. 2(b) Form of Acceptance in respect of the 62 Recommended Cash Offer made on September 9, 1994 by Goldman Sachs International on behalf of Stanhome for Lilliput. 2(c) Notice of Unconditional Acceptance 66 of Recommended Cash Offer made on September 9, 1994 dated as of October 3, 1994. 2(d) Notice to Non-Assenting Shareholders 67 and related Letter dated as of October 11, 1994. 2(e) Notice and Recommended Cash Offer to the 69 holders of options under the Lilliput Savings-Related Share Option Scheme made on October 11, 1994. 2(f) Form of Acceptance and Surrender relating 77 to the Proposal by Stanhome made to the holders of options under the Lilliput Savings-Related Share Option Scheme. 2(g) Notice and Recommended Cash Offer to the 79 holders of options under the Lilliput Executive Share Option Scheme made on October 11, 1994. 2(h) Form of Acceptance and Surrender relating 87 to the Proposal by Stanhome made to the holders of options under the Lilliput Executive Share Option Scheme.
-6- EX-2.A 2 RECOMMENDED CASH OFFER Exhibit 2(a) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR OWN FINANCIAL ADVICE IMMEDIATELY FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR SHARES IN LILLIPUT, PLEASE FORWARD THIS DOCUMENT AND THE ACCOMPANYING FORM OF ACCEPTANCE AT ONCE TO THE PURCHASER OR TRANSFEREE OR TO THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR TRANSFER WAS EFFECTED, FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO THE UNITED STATES OR CANADA. - -------------------------------------------------------------------------------- RECOMMENDED CASH OFFER BY GOLDMAN SACHS INTERNATIONAL ON BEHALF OF STANHOME PLC A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC - -------------------------------------------------------------------------------- A LETTER FROM THE CHAIRMAN & CHIEF EXECUTIVE OF LILLIPUT CONTAINING THE RECOMMENDATION OF THE DIRECTORS OF LILLIPUT IS SET OUT ON PAGES 5 TO 7. ACCEPTANCES SHOULD BE DESPATCHED AS SOON AS POSSIBLE, AND IN ANY EVENT SO AS TO BE RECEIVED NOT LATER THAN 3.00 P.M. ON 30TH SEPTEMBER, 1994. THE PROCEDURE FOR ACCEPTANCE IS SET OUT IN SECTION 11 OF THE LETTER FROM GOLDMAN SACHS ON PAGES 11 AND 12. GOLDMAN SACHS IS ACTING FOR STANHOME INC. AND STANHOME AND FOR NO ONE ELSE IN CONNECTION WITH THE OFFER AND WILL NOT BE RESPONSIBLE TO ANYONE OTHER THAN STANHOME INC. AND STANHOME FOR THE PROTECTIONS PROVIDED TO CUSTOMERS OF GOLDMAN SACHS OR FOR GIVING ADVICE IN RELATION TO THE OFFER. NATWEST MARKETS IS ACTING FOR LILLIPUT AND NO ONE ELSE IN CONNECTION WITH THE OFFER AND WILL NOT BE RESPONSIBLE TO ANYONE OTHER THAN LILLIPUT FOR THE PROTECTIONS PROVIDED TO CUSTOMERS OF NATWEST MARKETS OR FOR GIVING ADVICE IN RELATION TO THE OFFER. THE OFFER REFERRED TO IN THIS DOCUMENT IS NOT BEING MADE DIRECTLY OR INDIRECTLY IN, AND THIS DOCUMENT IS NOT BEING, AND MUST NOT BE, MAILED OR OTHERWISE DISTRIBUTED OR SENT, IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES OR CANADA. ALL LILLIPUT SHAREHOLDERS (INCLUDING NOMINEES, TRUSTEES OR CUSTODIANS) WHO WOULD, OR OTHERWISE INTEND TO, FORWARD THIS DOCUMENT AND THE ACCOMPANYING FORM OF ACCEPTANCE SHOULD READ THE FURTHER DETAILS IN THIS REGARD WHICH ARE CONTAINED IN PARAGRAPH 6 OF PART B OF APPENDIX I TO THIS DOCUMENT BEFORE TAKING ANY ACTION. - -------------------------------------------------------------------------------- DEFINITIONS In this document and the accompanying Form of Acceptance the following definitions apply, unless the context requires otherwise: "Canada" Canada, its territories, provinces and all areas subject to its jurisdiction or any political sub- division thereof "Code" the City Code on Takeovers and Mergers "Company" Stanhome Inc. "dollars" or "$" US dollars "Form of Acceptance" the form of acceptance to be used in connection with the Offer "Goldman Sachs" Goldman Sachs International "Lilliput" Lilliput Group plc "Lilliput Group" Lilliput and its subsidiaries "Lilliput Shareholders" holders of Lilliput Shares "Lilliput Share Option the Lilliput Group plc Executive Share Option Schemes" Scheme and the Lilliput Group plc Savings Related Share Option Scheme "Lilliput Shares" or existing issued and fully-paid ordinary shares of "Shares" 5 pence each in Lilliput and any further such shares which are allotted or issued after the date hereof pursuant to the Lilliput Share Option Schemes or otherwise, while the Offer remains open for acceptance or up to such earlier date as Stanhome may decide "NatWest Markets" NatWest Markets Corporate Finance Limited "Offer" the recommended offer by Goldman Sachs on behalf of Stanhome contained in this document to acquire all the Lilliput Shares not already owned by the Stanhome Group "Panel" the Panel on Takeovers and Mergers "Receiving Agent" or "The The Royal Bank of Scotland plc, Registrar's Royal Bank of Scotland Department, New Issues Section, P.O. Box 859, plc" Consort House, East Street, Bedminster, Bristol, BS99 1XZ "Registrars of Lilliput" The Royal Bank of Scotland plc, Securities Services--Registrars, Owen House, 8 Bankhead Crossway North, Edinburgh, EH11 4BR "Stanhome" Stanhome plc "Stanhome Group" Stanhome Inc. and its subsidiaries "Stock Exchange" The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited "United States" or "US" the United States of America (including the States thereof and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. 2 CONTENTS
PAGE LETTER FROM G. WILLIAM SEAWRIGHT, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STANHOME INC. ........................................................... 4 LETTER FROM J A RUSSELL, CHAIRMAN & CHIEF EXECUTIVE OF LILLIPUT........... 5 LETTER FROM GOLDMAN SACHS 1. Introduction......................................................... 8 2. The Offer............................................................ 8 3. Terms and Conditions................................................. 9 4. Financial effects of acceptance...................................... 9 5. UK taxation.......................................................... 10 6. Information regarding Stanhome Inc. ................................. 10 7. Information regarding Stanhome....................................... 10 8. Information regarding Lilliput....................................... 10 9. Reasons for the Offer................................................ 11 10. Management and employees............................................. 11 11. Procedure for acceptance............................................. 11 12. Settlement........................................................... 12 13. Further information.................................................. 12 APPENDICES I. Conditions and Further Terms of the Offer............................ 13 II. Financial and Other Information on Stanhome Inc. .................... 21 III. Financial and Other Information on Stanhome.......................... 34 IV. Financial and Other Information on Lilliput.......................... 35 V. Additional Information............................................... 50
3 [LETTERHEAD OF G. WILLIAM SEAWRIGHT, PRESIDENT AND CEO, OF STANHOME INC. APPEARS HERE] 9th September, 1994 To Lilliput Shareholders and, for information only, to participants in the Lilliput Share Option Schemes Dear Sir or Madam, RECOMMENDED CASH OFFER FOR LILLIPUT I am delighted that the Boards of Stanhome Inc. and Lilliput were able to announce an agreed offer for Lilliput on 1st September, 1994. Stanhome Inc. has been developing its interests in the United Kingdom for some time and believes that the acquisition will be beneficial to both groups. The reasons for the Offer are explained in detail in the accompanying letters from your Chairman & Chief Executive, John Russell, and from Goldman Sachs, but I would like to emphasise the following points: . The two groups' activities are highly complementary. Lilliput's strength in distribution and brand name is here in the United Kingdom, whereas that of Stanhome's giftware operations is concentrated in the Americas. . Each group will obtain better access to the other's markets, at little incremental cost. . Lilliput will benefit from Stanhome Inc.'s financial resources. . Lilliput's senior management will be involved in developing Stanhome Inc.'s European giftware and collectibles group. The combination of Lilliput and Enesco will create one of the largest giftware and collectibles groups in Europe. I look forward to welcoming Lilliput's management and employees to the Stanhome Group. Yours faithfully for the Board of Stanhome Inc. [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] G. William Seawright President and Chief Executive Officer 333 Western Ave., Westfield, MA 01085, Telephone 413-562-3631, Fax 413-568-2820 4 [LOGO OF LILLIPUT GROUP PLC APPEARS HERE] Directors: Registered Office: John A Russell (Chairman & Chief Executive) Skirsgill Andrew R Dunning Penrith Robert E Freestone Cumbria Jane M Hill CA11 0DP David J Tate Paul G Thomas Peter J Folkman* Anthony J J Simonds-Gooding* *Non-Executive 9th September, 1994 To Lilliput Shareholders and, for information only, to participants in the Lilliput Share Option Schemes Dear Sir or Madam, RECOMMENDED CASH OFFER FROM STANHOME On 1st September, 1994, it was announced that your Board and the Board of Stanhome Inc. had reached agreement on the terms of a recommended cash offer to be made by Goldman Sachs on behalf of Stanhome to acquire the whole of the issued and to be issued share capital of Lilliput. I am now writing to you to explain the reasons for and benefits of the Offer and why your Directors recommend you to accept it. Details of the Offer are set out in the accompanying letter from Goldman Sachs. REASONS FOR AND BENEFITS OF THE OFFER The Board of Lilliput believes that there are substantial benefits that can be derived from the acquisition of Lilliput by Stanhome Inc., one of the world's leading distributors of giftware and collectibles. Although your Directors are confident that Lilliput would continue to trade successfully as an independent company, they firmly believe that the future prospects of Lilliput will be greatly enhanced as part of the enlarged Stanhome Group. In particular, they believe that Lilliput will be able to grow more rapidly as part of the enlarged Stanhome Group than as an independent company. Stanhome has assured the Directors that Lilliput will retain its identity and will continue to be run from its head office in Penrith. There is a strong complementary fit between the products sold by Stanhome Inc.'s Enesco Giftware Group and Lilliput's product range and, following the Offer being successfully completed, Lilliput will be involved in the marketing and distribution of Enesco's products in Europe. The combination of the proven management, manufacturing and marketing skills of Lilliput and those of the Enesco Giftware Group, together with the financial resources of the Stanhome Group, should result in a business that is well positioned to compete successfully both in the US and continental Europe. The acquisition of Lilliput should enhance the Stanhome Group's presence in the US collectibles market and accelerate its expansion into the European market. 5 INTERIM RESULTS OF LILLIPUT FOR THE SIX MONTHS ENDED 30TH JUNE, 1994 Lilliput's unaudited interim results for the six months ended 30th June, 1994 were announced on 1st September, 1994 and showed an increase in profit before taxation to (Pounds)1.13 million from (Pounds)1.08 million on sales of (Pounds)7.50 million, up by 6 per cent. compared with the same period last year. As at 30th June, 1994, shareholders' funds stood at (Pounds)5.06 million (1993: (Pounds)2.77 million). Lilliput's profit before taxation was (Pounds)3.1 million for the year ended 31st December, 1993 on turnover of (Pounds)16.5 million. Further financial information on Lilliput, including the unaudited interim results for the six months ended 30th June, 1994, is set out in Appendix IV to this document. THE OFFER You will find set out on pages 8 to 12 a letter from Goldman Sachs, containing the Offer on behalf of Stanhome to acquire your shares on the basis of 160p in cash for each Lilliput Share. In addition, Lilliput Shareholders on the register at the close of business on 29th September, 1994 will be entitled to receive and retain the interim dividend in respect of the year ending 31st December, 1994 of 1.65p (net) per share declared on 1st September, 1994. Acceptance of the Offer will not prevent Lilliput Shareholders from receiving and retaining this interim dividend. The Offer values the fully diluted share capital of Lilliput at approximately (Pounds)38.2 million and the Offer price of 160p per share represents a premium of approximately 74 per cent. to the closing middle market quotation of 92p per Lilliput Share on 31st August, 1994 (the day prior to the announcement of the Offer). If the Offer is declared or becomes unconditional in all respects, Stanhome intends to offer a cash cancellation proposal, in due course, to those optionholders who have not exercised their options during the Offer Period. Under such proposal, optionholders will be offered the difference between the exercise price of the option and the Offer price of 160p in cash, for each option. In the case of the Lilliput Group plc Savings Related Share Option Scheme, the cash cancellation proposal will be limited to the number of Lilliput Shares that can be purchased with the repayment under the related savings contract at the date of the proposal. The conditions and further terms of the Offer are set out in Appendix I to this document. Details of the financial effects on Lilliput Shareholders of accepting the Offer are shown on page 9 of this document. MANAGEMENT AND EMPLOYEES All of the Lilliput executive Directors will remain as Directors of Lilliput. Stanhome Inc. has given assurances to your Board that the existing employment rights of all the Lilliput Group's management and employees, including pension rights, will be fully safeguarded. Your Board believes that the career opportunities of Lilliput Group employees will be enhanced within the enlarged Stanhome Group. ACTION TO BE TAKEN Your attention is drawn to pages 11 and 12 of this document in which is set out the procedure for acceptance of the Offer. FURTHER INFORMATION Your attention is drawn to the further information contained in Appendices II to V to this document. TAXATION Your attention is drawn to section 5 of the letter from Goldman Sachs, headed "UK taxation", on page 10 of this document. If you are in any doubt as to your own tax position, you should consult your independent professional adviser immediately. RECOMMENDATION YOUR BOARD, WHICH HAS BEEN SO ADVISED BY NATWEST MARKETS, CONSIDERS THE TERMS OF THE OFFER TO BE FAIR AND REASONABLE AND IN THE BEST INTEREST OF LILLIPUT SHAREHOLDERS. ACCORDINGLY, YOUR DIRECTORS UNANIMOUSLY RECOMMEND YOU TO ACCEPT THE OFFER. THE DIRECTORS AND THEIR WIVES HAVE IRREVOCABLY UNDERTAKEN TO ACCEPT THE OFFER IN RESPECT OF THEIR BENEFICIAL SHAREHOLDINGS AMOUNTING TO 4,981,039 LILLIPUT SHARES, REPRESENTING 21.4 PER CENT. OF THE CURRENT ISSUED SHARE CAPITAL OF LILLIPUT. Funds managed by North of England Ventures and Lazard Ventures, have irrevocably undertaken to accept the Offer in respect of a further 5,356,176 Lilliput Shares, representing 23.0 per cent. of the current issued share capital of Lilliput. 6 Since the announcement of the Offer, Stanhome has purchased 3,145,331 Lilliput Shares in the market. Consequently, Stanhome either owns or has received irrevocable undertakings to accept the Offer in respect of a total of 13,482,546 Lilliput Shares, representing 57.9 per cent. of the current issued share capital of Lilliput. Yours faithfully, [SIGNATURE OF JOHN A RUSSELL APPEARS HERE] J A Russell Chairman & Chief Executive Registered in England No. 2137296 7 - -------------------------------------------------------------------------------- Goldman Sachs International, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England Tel: 071-774 1000, Telex: 94015777, Cable: GOLDSACHS LONDON Member of The Securities and Futures Authority [LOGO OF GOLDMAN SACHS APPEARS HERE] - -------------------------------------------------------------------------------- 9th September, 1994 To Lilliput Shareholders and, for information only, to participants in the Lilliput Share Option Schemes Dear Sir or Madam, RECOMMENDED CASH OFFER ON BEHALF OF STANHOME FOR LILLIPUT 1. INTRODUCTION It was announced on 1st September, 1994 that the Boards of Stanhome Inc. and Lilliput had reached agreement on the terms of a recommended cash offer to be made by Goldman Sachs on behalf of Stanhome, a wholly-owned subsidiary of Stanhome Inc., to acquire the whole of the issued and to be issued share capital of Lilliput. This document contains the formal Offer. The Form of Acceptance to be used in connection with the Offer is enclosed. The Directors of Lilliput and their wives and funds managed by North of England Ventures and Lazard Ventures have irrevocably undertaken to accept the Offer in respect of their holdings of Lilliput Shares, representing in aggregate 10,337,215 shares or 44.4 per cent. of Lilliput's current issued share capital. In addition, Stanhome currently owns 3,145,331 Lilliput Shares representing 13.5 per cent. of Lilliput's current issued share capital. YOUR ATTENTION IS DRAWN TO THE LETTER FROM YOUR CHAIRMAN & CHIEF EXECUTIVE, JOHN RUSSELL, SET OUT ON PAGES 5 TO 7 OF THIS DOCUMENT, FROM WHICH YOU WILL SEE THAT YOUR BOARD, WHICH HAS BEEN SO ADVISED BY NATWEST MARKETS, CONSIDERS THE TERMS OF THE OFFER TO BE FAIR AND REASONABLE AND THAT YOUR DIRECTORS UNANIMOUSLY RECOMMEND YOU TO ACCEPT THE OFFER, AS THEY HAVE IRREVOCABLY UNDERTAKEN SO TO DO IN RESPECT OF THEIR OWN BENEFICIAL HOLDINGS. INSTRUCTIONS ON HOW TO ACCEPT THE OFFER ARE SET OUT IN SECTION 11 OF THIS LETTER, "PROCEDURE FOR ACCEPTANCE", ON PAGES 11 AND 12. 2. THE OFFER On behalf of Stanhome, we hereby offer to acquire, on the terms and subject to the conditions set out or referred to in this document and in the Form of Acceptance, all the Lilliput Shares, not already owned by the Stanhome Group, on the following basis: FOR EACH LILLIPUT SHARE 160p IN CASH 8 The Offer values the fully-diluted share capital of Lilliput at approximately (Pounds)38.2 million and the Offer price of 160p per Lilliput Share represents a premium of approximately 74 per cent. to the closing middle market quotation of 92p per Lilliput Share on 31st August, 1994 (the day prior to the announcement of the Offer). ACCEPTANCES OF THE OFFER SHOULD BE DESPATCHED AS SOON AS POSSIBLE AND IN ANY EVENT SO AS TO BE RECEIVED BY 3.00 P.M. ON 30TH SEPTEMBER, 1994. 3. TERMS AND The Lilliput Shares which are the subject of the Offer will be CONDITIONS acquired by Stanhome free from all liens, charges, equitable interests and encumbrances and together with all rights now or hereafter attaching thereto, including the right to receive all dividends and other distributions declared, made or paid after 1st September, 1994, save that Lilliput Shareholders will retain the right to receive the interim dividend of 1.65p (net) per Lilliput Share declared on 1st September, 1994. The conditions and further terms of the Offer are set out in Appendix I. If the Offer is declared or becomes unconditional in all respects, Stanhome intends to offer a cash cancellation proposal, in due course, to those participants in the Lilliput Share Option Schemes who have not exercised their options during the Offer Period. Under such a proposal, optionholders will be offered the difference between the exercise price of their options and 160p in cash, for each option. In the case of the Lilliput Group plc Savings Related Share Option Scheme, the cash cancellation proposal will be limited to the number of Lilliput Shares that can be purchased with the repayment under the related savings contract at the date of the proposal. 4. FINANCIAL (A) CAPITAL EFFECTS OF ACCEPTANCE The table below shows the effect on capital value for a holder of 100 Lilliput Shares accepting the Offer:
(Pounds) -------- Consideration................................. 160 Market value of Lilliput Shares (i).......... 92 --- Change in value............................... 68 === This represents an increase of................ 74% ===
(B) INCOME The table below shows the effect on gross income for a holder of 100 Lilliput Shares accepting the Offer:
(Pounds) -------- Gross income on (Pounds)160 cash (ii)........ 14 Gross dividend income from 100 Lilliput Shares (iii)................................ 6 --- Change in gross income........................ 8 === This represents an increase of................ 147% ===
Notes: The financial comparisons set out above have been made on the following bases: (i) The market value of 100 Lilliput Shares of (Pounds)92 is based on the middle market quotation as derived from The Stock Exchange Daily Official List for 31st August, 1994 (being the last day on which the Lilliput Shares were dealt in on the Stock Exchange before the announcement of the Offer). (ii) The gross income on the cash consideration has been calculated on the assumption that the cash is reinvested to yield approximately 9 per cent., being the yield on the 2008 Treasury 9 per cent. gilt, on 8th September, 1994 (the latest practicable date prior to the posting of this document). (iii) The gross dividend from Lilliput Shares is based on the notional dividend of 2.90p (net) per share that would have been paid as a final dividend in respect of the year ended 31st December, 1993 had the Lilliput Shares been listed on the Stock Exchange for the whole of the financial year ended 31st December, 1993 and the interim dividend of 1.65p (net) per share in respect of the financial year ending 31st December, 1994, together with the associated tax credits of 20/80ths of the amounts paid. (iv) No account has been taken of any liability to taxation. 9 5. UK The following paragraphs, which are intended as a general TAXATION guide only and are based on current legislation and Inland Revenue practice, summarise advice received by Stanhome regarding the position of Lilliput Shareholders, who are resident or ordinarily resident in the UK for tax purposes and who hold their Lilliput Shares as an investment, in respect of UK taxation. To the extent that a Lilliput Shareholder receives cash under the Offer, this will constitute a disposal of shares for the purposes of UK taxation of capital gains which may give rise to a liability to taxation. Liability to UK taxation of capital gains will depend upon the particular circumstances of the individual Lilliput Shareholder. Lilliput Shareholders who acquired or acquire their Lilliput Shares by exercising options under the Lilliput Share Option Schemes are reminded that they may incur a charge to UK income tax upon exercising their options. IF YOU ARE IN ANY DOUBT AS TO YOUR TAXATION POSITION, YOU SHOULD CONSULT YOUR INDEPENDENT PROFESSIONAL ADVISER WITHOUT DELAY. 6. INFORMATION (A) BUSINESS DESCRIPTION REGARDING Stanhome Inc. is a worldwide marketer and distributor of high- STANHOME quality consumer products. Key activities include the sale to INC. independent retailers of giftware and collectibles (figurines, musical boxes, dolls and ornaments) through its Enesco Giftware Group, the direct-response sale of dolls, plates and figurines through its Hamilton Direct Response Group, and the direct selling of home care and personal care products, cosmetics and giftware through its Stanhome Direct Selling Group. Stanhome Inc. is a Fortune 500 company and operates primarily in North America, Europe, Australasia and Latin America. Giftware and direct-response products are principally sourced from third parties, primarily Far Eastern. Home and personal care products are manufactured at Stanhome's own facilities, as well as being sourced from third parties. In 1993, international operations accounted for 36 per cent. of total sales and Stanhome Inc. employed 4,200 people worldwide. Stanhome Inc. has a market capitalisation of approximately $690 million and is listed on the New York Stock Exchange. (B) CONSOLIDATED FINANCIALS For the year ended 31st December, 1993, Stanhome Inc. recorded a profit before tax of (Pounds)44 million (1992: (Pounds)58 million) on net sales of (Pounds)507 million (1992: (Pounds)493 million). Shareholders' funds amounted to (Pounds)172 million (1992: (Pounds)170 million). Notes: The results above are converted from US Dollars at the following exchange rates: Financial year ended 31st December, 1993--US$1.48:(Pounds)1, Financial year ended 31st December, 1992-- US$1.51:(Pounds)1. Further information relating to Stanhome Inc. is set out in Appendix II. 7. INFORMATION Stanhome is a newly-incorporated, wholly-owned subsidiary of REGARDING Stanhome Inc. established for the purposes of the Offer. STANHOME Further information relating to Stanhome is set out in Appendix III. 8. INFORMATION (A) BUSINESS DESCRIPTION REGARDING The business of Lilliput was founded in 1982 and the Lilliput LILLIPUT Group has become one of the UK's leading collectibles groups. The Lilliput Group manufactures and markets high-quality, hand-painted miniature cottages under the "Lilliput Lane" brand name. There are approximately 210 pieces in Lilliput's product range which are marketed in a number of different collections to both the collectibles and giftware markets. Lilliput has successfully developed what its Directors believe to be one of the largest collectors' clubs of any UK giftware or collectibles manufacturer. The Lilliput Collectors' Club currently has over 72,000 members worldwide and allows Lilliput direct access to its end customers. The Lilliput Group operates primarily in the UK, through more than 2,000 retail outlets and exports its products to some 48 countries. Lilliput also has a 10 marketing and distribution subsidiary in Columbia, Maryland, US which markets the products of other collectibles and giftware companies in addition to Lilliput's own products. In the year ended 31st December, 1993, sales to international markets accounted for approximately 38.6 per cent. of the Lilliput Group's total sales and the Lilliput Group employed an average of 565 people. (B) CONSOLIDATED FINANCIALS In the year ended 31st December, 1993, the Lilliput Group reported profit before tax of (Pounds)3.1 million (1992: (Pounds)2.0 million) on sales of (Pounds)16.5 million (1992: (Pounds)13.6 million). As at 31st December, 1993, shareholders' funds stood at (Pounds)4.7 million (1992: (Pounds)2.3 million). On 1st September, 1994, Lilliput reported unaudited interim results for the six months ended 30th June, 1994, of profit before tax of (Pounds)1.13 million (1993: (Pounds)1.08 million) on sales of (Pounds)7.5 million (1993 (Pounds)7.1 million). As at 30th June, 1994, shareholders' funds stood at (Pounds)5.06 million (1993: (Pounds)2.77 million). Further information relating to Lilliput and its interim statement are set out in Appendix IV. 9. REASONS Stanhome Inc.'s intention is to strengthen its position as a FOR THE leader in the marketing and distribution of giftware and to OFFER expand further its geographical presence outside North America. The acquisition of Lilliput, a manufacturer and distributor of giftware and collectibles, is directly in line with Stanhome Inc.'s strategy of increased access to European markets through on-the-ground presence and represents the addition of a strong brand to the Enesco Giftware Group's existing product lines. The board of Stanhome Inc. believes that the acquisition of Lilliput should allow the Enesco Giftware Group to benefit from synergies, including the leveraging of resources with Enesco's European operations in the UK and Germany and other distributorships in Europe. In addition, the combination of Lilliput's and Enesco's strong management teams and efficient production, marketing and financial organisations should assist in the successful growth of the two organisations. Stanhome Inc. believes that the prospects for the management 10. MANAGEMENT and employees of the Lilliput Group will be enhanced by the AND merger. The financial resources and geographical spread of the EMPLOYEES Stanhome Group will help Lilliput capitalise on its strong brand name and facilitate expansion. Lilliput has been assured by Stanhome Inc. that the existing employment rights of all employees of the Lilliput Group, including their existing pension rights, will be fully safeguarded. 11. PROCEDURE TO ACCEPT THE OFFER, YOU SHOULD COMPLETE BOXES 1 AND 3 AND FOR SIGN BOX 2 OF THE ENCLOSED FORM OF ACCEPTANCE IN ACCORDANCE ACCEPTANCE WITH THE INSTRUCTIONS CONTAINED THEREIN, WHICH INSTRUCTIONS SHALL BE DEEMED TO FORM PART OF THE TERMS OF THE OFFER. THE SIGNED AND COMPLETED FORM OF ACCEPTANCE SHOULD BE RETURNED WITH THE RELEVANT SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENT(S) OF TITLE EITHER BY POST OR BY HAND TO THE ROYAL BANK OF SCOTLAND PLC, REGISTRAR'S DEPARTMENT, NEW ISSUES SECTION, P.O. BOX 859, CONSORT HOUSE, EAST STREET, BEDMINSTER, BRISTOL, BS99 1XZ, OR BY HAND ONLY TO THE ROYAL BANK OF SCOTLAND PLC, REGISTRAR'S DEPARTMENT, NEW ISSUES SECTION, 15 FEATHERSTONE STREET, LONDON EC1Y 8QS AS SOON AS POSSIBLE AND IN ANY EVENT SO AS TO BE RECEIVED NOT LATER THAN 3.00 P.M. ON 30TH SEPTEMBER, 1994. The enclosed pre-paid envelope, addressed to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol, BS99 1XZ may be used by Lilliput Shareholders currently resident in the UK to return the Form of Acceptance. No acknowledgment of receipt of documents will be given. If your share certificate(s) and/or other document(s) of title are not readily available or have been lost, the Form of Acceptance should nevertheless be completed, signed and returned as indicated above. 11 You should also write to the Registrars of Lilliput advising them of the loss and requesting them to send a letter of indemnity to you for completion. The share certificate(s) and/or other document(s) of title should then be forwarded to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol, BS99 1XZ as soon as possible thereafter, although no payment will be made until the share certificate(s) and/or other document(s) of title, or an acceptable letter of indemnity in lieu thereof, is/are received. Stanhome and Goldman Sachs reserve the right, subject to the provisions of the Code, to treat acceptances of the Offer as valid even if not complete in all respects or not accompanied by the relevant certificate(s) and/or other document(s) of title. THE ATTENTION OF LILLIPUT SHAREHOLDERS WHO ARE CITIZENS OR RESIDENTS OF JURISDICTIONS OUTSIDE THE UK IS DRAWN TO PARAGRAPH 6 OF PART B OF APPENDIX I AND TO THE RELEVANT PROVISIONS OF THE FORM OF ACCEPTANCE. 12. SETTLEMENT Subject to the Offer becoming or being declared unconditional in all respects and to compliance with the procedure for acceptance as set out above, cheques drawn on a branch of The Royal Bank of Scotland plc within the town clearing system will be despatched to each accepting Lilliput Shareholder, or as may be directed in the Form of Acceptance, promptly, but in any event within 21 days of the Offer becoming or being declared wholly unconditional or within 21 days of receipt of a valid and complete acceptance, whichever is the later. Unless other instructions are given in the Form of Acceptance, all cheques will be sent to accepting Lilliput Shareholders (or to the first-named Lilliput Shareholder in the case of joint holders) at the address indicated in the Form of Acceptance. If the Offer does not become or is not declared unconditional in all respects, Forms of Acceptance, share certificates and/or other documents of title will be returned by post or by any other method approved by the Panel as promptly as practicable but in any event within 14 days of the Offer lapsing. All documents or remittances sent by or to Lilliput Shareholders or their designated agents will be sent at their risk. 13. FURTHER Your attention is drawn to the following Appendices which form INFORMATION part of this document. Appendix I Conditions and Further Terms of the Offer Appendix II Financial and Other Information on Stanhome Inc. Appendix III Financial and Other Information on Stanhome Appendix IV Financial and Other Information on Lilliput Appendix V Additional Information Yours faithfully, for GOLDMAN SACHS INTERNATIONAL Richard A. Sapp Managing Director 12 APPENDIX I CONDITIONS AND FURTHER TERMS OF THE OFFER PART A CONDITIONS OF THE OFFER The Offer is conditional on: (i) valid acceptances being received (and not, where permitted, withdrawn) by 3.00 p.m. on 30th September, 1994, (or such later times(s) and/or date(s) as Stanhome may decide), in respect of not less than 90 per cent. (or such lesser percentage as Stanhome may decide) of the Lilliput Shares to which the Offer relates, provided that this condition will not be satisfied unless Stanhome has acquired or agreed to acquire (pursuant to the Offer or otherwise) Lilliput Shares carrying in aggregate over 50 per cent. of the voting rights exercisable at general meetings of Lilliput on such basis as may be required by the Panel (including for this purpose, to the extent (if any) required by the Panel, any voting rights attaching to any Lilliput Shares which are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of conversion or subscription rights, including options under the Lilliput Share Option Schemes, or otherwise); and for this purpose, the expression "Lilliput Shares to which the Offer relates" means the aggregate of: (a) Lilliput Shares which have been allotted on or prior to the date of the Offer; and (b) any Lilliput Shares allotted after the date of the Offer but on or prior to the first closing date of the Offer (or such later time(s) and/or date(s) as Stanhome may decide) but excluding Lilliput Shares which are at the date of the Offer held by Stanhome or any associate (within the meaning of Section 430E of the Companies Act 1985) of Stanhome or which, at that date, Stanhome or any such associate has contracted to acquire (within the meaning of Section 428(5) of the Companies Act 1985); (ii) the Office of Fair Trading indicating, in terms satisfactory to Stanhome, that it is not the intention of the Secretary of State for Trade and Industry to refer the proposed acquisition of Lilliput by Stanhome, or any matters arising therefrom, to the Monopolies and Mergers Commission; (iii) all filings having been made and all or any applicable waiting periods under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations thereunder having expired or been terminated as appropriate in respect of the proposed acquisition of Lilliput by Stanhome or any matters arising therefrom; (iv) no government or governmental, quasi-governmental, supranational, statutory or regulatory body, or any court, professional association or trade agency, or any other person or body in any jurisdiction having instituted, implemented or threatened any action, proceedings, suit, investigation or enquiry or enacted, made or proposed any statute or regulation or order or taken any other step that would or might: (a) prohibit or materially restrict, restrain or impose additional material conditions or obligations with respect to, or otherwise materially interfere with the implementation of, the Offer or the acquisition of Lilliput Shares by Stanhome or any matters arising therefrom, (b) result in a material delay in the ability of Stanhome, or render Stanhome unable, to acquire some or all of the Lilliput Shares, (c) require or prevent the divestiture by any member of the Stanhome Group or any partnership, joint venture, firm or company in which any of them is materially interested (together the "wider Stanhome Group") or any member of the Lilliput Group or any partnership, joint venture, firm or company in which any of them is materially interested (together the "wider Lilliput Group") of all or any material or substantial portion of their businesses, assets or property or impose any limitation on the ability of any of them to conduct their respective businesses or own their respective assets or properties, (d) impose any material limitation on the ability of the Stanhome Group to acquire or hold or exercise effectively all rights of Lilliput Shares (whether acquired pursuant to the Offer or otherwise), (e) make the Offer or the proposed acquisition of Lilliput illegal, void or unenforceable, (f) otherwise materially adversely affect any or all of the businesses, assets, prospects or profits of the wider Stanhome Group or the wider Lilliput Group or the exercise of rights of shares of any company in the Lilliput Group, or (g) require any member of the wider Stanhome Group or the wider Lilliput Group to offer to acquire any shares in any member of the wider Lilliput Group owned by any third party; and all applicable waiting periods during which such government or governmental, quasi-governmental, supranational, statutory or regulatory body, or any court, professional association or trade agency, or any other person or body in any jurisdiction could institute, implement or threaten any such action, proceedings, suit, investigation or enquiry having expired, lapsed or terminated; (v) all authorisations, orders, grants, consents, permissions and approvals necessary or appropriate for or in respect of the Offer and the proposed acquisition of Lilliput by Stanhome or any matters arising therefrom being obtained in terms satisfactory to Stanhome from appropriate governments or governmental, quasi-governmental, supranational, statutory or regulatory bodies, or any courts, professional associations or trade agencies, or any other persons or bodies in any jurisdiction and such authorisations, orders, grants, consents, permissions and approvals remaining in full force and effect and all necessary filings having been made, all appropriate waiting periods having expired, lapsed or been terminated and all necessary statutory or regulatory obligations in any jurisdiction in respect of the Offer and the proposed acquisition of Lilliput by Stanhome or any matters arising therefrom having been complied with; (vi) there being no indication from the relevant authorities or any party with whom any member of the wider Lilliput Group has any contractual or other relationship that the interests held by any member of the wider Lilliput Group under licences, leases, consents, permits and other rights will be adversely amended or otherwise affected (in any such case to the extent material in the context of the wider Lilliput Group, taken as a whole) by the proposed acquisition or any matters arising therefrom, that such licences, leases, consents, permits and other rights are not in full force and effect and that there is any intention to revoke or amend any of the same (in each case to an extent material in the context of the wider Lilliput Group); 13 (vii) there being no provision of any agreement, instrument or other arrangement to which any member of the wider Lilliput Group is a party or by or to which any of its assets may be bound or subject which as a consequence of the Offer or the acquisition of the Lilliput Group by Stanhome or any matters arising therefrom would or might to an extent which is material in the context of the wider Lilliput Group taken as a whole have the result that: (a) any indebtedness of any member of the wider Lilliput Group becomes or is capable of being declared repayable immediately or earlier than the repayment date stated in such agreement, instrument or other arrangement, (b) any mortgage, charge or other security interest is created over the whole or any part of the business, property or assets of any member of the wider Lilliput Group, (c) any such agreement, instrument or other arrangement is terminated or modified or any action is taken or onerous obligation arises thereunder, (d) the value of any member of the wider Lilliput Group or its financial or trading position is prejudiced or adversely affected, (e) any asset or, other than in the ordinary course of business, any asset of the wider Lilliput Group is disposed of, (f) the interest or business of any member of the wider Lilliput Group in or with any other person, firm or company (or any arrangement relating to such interest or business) is terminated or adversely affected, or (g) any member of the wider Lilliput Group ceases to be able to carry on business under any name under which it currently does so; (viii) since 1st September, 1994 no material litigation, arbitration, prosecution or other legal proceedings having been instituted or threatened or become pending against any member of the wider Lilliput Group or to which any member of the wider Lilliput Group is a party and no investigation by any government or quasi-governmental, supranational, regulatory or investigative body against or in respect of any member of the wider Lilliput Group having been threatened, announced, or instituted or remaining outstanding by, against, or in respect of any member of the wider Lilliput Group; (ix) no material adverse change having occurred in the business or financial or trading position or prospects of any member of the wider Lilliput Group since 1st September, 1994; (x) Stanhome not having discovered that any business, financial or other information of any member of the Lilliput Group publicly disclosed by or on behalf of any member of the Lilliput Group either contains a material misrepresentation of fact or omits to state a fact necessary to make the information contained therein not materially misleading; (xi) save as disclosed in Lilliput's published report and audited accounts for the year ended 31st December, 1993 or in any public announcement released to the Stock Exchange prior to or at the same time as the announcement of the Offer, no member of the Lilliput Group having since 31st December, 1993: (a) issued or authorised or proposed the issue of additional shares of any class, other than pursuant to options granted under the Lilliput Share Option Schemes, (b) issued or authorised or proposed the issue of or granted securities convertible into or rights, warrants or options to acquire such shares (referred to in subparagraph (a) above) or convertible securities, (c) recommended, declared, paid or made or proposed to recommend, declare, pay or make any dividend, bonus or other distribution, other than the interim dividend of 1.65p per Lilliput Share declared on 1st September, 1994, (d) authorised or proposed or announced its intention to propose any merger or acquisition or disposal or transfer of material assets (save in the ordinary course of business) or shares or any change in its share or loan capital, (e) (save in the ordinary course of business) incurred any indebtedness in aggregate amount which is material in the context of the Lilliput Group, (f) (save in the ordinary course of business) disposed of or transferred, mortgaged or encumbered any asset or right, title or interest in any asset or entered into any contract, commitment or arrangement (whether in respect of capital expenditure or otherwise) which is of a long term or unusual nature or which involves or could involve any obligation of a nature or magnitude which is material in the context of the Lilliput Group, (g) entered into any contract, reconstruction, amalgamation, arrangement or other transaction otherwise than in the ordinary course of business, (h) entered into, or varied the terms of, any service agreements with any of the directors of Lilliput, (i) taken any corporate action or had any legal proceedings started or threatened against it for its winding-up, dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues, or (j) entered into any contract, commitment or agreement with respect to any of the transactions or events referred to in this condition (xi); and (xii) no contingent liability having arisen or been incurred which might be expected materially adversely to affect a member of the Lilliput Group. Stanhome reserves the right to waive all or any of conditions (ii) to (xii) (inclusive) above, in whole or in part. Conditions (ii) to (xii) (inclusive) must be satisfied as at, or waived on or before, the 21st day after the later of 30th September, 1994 and the date on which condition (i) is fulfilled (or in each case such later date as the Panel may agree) provided that Stanhome shall be under no obligation to waive or treat as satisfied any of conditions (ii) to (xii) (inclusive) by a date earlier than the latest date specified above for the satisfaction thereof notwithstanding that the other conditions of the Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment. If Stanhome is required by the Panel to make an offer for Lilliput Shares under the provisions of Rule 9 of the Code, Stanhome may make such alterations to the conditions as are necessary to comply with the provisions of that Rule. The Offer will lapse if it is referred to the Monopolies and Mergers Commission or if the European Commission in respect thereof either initiates proceedings under Article 6(1)(c) of Council Regulation (EEC) 4064/89 or makes a referral to a competent authority of the United Kingdom under Article 9(1) of that Regulation, before (in any such case) the later of 30th September, 1994 and the date when the Offer becomes or is declared unconditional as to acceptances. 14 PART B FURTHER TERMS OF THE OFFER Except where the context requires otherwise, any reference in this Part B of Appendix 1 and in the Form of Acceptance to: (i) "the Offer" shall mean the Offer and any revision thereof or extension thereto and shall include any election available in connection with it; (ii) "the Offer becoming unconditional" shall include the Offer being declared unconditional; (iii) "the Offer being or becoming unconditional" shall be construed as a reference to the Offer being or becoming unconditional as to acceptances, whether or not any other condition of the Offer remains to be fulfilled; (iv) the "acceptance condition" shall mean the condition as to acceptances set out in paragraph (i) of Part A of this Appendix I; (iv) an extension of the Offer shall, in relation to the Offer, include an extension of the date by which the acceptance condition has to be fulfilled; and (v) "the Offer document" shall mean any document containing the Offer. 1. ACCEPTANCE PERIOD (a) The Offer will initially remain open for acceptance until 3.00 p.m. on 30th September, 1994. Although no revision is envisaged, if the Offer is revised it will remain open for acceptance for a period of at least 14 days from the date of posting of written notification of the revision to Lilliput Shareholders. Except with the consent of the Panel, no such written notification of the revised Offer may be posted to Lilliput Shareholders after 25th October, 1994 or, if later, the date falling 14 days prior to the last date on which the Offer can become unconditional. (b) The Offer, whether revised or not, shall not (except with the consent of the Panel) be capable of becoming or being declared unconditional after midnight on 8th November (or any earlier time and/or date beyond which Stanhome has stated that the Offer will not be extended and in respect of which it has not withdrawn that statement) nor of being kept open after that time and/or date unless it has previously become unconditional. However, Stanhome reserves the right, with the consent of the Panel, to extend the Offer to a later time(s) and/or date(s). Stanhome may not, for the purpose of determining whether the acceptance condition has been satisfied, take into account acceptances received, or purchases of Lilliput Shares made, after 1.00 p.m. on 8th November, 1994 (or on any earlier date beyond which Stanhome has stated that the Offer will not be extended and in respect of which it has not withdrawn that statement) or such later time and/or date as Stanhome may with the permission of the Panel decide. If the Offer is extended beyond midnight on 8th November, 1994 acceptances received and purchases made in respect of which relevant documents have been received by The Royal Bank of Scotland plc after 1.00 p.m. on the relevant date may (except where the Code otherwise permits) only be taken into account with the consent of the Panel. (c) If the Offer becomes unconditional, it will remain open for acceptance for not less than 14 days after the date on which it would otherwise have expired. If the Offer has become unconditional and it is stated that the Offer will remain open until further notice, then not less than 14 days' notice will be given prior to the closing of the Offer. (d) If a competitive situation arises after Stanhome has given a no extension statement or a no increase statement, Stanhome may (if it has specifically reserved the right to do so at the time such statement was made) withdraw such statement provided that notice is given to that effect within 4 business days after the day of the announcement of the competing offer and Lilliput Shareholders are informed in writing thereof. Stanhome may (if it has reserved the right to do so) choose not to be bound by the terms of a no increase statement or a no extension statement, if it would otherwise prevent the posting of an increased or improved Offer which is recommended for acceptance by the Board of Lilliput, or in other circumstances permitted by the Panel. (e) For the purpose of determining at any particular time whether the acceptance condition has been satisfied, Stanhome shall not be bound (unless otherwise required by the Panel) to take into account any Lilliput Shares which have been unconditionally allotted or issued before such determination takes place, unless The Royal Bank of Scotland plc on behalf of Stanhome has received written notice of the relevant details of such allotment or issue (including the price thereof) before that time. Telex or facsimile transmission will not be sufficient for this purpose. 2. ANNOUNCEMENTS (a) By 8.30 a.m. on the business day ("the relevant day") following the day on which the Offer is due to expire or becomes unconditional or is revised or extended, or such later time and/or date as the Panel may agree, Stanhome will make an appropriate announcement and simultaneously inform the Stock Exchange of the position. Such announcement will also state (unless otherwise permitted by the Panel) the total number of Lilliput Shares and rights over Lilliput Shares (as nearly as practicable) (i) for which acceptances of the Offer have been received (showing the extent, if any, to which such acceptances have been received from persons acting in concert with Stanhome), (ii) acquired or agreed to be acquired by or on behalf of Stanhome or any person acting in concert with Stanhome during the Offer Period and (iii) held by or on behalf of Stanhome or any person acting in concert with Stanhome prior to the Offer Period, and will specify the percentage of the share capital of Lilliput represented by these figures. Any decision to extend the time and/or date by which the acceptance condition has to be fulfilled may be made at any time up to, and will be announced not later than, 8.30 a.m. on the relevant day (or such later time and/or date as the Panel may agree) and the announcement will state the next expiry date. In computing the number of Lilliput Shares represented by acceptances and purchases, there may, at the discretion of Stanhome, be included or excluded for announcement purposes acceptances and purchases which are not complete in all respects or are subject to verification where such acceptances or purchases of Lilliput Shares could be counted towards fulfilling the acceptance condition in accordance with paragraph 5(k) below. (b) References in this Part B of Appendix I to the making of an announcement by Stanhome include the release of an announcement by public relations consultants or by Goldman Sachs to the press, and the delivery or telephone, telex or facsimile or other electronic transmission of an announcement to the Stock Exchange. An announcement made otherwise than to the Stock Exchange will be notified simultaneously to the Stock Exchange. 15 3. RIGHTS OF WITHDRAWAL (a) If Stanhome, having announced the Offer to be unconditional, fails to comply by 3.30 p.m. on the relevant day (or such later time and/or date as the Panel may agree) with any of the other requirements specified in paragraph 2(a) above, an accepting Lilliput Shareholder may immediately thereafter withdraw his acceptance by written notice (signed by the accepting shareholder or his agent duly appointed in writing and evidence of whose appointment is produced with the notice) given to The Royal Bank of Scotland plc, Registrar's Department New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ on behalf of Stanhome. Subject to paragraph 1(b) above, this right of withdrawal may be terminated not less than 8 days after the relevant day by Stanhome confirming, if that be the case, that the Offer is still unconditional and complying with the other requirements specified in paragraph 2(a) above. If any such confirmation is given, the first period of 14 days referred to in paragraph 1(c) above will run from the date of such confirmation and compliance. (b) If by 3.00 p.m. on 21st October, 1994 (or such later time and/or date as the Panel may agree) the Offer has not become unconditional, an accepting Lilliput Shareholder may withdraw his acceptance at any time thereafter at the address and in the manner referred to in paragraph 3(a) above before the earlier of (i) the time that the Offer becomes unconditional and (ii) the final time for lodgement of acceptances which can be taken into account in accordance with paragraph 1(b) above. If Stanhome withdraws a no extension statement or a no increase statement in accordance with paragraph 1(d) above, any Lilliput Shareholder who accepts the Offer after the date of such statement may withdraw his acceptance thereafter at the address and in the manner referred to in paragraph 3(a) above for a period of 8 days after the date of posting of written notice to that effect by Stanhome to the relevant Lilliput Shareholders. (c) Except as provided by this paragraph 3, acceptances and elections shall be irrevocable. In this paragraph 3, "written notice" (including any letter of appointment, direction or authority) means notice in writing bearing the original signature(s) of the relevant accepting Lilliput Shareholders or his/their agent(s) duly appointed in writing (evidence of whose appointment is produced with the notice) and telex or facsimile transmissions or copies will not be sufficient. No notice which appears to Stanhome, its agents or advisers, to have been sent from the United States or Canada or by a North American person will be treated as valid. 4. REVISED OFFER (a) Although no such revision is envisaged, if the Offer (in its original or any previously revised form(s)) is revised (either in its terms or conditions or otherwise) and such revision represents on the date on which such revision is announced (on such basis as Goldman Sachs may consider appropriate) no diminution in the value of the consideration previously offered, the benefit of the revised Offer (subject to this paragraph 4 and paragraph 6 below) will be made available to Lilliput Shareholders who have accepted the Offer in its original or any previously revised form(s)) (hereinafter called "Previous Acceptor(s)"). The acceptance by or on behalf of a Previous Acceptor of the Offer (in its original or any previously revised form(s)) shall, subject as provided in this paragraph 4 and paragraph 6 below, be deemed an acceptance of the Offer as so revised and shall also constitute an appointment of any director of Stanhome or of Goldman Sachs as his attorney and/or agent with authority to accept any such revised Offer on behalf of such Previous Acceptor. (b) Although no such revision is envisaged, if any revised Offer provides for Lilliput Shareholders who accept it to elect for (or accept) alternative forms of consideration, the acceptance by or on behalf of a Previous Acceptor of the Offer (in its original or any previously revised form(s)) shall, subject as provided below, also constitute an appointment of any director of Stanhome or of Goldman Sachs as his attorney and/or agent to make on his behalf elections for and/or to accept such alternative forms of consideration on his behalf as such attorney and/or agent in his absolute discretion thinks fit and to execute on behalf of and in the name of such Previous Acceptor all further documents (if any) as may be required to give effect to such acceptances and/or elections. In making such acceptance or any such election, such attorney and/or agent shall take into account the nature of any previous acceptances and/or elections made by the Previous Acceptor and such other facts or matters as he may reasonably consider relevant. (c) The deemed acceptances referred to in paragraphs 4(a) and (b) above shall not apply and the authorities conferred by paragraphs 4(a) and (b) above shall not be exercised if as a result thereof a Previous Acceptor would receive less in aggregate in cash than he would have received as a result of his acceptance of the Offer in the form in which it was originally accepted by him. (d) The deemed acceptances referred to in paragraphs 4(a) and (b) above shall not apply and the authorities conferred by paragraphs 4(a) and (b) above shall be ineffective to the extent that a Previous Acceptor shall lodge, within 14 days of the posting of the document pursuant to which the revision of the Offer referred to in paragraphs 4(a) and (b) above is made available to the Lilliput Shareholders (or such later date as Stanhome may determine), a form in which he validly elects to receive the consideration receivable by him under that revised Offer in some other manner. (e) The authorities referred to in this paragraph 4 and any acceptance of a revised Offer and/or election pursuant thereto shall be irrevocable unless and until the Previous Acceptor becomes entitled to withdraw his acceptance under paragraph 3 above and duly does so. (f) Stanhome reserves the right to treat an executed Form of Acceptance relating to the Offer (in its original or any previously revised form(s)) which is received after the announcement or the issue of the Offer in any revised form as a valid acceptance of the revised Offer and such acceptance shall constitute an authority in the terms of this paragraph 4 mutatis mutandis on behalf of the relevant Lilliput Shareholders. 5. GENERAL (a) Except with the consent of the Panel, the Offer will lapse unless all the conditions to the Offer have been fulfilled by or (if capable of waiver) waived by or (where appropriate) satisfied as at midnight on 21st October, 1994 or within 21 days after the date on which the Offer becomes unconditional, (whichever is the later), or such later date as Stanhome may, with the consent of the Panel, decide. If the Offer is referred to the Monopolies and Mergers Commission before 30th September, 1994 or the date when the Offer becomes unconditional (whichever is the later) the Offer will lapse. References in this paragraph 5(a) to the Offer lapsing mean that the Offer will thereupon cease to be capable of further acceptance and Lilliput Shareholders who have accepted the Offer and Stanhome will cease to be bound by acceptances effected on or before the date on which the Offer so lapses. 16 (b) No acknowledgement of receipt of any Form of Acceptance, share certificate(s) or other document(s) of title will be given. All communications, notices, certificates, documents of title and remittances to be delivered by or to or sent to or from Lilliput Shareholders or as otherwise directed will be delivered by or to or sent to or from them (or their designated agents) at their risk. (c) The expression "Offer Period" when used in this document means the period commencing on 1st September, 1994 and ending on whichever of the following dates shall be the latest:- (i) 30th September, 1994; (ii) the date on which the Offer lapses; and (iii) the date on which the Offer becomes unconditional. (d) All references in this document and in the Form of Acceptance to 30th September, 1994, shall (except in paragraph 5(c) above and where the context otherwise requires), if the expiry date of the Offer shall be extended, be deemed to refer to the expiry date of the Offer as so extended. (e) Except with the consent of the Panel, settlement of the consideration to which any Lilliput Shareholder is entitled under the Offer will be implemented in full in accordance with the terms of the Offer without regard to any lien, right of set-off, counterclaim or other analogous right to which Stanhome may otherwise be, or claim to be, entitled as against such Lilliput Shareholder. (f) Subject to paragraph 5(k) of this Part B, notwithstanding that no share certificate(s) is/are delivered in respect of it, a duly completed Form of Acceptance (i) executed as a deed by SEPON Limited and endorsed on behalf of the Stock Exchange to the effect that the shares to which it refers are the whole or part of a holding registered in the name of SEPON Limited and/or are Lilliput Shares to which SEPON Limited is unconditionally entitled immediately to become the registered holder or (ii) executed by any other person(s) and endorsed on behalf of the Stock Exchange to the effect that such person(s) is/are unconditionally entitled immediately to become the registered holder(s) of the Lilliput Shares to which it refers and that one or more Talisman transfer(s) in favour of such person(s) in respect thereof is/are in the course of registration shall (if otherwise in order) be treated by Stanhome and Goldman Sachs as an acceptance valid in all respects on the date of its actual receipt provided that, on its presentation to the Registrars of Lilliput, it is unconditionally accepted for registration. (g) The instructions, terms, provisions and authorities contained in or deemed to be incorporated in the Form of Acceptance constitute part of the terms of the Offer. Words and expressions defined in this document shall, unless the context otherwise requires, have the same meanings when used in the Form of Acceptance. (h) The Offer, the Form of Acceptance and all acceptances thereof and all elections thereunder or pursuant thereto and all contracts made pursuant thereto and action taken or made or deemed to be taken or made under any of the foregoing shall be governed by and construed in accordance with English law. Execution by or on behalf of a Lilliput Shareholder of a Form of Acceptance constitutes his submission, in relation to all matters arising out of the Offer and Form of Acceptance, to the jurisdiction of the Courts of England. (i) Any omission to despatch this document or the Form of Acceptance or any notice required to be given under the terms of the Offer to, or any failure to receive the same by, any person to whom the Offer is made or should be made shall not invalidate the Offer in any way or create any implication that the Offer has not been made to any such person. (j) Stanhome and Goldman Sachs reserve the right to treat acceptances of the Offer and/or elections pursuant thereto as valid if received by or on behalf of either of them at any place or places determined by them otherwise than as stated herein or in the Form of Acceptance. (k) Notwithstanding the right reserved by Stanhome and Goldman Sachs to treat a Form of Acceptance as valid even though not entirely in order or not accompanied by the relevant share certificate(s) and/or other document(s) of title, except with the consent of the Panel an acceptance of the Offer will only be counted towards fulfilling the acceptance condition if the requirements of Note 4 and, if applicable, Note 6 on Rule 10 of the Code are satisfied in respect of it. Except with the consent of the Panel, a purchase of Lilliput Shares by Stanhome or its nominee(s) (or, if Stanhome is required to make an offer or offers under the provisions of Rule 9 of the Code, by a person acting in concert with Stanhome for the purpose of such offer(s) or its nominee(s)) will only be counted towards fulfilling the acceptance condition if the requirements of Note 5 and, if applicable, Note 6 on Rule 10 of the Code are satisfied in respect of it. The Offer may not be accepted otherwise than by means of a Form of Acceptance. (l) Except with the consent of the Panel, the Offer will not become unconditional until The Royal Bank of Scotland plc has issued a certificate to Stanhome or Goldman Sachs (or their respective agents) which states the number of Lilliput Shares in respect of which acceptances have been received which meet the requirements of Note 4 on Rule 10 of the Code and the number of Lilliput Shares otherwise acquired (whether before or during the Offer Period) which meet the requirements of Note 5 on Rule 10 of the Code and, in each case, if applicable, Note 6 on Rule 10 of the Code. Copies of such certificate will be sent to the Panel as soon as possible after it is issued. (m) All mandates and other instructions to Lilliput given by Lilliput Shareholders or in force relating to holdings of Lilliput Shares will, unless and until revoked, continue in force in relation to such shareholders. (n) All powers of attorney, appointments of agents and authorities on the terms conferred by or referred to in this Part B of Appendix 1 or in the Form of Acceptance are given by way of security for the performance of the obligations of the Lilliput Shareholders concerned and are irrevocable in accordance with Section 4 of the Powers of Attorney Act 1971, except in the circumstances where the donor of such power of attorney or authority is entitled to withdraw his acceptance in accordance with paragraph 3 above and duly does so. (o) The Offer extends to any Lilliput Shareholders not resident in the UK to whom this document, the Form of Acceptance and any related documents may not have been despatched and such Lilliput Shareholders may collect copies of those documents from The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ. Stanhome and Goldman Sachs reserve the right to notify any matter, including the making of 17 the Offer, to all or any Lilliput Shareholders with a registered address outside the UK (or whom Stanhome knows to be nominees, trustees or custodians for such persons) by announcement or paid advertisement in a daily newspaper published and circulated in the UK, in which event such notice shall be deemed to have been sufficiently given notwithstanding any failure by a Lilliput Shareholder to receive such notice and all references in this document to notice, or the provision of information in writing, by Stanhome, Goldman Sachs and/or their respective agents and/or public relations consultants shall be construed accordingly. (p) The Offer is made at 11.59 p.m. on 9th September, 1994 and is capable of acceptance from and after that time. Forms of Acceptance are available for collection from Goldman Sachs, Peterborough Court, 133 Fleet Street, London EC4A 2BB from that time. The Offer is being made by means of this document and by means of an advertisement in the London edition of the Financial Times dated 10th September, 1994. (q) If the Offer does not become unconditional in all respects, Forms of Acceptance, share certificate(s) and other document(s) of title will be returned by post (or by such other method as may be approved by the Panel) within 14 days of the Offer lapsing to the person or agent whose name and address is set out in the relevant box on the Form of Acceptance or, if none is set out, to the first-named holder at his registered address outside the United States or Canada. No such documents will be sent to an address in the United States or Canada. (r) If sufficient acceptances are received, Stanhome intends to apply the provisions of Sections 428 to 430F of the Companies Act 1985 to acquire compulsorily any outstanding Lilliput Shares. 6. LILLIPUT OVERSEAS SHAREHOLDERS (a) The making of the Offer in, or to certain persons resident in, jurisdictions outside the UK or to certain persons who are citizens, residents or nationals of jurisdictions outside the UK may be affected by the laws of the relevant overseas jurisdiction. Lilliput Shareholders who are citizens, residents or nationals of jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements. It is the responsibility of any such person wishing to accept the Offer to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consents which may be required, or the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territory. Any such Lilliput Shareholder will be responsible for any issue, transfer or other taxes by whomsoever payable and Stanhome shall be entitled to be fully indemnified and held harmless by such shareholder for any such issue, transfer or other taxes as Stanhome may be required to pay. (b) In particular, the Offer is not being made directly or indirectly in, or by the use of the mails of, or by any means or instrumentality of interstate or foreign commerce of, or any facilities of a national securities exchange of, the United States or Canada. This includes, but is not limited to, facsimile transmission, telex and telephone. Stanhome will not (unless otherwise determined by Stanhome in its sole discretion and save as provided for in paragraph 6(c) below) mail or deliver, or authorise the mailing or delivery of, this document, the Form of Acceptance or any related offering document in or into the United States or Canada, including to Lilliput Shareholders with registered addresses in the United States or Canada or to persons whom Stanhome knows to be nominees holding Lilliput Shares for such persons. Persons receiving such documents should not distribute or send them in or into the United States or Canada or use such mails or any such means or instrumentality for any purpose directly or indirectly in connection with the Offer and so doing may invalidate any proposed acceptance. Persons wishing to accept the Offer should not use such mails or any such means or instrumentality for any purpose directly or indirectly related to acceptance of the Offer. Envelopes containing Form(s) of Acceptance should not be postmarked in the United States or Canada or otherwise despatched from the United States or Canada for the receipt of the remittance of cash or for the return of Form(s) of Acceptance, certificate(s) for Lilliput Shares and/or other document(s) of title. (c) The provisions of this paragraph 6 and/or any other terms of the Offer relating to citizens, residents or nationals of jurisdictions outside the UK may be waived, varied or modified as regards specific Lilliput Shareholder(s) or on a general basis by Stanhome in its absolute discretion. Subject as aforesaid, the provisions of this paragraph 6 shall have precedence over any terms of the Offer which are inconsistent therewith. 7. FORM OF ACCEPTANCE Each Lilliput Shareholder by whom, or on whose behalf, a Form of Acceptance is executed irrevocably undertakes, represents, warrants and agrees to and with Stanhome and Goldman Sachs (so as to bind him, his personal representatives and his heirs, successors and assigns) that: (a) the execution of a Form of Acceptance shall constitute an acceptance of the Offer in respect of the number of Lilliput Shares inserted or deemed to be inserted in Box 1 of the Form of Acceptance on and subject to the terms and conditions set out or referred to in this document and the Form of Acceptance and that, subject to the rights of withdrawal set out in paragraph 3 above, each such acceptance shall be irrevocable; (b) the Lilliput Shares in respect of which the Offer is accepted or deemed to be accepted are sold free from all liens, charges, encumbrances, equities, rights of pre-emption and any other third party rights of whatsoever nature and together with all rights now or hereafter attaching thereto, including the right to receive all dividends or other distributions declared, paid or made after 1st September, 1994, except that Lilliput Shareholders will be entitled to receive and retain the recommended interim 18 dividend of 1.65p (net) per Lilliput Share in respect of the year ending 31st December, 1994 proposed to be paid on 14th October, 1994 to shareholders on the register at the close of business on 29th September, 1994; (c) such Lilliput Shareholder has not received or sent copies of this document, the Form of Acceptance or any related offering documents in, into or from the United States or Canada, has not utilised in connection with the Offer, directly or indirectly, the mails of, or any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce of, or any facilities of a national securities exchange of, the United States or Canada, was outside the United States or Canada when the Form of Acceptance was delivered, and not an agent or fiduciary acting on a non-discretionary basis for a principal, unless such agent or fiduciary is an authorised employee of such principal or such principal has given any instructions with respect to the Lilliput Shares from outside the United States or Canada; (d) the execution of the Form of Acceptance constitutes, subject to the Offer becoming unconditional in all respects in accordance with its terms and to the accepting Lilliput Shareholder not having validly withdrawn his acceptance, the irrevocable appointment of any director of Stanhome or any director of Goldman Sachs as such shareholder's attorney and/or agent, and an irrevocable instruction to the attorney and/or agent, to complete and execute all or any form(s) of transfer and/or other document(s) at the discretion of the attorney and/or agent in relation to the Lilliput Shares referred to in paragraph 7(a) in respect of which the accepting Lilliput Shareholder has not validly withdrawn his acceptance in favour of Stanhome or such other person or persons as Stanhome may direct and to deliver such form(s) of transfer and/or other document(s) at the discretion of the attorney and/or agent, together with the share certificate(s) and/or other documents relating to the Lilliput Shares, for registration within 6 months of the Offer becoming unconditional in all respects and to do all such other acts and things as may in the opinion of such attorney and/or agent be necessary or expedient for the purpose of, or in connection with, the acceptance of the Offer and to vest in Stanhome or its nominee(s) the Lilliput Shares as aforesaid; (e) the execution of the Form of Acceptance constitutes, subject to the Offer becoming unconditional in all respects in accordance with its terms and to the accepting Lilliput Shareholder not having validly withdrawn his acceptance, separate irrevocable authorities and requests: (i) to Lilliput or its agents, to procure the registration of the transfer of the Lilliput Shares pursuant to the Offer and the delivery of the share certificate(s) and/or other document(s) of title in respect thereof to Stanhome or as it may direct; (ii) to Stanhome or its agents, to procure the despatch by post (or by such other method as may be approved by the Panel) of a town clearing cheque for any cash to which an accepting Lilliput Shareholder becomes entitled pursuant to his acceptance of the Offer (and at the risk of such person) to the person whose name and address is set out in Box 4 of the Form of Acceptance or, if none is set out, to the person whose name and address (outside the United States or Canada) is set out in Box 3 of the Form of Acceptance or to the first-named holder at his registered address (outside the United States or Canada); (f) the execution of the Form of Acceptance constitutes a separate authority to any director of Stanhome and to any director of Goldman Sachs and/or their respective agents and the irrevocable appointment of any such director and/or agent as such shareholder's attorney and/or agent within the terms of paragraph 4 above; (g) after the Offer becomes or is declared unconditional in all respects (or if the Offer would become or be declared unconditional in all respects or lapse immediately upon the outcome of the resolution in question) and pending registration: (i) Stanhome shall be entitled to direct the exercise of any votes attaching to any Lilliput Shares in respect of which the Offer has been accepted or is deemed to have been accepted (and in respect of which such acceptance has not been validly withdrawn) and any other rights and privileges attaching to such Lilliput Shares, including the right to requisition a general meeting or separate class meeting of Lilliput, such votes (where relevant) to be cast so far as possible to satisfy any outstanding condition of the Offer; and (ii) the execution of the Form of Acceptance by a Lilliput Shareholder constitutes, with regard to the Lilliput Shares comprised in such acceptance and in respect of which such acceptance has not been validly withdrawn: (a) an authority to Lilliput from such Lilliput Shareholder to send any notice, warrant, document or other communication (save in relation to the interim dividend) which may be required to be sent to him as a member of Lilliput to Stanhome at its registered office; (b) an authority to Stanhome to sign any consent to short notice of a general or separate class meeting on his behalf and/or to execute a form of proxy in respect of such Lilliput Shares appointing any person nominated by Stanhome to attend general or separate class meetings of Lilliput or its members or any of them and to exercise the votes attaching to such Lilliput Shares on his behalf, such votes (where relevant) to be cast so far as possible to satisfy any outstanding condition of the Offer; and (c) the agreement of such Lilliput Shareholder not to exercise any of such rights without the consent of Stanhome and the irrevocable undertaking of such shareholder not to appoint a proxy or representative for or to attend any such meetings; (h) he will deliver to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, (or alternatively by hand only to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, 15 Featherstone Street, London EC1Y 8QS), his share certificate(s) and/or other document(s) of title in respect of the Lilliput Shares referred to in paragraph 7(a) above, or an indemnity acceptable to Stanhome in lieu thereof, as soon as possible and in any event within 6 months of the Offer becoming unconditional in all respects; (i) the terms and conditions of the Offer contained in this document shall be deemed to be incorporated in and form part of the Form of Acceptance, which shall be read and construed accordingly; (j) if he accepts the Offer, he shall do all such acts and things as shall be necessary or expedient to vest in Stanhome or its nominees or such other persons as it may decide the Lilliput Shares as aforesaid; 19 (k) he agrees to ratify each and every act or thing which may be done or effected by Stanhome or Goldman Sachs and any director or either of them or their respective agents, or Lilliput or its agents, as the case may be, in the proper exercise of any of his or its powers and/or authorities conferred by or referred to in this Part B; (l) if any provision of this Part B shall be unenforceable or invalid or shall not operate so as to afford Stanhome and Goldman Sachs and/or any director of either of them or their agent the full benefit of the authorities and powers of attorney expressed to be given therein, he shall with all practicable speed do all such acts and things and execute all such documents as may be required or desirable to enable Stanhome and Goldman Sachs and/or any director of either of them or their agents to secure the full benefit of such authorities and powers of attorney. On execution the Form of Acceptance shall take effect as a deed. References in this Part B to Lilliput Shareholders shall include reference to the person or persons executing a Form of Acceptance and, in the event of more than one person executing a Form of Acceptance, the provisions of this Part B shall apply to them jointly and to each of them. References to the masculine gender shall include the feminine. 20 APPENDIX II FINANCIAL AND OTHER INFORMATION ON STANHOME INC. 1. DIRECTORS OF STANHOME INC. The Directors of Stanhome Inc. are: H. L. Tower............. Chairman of the Board G. William Seawright.... President and Chief Executive Officer Allan G. Keirstead...... Executive Vice President and Chief Administrative and Financial Officer John F. Cauley, Jr. .... Director Janet M. Clarke......... Director Alejandro Diaz Vargas... Director Judith R. Haberkorn..... Director Thomas R. Horton........ Director Alla O'Brien............ Director Homer G. Perkins........ Director Anne-Lee Verville....... Director
2. PRINCIPAL AND REGISTERED OFFICE OF STANHOME INC. The principal and registered office of Stanhome Inc. is at 333 Western Avenue, Westfield, Massachusetts 01085. 3. FINANCIAL STATEMENTS (A) CONSOLIDATED PROFIT AND LOSS ACCOUNTS A summary of the consolidated profit and loss account of Stanhome Inc. for the three years ended 31st December, 1993, extracted from the published audited accounts of Stanhome Inc., on which the audit opinion was unqualified, is set out below:
Years ended 31st December, ---------------------------- 1993 1992 1991 -------- -------- -------- US$ millions NET SALES......................................... 750.7 744.0 710.2 Cost of Sales..................................... 304.7 295.1 281.7 -------- -------- -------- Gross Profit...................................... 446.0 448.9 428.5 Selling, General and Administrative Expense....... 363.5 365.5 349.4 Restructuring Charge.............................. 17.0 -- -- -------- -------- -------- OPERATING PROFIT.................................. 65.5 83.4 79.1 Interest Expense.................................. (2.0) (3.4) (5.0) Other Income, net................................. 2.6 6.9 7.0 -------- -------- -------- INCOME BEFORE INCOME TAXES........................ 66.1 86.9 81.1 Income Taxes...................................... 33.0 40.3 36.1 NET INCOME........................................ 33.1 46.6 45.0 ======== ======== ======== EARNINGS PER COMMON SHARE Primary........................................... $1.68 $2.32 $2.22 Fully Diluted..................................... 1.67 2.32 2.21
(B) CONSOLIDATED STATEMENT OF RETAINED EARNINGS A summary of the consolidated statement of retained earnings of Stanhome Inc. for the three years ended 31st December, 1993, extracted from Stanhome's published audited accounts is set out below:
Years ended 31st December, ---------------------------- 1993 1992 1991 -------- -------- -------- US$ millions BALANCE, BEGINNING OF YEAR....................... 325.2 297.5 270.6 Net Income....................................... 33.1 46.7 45.1 Cash dividends, $1.00 per share in 1993, $0.96 per share in 1992 and $0.92 per share in 1991... (19.6) (18.9) (18.1) BALANCE, END OF YEAR............................. 338.7 325.3 297.6 -------- -------- --------
21 (C) CONSOLIDATED BALANCE SHEET The consolidated balance sheet of Stanhome Inc. as at 31st December, 1993, extracted from the published audited accounts of Stanhome Inc. as at that date, is set out below:
31st December, 1993 -------------- US$ millions ASSETS CURRENT ASSETS: Cash (including interest bearing demand deposits).............. 20.9 Certificates of deposit and time deposits...................... 32.5 Marketable securities, at cost (which approximates market val- ue)........................................................... 7.4 Notes and accounts receivable, net............................. 123.0 Inventories.................................................... 94.9 Prepaid advertising............................................ 30.9 Other prepaid expenses......................................... 4.8 ----- TOTAL CURRENT ASSETS........................................... 314.4 ----- PROPERTY, PLANT AND EQUIPMENT, AT COST: Land and improvements.......................................... 6.9 Buildings and improvements..................................... 42.1 Machinery and equipment........................................ 26.9 Furniture and fixtures......................................... 28.3 Transportation equipment....................................... 3.6 ----- 107.8 Less Accumulated depreciation and amortization................. 63.2 ----- TOTAL PROPERTY, PLANT AND EQUIPMENT............................ 44.6 ----- OTHER ASSETS: Intangibles.................................................... Goodwill, net.................................................. 43.0 Product lines and other, net................................... 18.7 Other.......................................................... 9.0 ----- TOTAL OTHER ASSETS............................................. 70.7 ----- 429.7 ===== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes and loans payable........................................ 0.8 Accounts payable............................................... 51.2 Federal, state and foreign taxes on income..................... 21.6 Accrued expenses--Payroll and commissions...................... 12.8 Restructuring.................................................. 10.8 Acquisitions................................................... 9.1 Vacation, sick leave, retirement insurance..................... 9.1 Royalties...................................................... 7.3 Pensions and profit sharing.................................... 5.1 Other.......................................................... 27.2 ----- TOTAL CURRENT LIABILITIES...................................... 155.0 ----- LONG-TERM LIABILITIES: Foreign employee severance obligations......................... 12.9 Pensions....................................................... 7.4 ----- TOTAL LONG-TERM LIABILITIES.................................... 20.3 ----- SHAREHOLDERS' EQUITY: Common stock, par value $.125 Authorised 80,000,000 shares Issued 25,228,240 shares....................................... 3.2 Capital in excess of par value................................. 34.0 Retained earnings.............................................. 338.8 Cumulative translation adjustments............................. (27.4) ----- 348.6 ----- Less Shares held in treasury, at cost -- common stock, 5,836,617 shares.............................................. 94.2 ----- TOTAL SHAREHOLDERS' EQUITY..................................... 254.4 ----- 429.7 =====
22 (D) CONSOLIDATED STATEMENT OF CASH FLOWS A summary of the consolidated statement of cash flows of Stanhome Inc. for the year ended 31st December, 1993, extracted from Stanhome's published audited accounts as at that date, is set out below:
Year ended 31st December, 1993 -------------- US$ millions OPERATING ACTIVITIES: Net Income..................................................... 33.1 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization of property, plant and equipment. 8.4 Allowance for losses on accounts receivable.................... 3.3 Amortization of other assets................................... 2.3 (Gain )/loss on sale of capital assets......................... (0.01) Changes in assets and liabilities, net of effects from acquisi- tion of businesses: Notes and accounts receivable.................................. (22.6) Inventories.................................................... 21.8 Prepaid expenses............................................... (7.4) Other assets................................................... (0.7) Accounts payable, accrued expenses and other current liabili- ties.......................................................... 20.8 Taxes on income................................................ (0.4) Foreign employee severance obligations......................... 0.004 Long-term pensions............................................. 0.7 ------------ Net cash provided by operating activities...................... 59.3 INVESTING ACTIVITIES: Purchase of property, plant and equipment...................... (6.5) Acquisition of businesses, net of cash acquired, including ad- ditional contingent cash payments............................. (0.2) Proceeds from sale of property, plant and equipment............ 0.6 Other, principally marketable securities....................... (0.0008) ------------ Net cash used in investing activities.......................... (6.1) FINANCING ACTIVITIES: Cash dividends................................................. (19.6) Exchanges and purchases of common stock........................ (12.2) Notes and loans payable........................................ (0.3) Exercise of stock options...................................... 0.9 Other common stock issuance.................................... 0.3 ------------ Net cash used in financing activities.......................... (30.9) Effect of exchange rate changes on cash and cash equivalents... (2.7) ------------ Increase/(decrease) in cash and cash equivalents............... 19.6 Cash and cash equivalents, beginning of year................... 33.8 ------------ Cash and cash equivalents, end of year......................... 53.4 ============
(E) SELECTED NOTES EXTRACTED FROM THE PUBLISHED AUDITED ACCOUNTS OF STANHOME INC. FOR THE THREE YEARS ENDED 31ST DECEMBER, 1993. (I) ACCOUNTING POLICIES: (a) Basis of consolidation The accompanying consolidated financial statements include the accounts of Stanhome Inc. and its subsidiaries. All significant intercompany transactions have been eliminated in the consolidated financial statements. Certain reclassifications have been made to the prior years' financial statements to make them comparable to the 1993 presentation. (b) Cash The carrying amount of cash and certificates of deposit and notes and loans payable approximate fair value. The Company considers all highly liquid securities with maturities of three months or less, when purchased, to be cash equivalents. Marketable securities consist primarily of treasury bills and commercial paper maturing as follows:
1993 ------------ US$ millions Three months or less.......................................... -- Over three months............................................. 7.4 --- 7.4 ===
23 (c) Direct selling Sales by certain international direct selling subsidiaries are transacted at retail prices. However, these sales are reflected in the consolidated financial statements at equivalent wholesale selling prices. (d) Notes and accounts receivable Notes and accounts receivable were net of allowance for doubtful accounts of $15.7 million at 31st December, 1993. (e) Inventories Inventories are valued at the lower of cost or market. Cost components include labour, manufacturing overhead and amounts paid to suppliers of materials. The Company values raw materials and certain manufactured and purchased items in the United States and Italy utilising the last-in, first-out method while the first-in, first-out method is used for substantially all other inventories. The cost, on a first-in, first-out basis over the carrying amount of inventories as reflected in the accompanying consolidated balance sheet was $1.2 million at 31st December, 1993. The major classes of inventories were as follows:
1993 ------------ US$ millions Raw materials and supplies.................................... 6.7 Work in process............................................... 0.6 Finished good in transit...................................... 8.8 Finished goods................................................ 78.8 ---- 94.9 ====
(f) Pre-paid expenses The Company incurs prepaid advertising expense in connection with the marketing of certain of its direct response products. Such expense is amortised over the life of the associated product programs which is generally less than one year. (g) Depreciation Depreciation is provided over the estimated useful lives of the assets utilising straight-line and declining balance methods. The methods for financial statement and income tax purposes differ in some circumstances, resulting in deferred income taxes. The estimated useful lives of the various classes of assets are:
Class of asset Range in years -------------- -------------- Land improvements........................................... 10-15 Buildings and improvements.................................. 15-40 Machinery and equipment..................................... 5-12 Furniture and fixtures...................................... 5-10 Transportation equipment.................................... 3-8
(h) Amortisation of goodwill Intangible assets result from the allocation of the excess cost of acquisitions over net tangible assets acquired. Intangibles were net of accumulated amortisation of $19.1 million at 31st December, 1993. Product lines, not resulting from the acquisition of Enesco in 1983 were $18.3 million in 1993 and are being amortised over the shorter of actual life or 33 years. Other items are being amortised over 5 years. Goodwill is being amortised over 20 to 40 years. Product lines and other amortisation amounted to $1.0 million for 1993. Goodwill amortisation was $1.3 million for 1993. (i) Interest paid Total Company interest paid was $2.0 million in 1993, $3.4 million in 1992 and $5.0 million in 1991. (j) Income from foreign subsidiaries The Company accrues appropriate US and foreign income taxes on earnings of subsidiary companies which are intended to be remitted to the parent company in the near future. The cumulative amount of unremitted earnings of subsidiaries which has been, or is intended to be, permanently reinvested, aggregated approximately $16.6 million at 31st December, 1993. Had such reinvested unremitted earnings been distributed during 1993, applicable income taxes would have amounted to approximately $3.6 million representing primarily taxes which would be withheld by foreign countries. (k) Earnings per share Primary earnings per common share are based on the average number of common shares outstanding and common share equivalents during the year. Common share equivalents represent dilutive stock options using the treasury stock method. Fully diluted earnings per common share assumes, in addition to the above, an additional dilutive effect of stock options. 24 The number of shares used in the earnings per common share computation for 1993, 1992 and 1991 were as follows:
1993 1992 1991 ---------- ---------- ---------- PRIMARY Average common shares outstanding........ 19,634,230 19,753,290 19,681,026 Stock options............................ 114,621 398,976 613,681 ---------- ---------- ---------- Average shares primary................... 19,748,851 20,152,266 20,294,707 FULLY DILUTED Additional dilutive effect of stock op- tions................................... 41,729 8,125 60,577 ---------- ---------- ---------- Average shares fully diluted............. 19,790,580 20,160,391 20,355,284
(II) EMPLOYEE BENEFIT PLANS: The Company and some of its subsidiaries have several employee benefit plans covering most of their full time US employees. The benefits under these plans are based primarily on years of service and compensation rates near retirement. The plans are funded in conformity with Federal tax and actuarial regulations. The prior year figures for the domestic plans have been adjusted to include nonqualified supplemental plans. Pension expense for the domestic plans includes the following components:
1993 1992 1991 ---- ---- ---- US$ millions Service cost during the period............................ 1.2 1.6 1.5 Interest cost on the projected benefit obligation......... 2.5 2.3 2.1 Actual return on plan assets.............................. (1.3) (0.9) (1.9) Net amortization of prior service cost, net transition li- ability and net loss..................................... 0.05 (0.4) 0.6 ---- ---- ---- PENSION EXPENSE........................................... 2.5 2.6 2.3 ==== ==== ====
The following table sets forth the plans' funded status and amounts recognized in the Company's balance sheet at 31st December, 1993:
1993 ------------ US$ millions Actuarial present value of benefit obligations: Vested benefits............................................... 28.6 Nonvested benefits............................................ 1.6 ----- Accumulated benefit obligation................................ 30.2 Additional obligation for future salary increases............. 7.1 ----- Projected benefit obligation.................................. 37.3 ----- Fair value of plan assets, primarily marketable securities.... (22.2) ----- Unfunded excess of projected benefit obligation over plan as- sets......................................................... 15.1 Unrecognized net transition asset/(liability), being recog- nized over 15 years.......................................... (1.2) Unrecognized prior service costs.............................. 0.2 Unrecognized net gain/loss.................................... (4.8) ----- PENSION LIABILITY RECOGNIZED IN THE BALANCE SHEET............. 9.3 =====
The weighted average discount rate used to measure the projected benefit obligation ranges from 5% to 8%, the rate of increase in future compensation levels ranges from 5% to 7% and the expected long- term rate of return on assets is 8%. Certain foreign subsidiaries are required to pay a severance allowance to eligible employees upon voluntary or involuntary separation. Provision is made annually for all eligible employees. Generally, such payments are based upon years of service and level of compensation. Severance expense for the combined foreign subsidiary severance allowance programs includes the following components:
1993 1992 1991 ------ ------ ------ US$ millions Service cost during the period...................... 1.6 1.9 1.8 Interest cost on the projected benefit obligation... 1.7 1.8 1.8 Actual return on plan assets........................ (0.03) (0.05) (0.04) Net amortization of prior service cost, net transi- tion liability and net loss........................ 0.3 0.1 0.1 ------ ------ ------ SEVERANCE EXPENSE................................... 3.6 3.8 3.7 ====== ====== ======
25 The following table sets forth the programs' funded status and amounts recognized in the subsidiaries' balance sheets at 31st December, 1993:
1993 ------------ US$ millions Actuarial present value of benefit obligations: Vested benefits...................................................... 9.6 Nonvested benefits................................................... 1.9 ---- Accumulated benefit obligation....................................... 11.5 Additional obligation for future salary increases.................... 7.3 ---- PROJECTED BENEFIT OBLIGATION......................................... 18.8 ---- Fair value of plan assets,........................................... (0.2) ---- Unfunded excess of projected benefit obligation over plan assets..... 18.6 Unrecognized net transition asset/(liability), being recognized over 17 years....................................................... (1.1) Unrecognized net gain/loss........................................... (4.5) ---- SEVERANCE LIABILITY RECOGNIZED IN THE BALANCE SHEET.................. 13.0 ====
The discount rates used to measure the projected benefit obligation range from 8% to 13.5%, the rate of increase in future compensation levels ranges from 5.5% to 11.5% and funding is not significant. In addition to providing pension benefits, the Stanhome Group sponsors a single-employer defined benefit post retirement health care and life insurance plan. Substantially all of the US direct selling and corporate employees may become eligible for the benefits under this plan if they reach allowable retirement age while working for the Company or its subsidiaries. Those benefits are provided principally through insurance companies whose premiums are based on the anticipated benefits to be paid. The total costs for such retired employee benefits were principally accrued during their active employment. Effective January 1993, the Company adopted Statement No. 106 of the Financial Accounting Standards Board and formalized its funding policy for the plan. Under that policy, the Company pays premiums to insurance companies who provide the post retirement benefits. The effect of adopting the statement in 1993 was not material to the Company. Net periodic post retirement benefit expense for 1993 includes the following components (in thousands):
1993 -------- US$ '000 Service cost......................................................... 310 Interest cost on accumulated post retirement benefit obligation...... 180 Actual return on plan assets......................................... -- Amortization of net transition liability............................. -- Net amortization and deferral........................................ -- -------- NET PERIODIC POST RETIREMENT BENEFIT EXPENSE......................... 490
The following table sets forth the funded status of the plan reconciled with the amount shown in the Company's balance sheet at 31st December, 1993 (in thousands):
1993 -------- US$ '000 Accumulated post retirement benefit obligation: Retirees............................................................. 1,762 Fully eligible active plan participants.............................. 933 Other active plan participants....................................... 2,657 -------- 5,352 Plan assets at fair value............................................ -- -------- Accumulated post retirement benefit obligation in excess of plan assets.............................................................. 5,352 Unrecognized net gain/(loss) from differences between past experience and that assumed.................................................... -- Unrecognized prior service cost...................................... -- Unrecognized net transition asset/(liability)........................ -- -------- ACCRUED POST RETIREMENT BENEFIT LIABILITY RECOGNIZED IN THE BALANCE SHEET............................................................... 5,352
A 25% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1994. The cost trend rate was assumed to decrease gradually but still remain at double digit rates until 2020. After 2020, the rate was assumed to drop to and stabilize at 8%. Increasing the assumed health care expense trend rates by one percentage point in each year would increase the accumulated post retirement benefit obligation as of 31st December, 1993 by $500,000 and the aggregate of the service and interest cost components of the net post retirement benefit expense for the year then ended by $150,000. The weighted-average discount rate used in determining the accumulated post retirement benefit obligation was 6%. In addition, provisions have been made for unfunded anticipated retirement benefits for certain Officers. Also, certain subsidiaries have established funded profit sharing and defined contribution retirement plans. Total consolidated pension, severance allowance, profit sharing and retirement plan expense amounted to $9,561,000 in 1993, $9,614,000 in 1992 and $8,579,000 in 1991. 26 (III) SHAREHOLDERS' EQUITY: In 1988, the Company's Board of Directors adopted a Stockholder Rights Plan in which common stock purchase rights were distributed to shareholders at the rate of one right for each share of common stock creating common stock together with the associated common stock purchase rights ("common stock"). The rights are exercisable at $85 per share and will expire on 19th September, 1998. In 1991, the shareholders approved a new Stock Option Plan previously adopted by the Board of Directors which provides for both incentive and nonqualified stock options. Options for up to 2,000,000 shares of common stock may be granted under the 1991 Plan. The plan provides that nonqualified options for 1,500 shares of common stock be granted annually from 1991 through 1995 to each non-employee Director then serving. The Company also has a 1984 Stock Option Plan, which provides for both incentive and nonqualified stock options, under which options for up to 3,000,000 shares of common stock may be granted. Both plans provide for the granting to selected key employees, and non-employee Directors in the case of the 1991 Plan, of options to acquire shares of such stock at a price not less than their fair market value at the time of grant. Other option terms are determined at the time of grant, but normally options are exercisable only after a one year waiting period in four equal annual instalments, and expire ten years from the date of grant. In 1993, the Board of Directors approved a Special Interim Chief Executive Officer Stock Option Plan which provided for a special one- time grant of nonqualified stock options to the Company's Interim Chief Executive Officer in lieu of cash compensation. These options vested fully in increments of 10,000 during each month in which he served in that capacity, are exercisable six months after the date of grant, and expire ten years from the date of grant. Stock option activity under all plans is summarised as follows:
Number of Shares Option Price --------- ------------ OUTSTANDING AT 31ST DECEMBER, 1990.................. 1,698,719 $4.47--30.88 Granted............................................. 19,500 33.62--41.12 Exercised........................................... (301,229) 4.97--27.13 Cancelled........................................... (35,230) 11.13--27.13 OUTSTANDING AT 31ST DECEMBER, 1991.................. 1,381,760 $4.47--41.12 Granted............................................. 378,000 33.75--33.88 Exercised........................................... (245,583) 4.47--28.50 Cancelled........................................... (114,700) 20.13--33.75 OUTSTANDING AT 31ST DECEMBER, 1992.................. 1,399,477 $4.97--41.12 Granted............................................. 499,200 26.88--33.25 Exercised........................................... (50,713) 4.97--27.13 Cancelled........................................... (97,350) 26.88--33.88 OUTSTANDING AT 31ST DECEMBER, 1993.................. 1,750,614 $8.94--41.12
At 31st December, 1993, there were 968,474 options vested and exercisable and 1,442,425 shares available for future grants. An analysis of treasury stock transactions for the three years ended 31st December, 1991, 1992 and 1993 is as follows:
Common Shares Cost --------- ------ US$ millions BALANCE, 31ST DECEMBER, 1990.............................. 5,678,082 72.4 Purchases................................................. -- -- Stock option exchanges.................................... 66,964 2.3 Exercise of stock options................................. (301,229) (0.9) Issue of PAYSOP shares.................................... (3,407) (0.01) Investment Savings Plan--401(k) issues.................... (2,964) (0.009) BALANCE, 31ST DECEMBER, 1991.............................. 5,437,446 73.8 Purchases................................................. 163,200 5.3 Stock option exchanges.................................... 107,998 3.8 Exercise of stock options................................. (245,583) (0.8) Issue of PAYSOP shares.................................... (5,596) (0.02) Investment Savings Plan--401(k) issues.................... (3,041) (0.01) BALANCE, 31ST DECEMBER, 1992.............................. 5,454,424 82.1 Purchases................................................. 435,800 12.0 Stock option exchanges.................................... 7,336 0.2 Exercise of stock options................................. (50,713) (0.2) Issue of PAYSOP shares.................................... (5,790) (0.02) Investment Savings Plan--401(k) issues.................... (4,440) (0.02) BALANCE, 31ST DECEMBER, 1993.............................. 5,836,617 94.1
In 1985, the Company approved a Payroll-Based Stock Ownership Plan ("PAYSOP") which provides common stock to eligible employees and allows the Company a Federal income tax deduction equal to the market value of the issued stock. In 1987, the Company introduced an Investment Savings Plan in accordance with Section 401(k) of the Internal Revenue Code. One of the features of this retirement savings plan provides common stock to eligible employees and allows the Company a Federal income tax deduction equal to the market value of the issued stock. The change in capital in excess of par value resulted from the exercise of stock options, including the related income tax benefit ($0.7 million, $5.0 million and $4.7 million in 1993, 1992 and 1991, respectively), issuance of PAYSOP shares ($0.2 million, $0.2 million and $0.1 million in 1993, 1992 and 1991, respectively) and issuance of 401(k) Plan shares ($0.1 million, $0.1 million and $0.1 million in 1993, 1992 and 1991, respectively) noted above. 27 An analysis of the change in shareholders' equity from the cumulative translation adjustment component for the years ended 31st December, 1993, 1992 and 1991 is as follows:
Cumulative Translation Adjustments ------------ US$ millions BALANCE, 31ST DECEMBER, 1990.................................... 12.6 Adjustment for 1991............................................. 0.8 ---- BALANCE, 31ST DECEMBER, 1991.................................... 13.4 Adjustment for 1992............................................. 8.9 ---- BALANCE, 31ST DECEMBER, 1992.................................... 22.3 Adjustment for 1993............................................. 5.1 ---- BALANCE, 31ST DECEMBER, 1993.................................... 27.4 ----
(IV) OTHER INCOME, NET Other income, net consists of the following:
1993 1992 1991 ----- ---- ----- US$ millions Investment income........................................ 4.2 6.7 8.2 Gains/(losses) on the sale of capital assets, net........ (0.01) 1.3 (0.03) Exchange transaction/translation gains, net.............. 0.6 0.7 0.5 Other assets amortization................................ (2.3) (2.2) (2.0) Other items, net......................................... 0.04 0.4 0.3 ----- ---- ----- OTHER INCOME............................................. 2.5 6.9 7.0 ===== ==== =====
(V) GEOGRAPHICAL AND PRODUCT ANALYSIS The Company operates predominantly in two major geographic areas and three business segments. The direct selling segment is engaged in the manufacture, sale and distribution of household cleaning, personal grooming and related products. The giftware segment imports and distributes creatively designed giftware and collectibles to a diverse group of retailers. The direct response segment markets collectibles and giftware to consumers and retailers. Transfers between geographic areas and segments are made at the market value of the merchandise transferred. The eliminations in the identifiable assets are for intercompany receivables and profit in inventory. Corporate assets have consisted principally of certificates of deposit, time deposits, marketable securities and corporate receivables. The following tables summarise the Company's operations by geographic area and business segment for 1991, 1992 and 1993:
1993 1992 1991 ----- ----- ----- US$ millions GEOGRAPHIC AREA Net Sales United States........................................... 480.3 427.7 388.7 Europe.................................................. 205.3 250.9 245.2 Other International and Eliminations.................... 65.1 65.5 76.4 ----- ----- ----- TOTAL CONSOLIDATED...................................... 750.7 744.1 710.3 ===== ===== ===== Operating Profit (a) United States........................................... 50.9 54.8 47.6 Europe.................................................. 17.8 32.7 32.8 Other International and Eliminations.................... 4.5 3.7 5.8 ----- ----- ----- Operating profit before corporate expense............... 73.2 91.2 86.2 General corporate expense............................... (7.6) (7.7) (7.1) ----- ----- ----- TOTAL CONSOLIDATED...................................... 65.6 83.5 79.1 ===== ===== ===== IDENTIFIABLE ASSETS United States........................................... 298.0 276.0 247.7 Europe.................................................. 81.6 108.8 132.0 Other International and Eliminations.................... 18.8 24.3 33.5 ----- ----- ----- Identifiable assets..................................... 398.4 409.1 413.2 Corporate assets........................................ 31.3 6.5 6.1 ----- ----- ----- TOTAL CONSOLIDATED...................................... 429.7 415.6 419.3 ===== ===== =====
(a) Operating profit for 1993 includes restructuring charges of $10,110,000 for the United States, $5,140,000 for Europe and $1,750,000 for other international locations 28
1993 1992 1991 ------ ----- ----- US$ millions PRODUCT AREA Net Sales Giftware............................................... 367.5 349.3 329.5 Direct Response........................................ 129.4 95.5 79.4 Direct Selling......................................... 255.1 300.1 301.4 Elimination............................................ (1.4) (0.8) (0.1) ------ ----- ----- TOTAL CONSOLIDATED..................................... 750.6 744.1 710.2 ====== ===== ===== Operating Profit(a) Giftware............................................... 52.6 52.1 48.7 Direct Response........................................ 10.4 7.3 6.1 Direct Selling......................................... 10.2 31.7 31.4 ------ ----- ----- Operating profit before corporate expense.............. 73.2 91.1 86.2 General corporate expense.............................. (7.6) (7.7) (7.1) ------ ----- ----- TOTAL CONSOLIDATED..................................... 565.6 83.4 79.1 ====== ===== ===== Depreciation and Amortisation Giftware............................................... 5.3 5.2 4.5 Direct Response........................................ 1.4 1.1 0.9 Direct Selling......................................... 3.8 4.0 4.4 ------ ----- ----- Depreciation and Amortisation.......................... 10.5 10.3 9.8 Corporate Depreciation and Amortisation................ 0.3 0.2 0.2 ------ ----- ----- TOTAL CONSOLIDATED..................................... 10.8 10.5 10.0 ====== ===== ===== Capital Expenditures Giftware............................................... 2.3 2.5 3.5 Direct Response........................................ 1.1 0.9 0.9 Direct Selling......................................... 2.8 3.2 3.4 ------ ----- ----- Capital Expenditures................................... 6.2 6.6 7.8 Corporate Capital Expenditures......................... 0.3 0.3 0.09 ------ ----- ----- TOTAL CONSOLIDATED..................................... 6.5 6.9 7.9 ====== ===== ===== Identifiable Assets Giftware............................................... 346.3 315.1 301.3 Direct Response........................................ 90.9 69.2 55.9 Direct Selling......................................... 91.2 119.6 150.1 Eliminations........................................... (130.0) (94.8) (94.1) ------ ----- ----- Identifiable Assets.................................... 398.4 409.1 413.2 Corporate Assets....................................... 31.3 6.5 6.1 ------ ----- ----- TOTAL CONSOLIDATED..................................... 429.7 415.6 419.3 ====== ===== =====
(a) Operating profit for 1993 includes restructuring charges of $4,000,000 for Giftware, $13,000,000 for Direct Selling (VI) INCOME TAXES Effective January 1993, the Company adopted Statement No. 109 of the Financial Accounting Standards Board. Prior year financial statements have not been restated for the effect of this statement. The effect of adopting the statement in 1993 on income before income taxes was not material.
Deferred Tax Benefit (Liability) 1993 ---------------- US$ millions UNITED STATES FEDERAL Prepaid advertising....................................... (9.7) Acquisition step-up amortization adjustment............... (4.2) Accelerated depreciation.................................. (1.5) Inventory reserve......................................... 4.2 Deferred compensation..................................... 2.8 Bad debt reserve.......................................... 1.9 Retirement insurance...................................... 1.7 Returns and allowances reserve............................ 1.0 Other items, net.......................................... 2.0 ------------ (1.8) ------------
29
Deferred Tax Benefit (Liability) 1993 ---------------- US$ millions STATE Prepaid advertising........................................ (1.8) Acquisition step-up amortization adjustment................ (.9) Accelerated depreciation................................... (.3) Inventory reserve.......................................... .9 Deferred compensation...................................... .6 Bad debt reserve........................................... .4 Retirement insurance....................................... .4 Returns and allowances reserve............................. .2 Other items, net........................................... .5 ---- 0.0 ---- FOREIGN Accelerated depreciation................................... (2.7) Other items, net........................................... 1.0 ---- (1.7) ---- TOTAL...................................................... (3.5) ====
The domestic and foreign components of income before income taxes are as follows:
1993 1992 1991 ---- ---- ---- US$ millions Domestic...................................................... 46.2 55.4 44.4 Foreign....................................................... 19.9 31.6 36.8 ---- ---- ---- 66.1 87.0 81.2 ==== ==== ====
The provision for income taxes consists of the following:
1993 1992 1991 ---- ---- ---- US$ millions CURRENTLY PAYABLE: United States Federal......................................... 15.7 15.3 14.7 United States State........................................... 4.6 4.1 3.8 Foreign....................................................... 13.5 21.0 18.9 ---- ---- ---- TOTAL CURRENTLY PAYABLE....................................... 33.8 40.4 37.4 ==== ==== ====
DEFERRED: United States Federal................................... 0.3 1.0 (1.7) United States State..................................... (0.009) 0.1 (0.1) Foreign................................................. (1.0) (1.2) 0.5 ------- ---- ---- TOTAL DEFERRED.......................................... (0.7) (0.1) (1.3) ------- ---- ---- 33.1 40.3 36.1 ======= ==== ====
A reconciliation of the total effective tax rate to the statutory Federal income tax rate is as follows:
1993 1992 1991 ---- ---- ---- Statutory income tax rate................................. 35.0% 34.0% 34.0% State taxes, net of Federal income tax effect............. 5.0 3.2 3.0 Impact of foreign tax rates and credits................... 4.4 5.6 5.2 Restructuring impact...................................... 3.6 -- -- Foreign subsidiaries in loss position receiving little or no tax benefit........................................... 1.1 1.9 0.9 Impact of non-deductible expenses......................... 1.0 1.7 1.5 Other items, net.......................................... (0.2) (0.1) (0.2) TOTAL EFFECTIVE INCOME TAX RATE........................... 49.9% 46.3% 44.4%
The Company made income tax payments of $33.4 million in 1993, $41.6 million in 1992 and $37.5 million in 1991. (VII) COMMITMENTS AND CONTINGENCIES (a) Rentals The Company and its subsidiaries incurred rental expense under operating leases of $6.0 million in 1993, $7.6 million in 1992 and $7.3 million in 1991. 30 The minimum rental commitments under non-cancellable operating leases as of 31st December, 1993 are as follows:
Aggregate Amount ---------------- US$ millions 1994..................................................... 6.2 1995..................................................... 4.4 1996..................................................... 3.6 1997..................................................... 2.6 1998..................................................... 2.5 Later years.............................................. 4.2 ---- TOTAL MINIMUM FUTURE RENTALS............................. 23.5 ====
(b) Royalties The Company and its subsidiaries have entered into various licensing agreements requiring royalty payments ranging from 0.5% to 15.5% of specified product sales. Royalty payments under these licensing agreements totalled $28.1 million in 1993, $23.9 million in 1992 and $21.3 million in 1991. Pursuant to the various licensing agreements, the future minimum guaranteed royalty payments due as of 31st December, 1993 were $13.9 million in 1994, $12.4 million in 1995 and $12.0 million in 1996. (c) Lines of Credit At 31st December, 1993 the Company had formal and informal unused lines of credit of approximately $100.0 million. (d) FOREX Hedging The Company enters into foreign exchange contracts as a hedge against receivables from international subsidiaries. Market value gains and losses are recognised and the resulting credit or debit offsets foreign exchange gains or losses on those receivables. At 31st December, 1993 the Company had approximately $22.0 million (notional amount) of foreign exchange hedge contracts outstanding. (e) Legal Proceedings There are various legal proceedings pending against the Company and its subsidiaries which have arisen during the normal course of business. Management does not believe that the ultimate outcome of those legal proceedings will have a material adverse impact upon the consolidated financial condition of the Company. 4. RECENT RESTRUCTURING In the second quarter of 1993, the Company incurred a restructuring charge of $17 million pre-tax, $11.5 million after tax, or $0.58 per share. The restructuring program takes advantage of consolidation opportunities principally in the distribution and administrative functions within the Company to achieve future operating efficiencies and savings. It is expected to include a reduction of approximately 10% of the Company's worldwide work force of 4,500. The program is expected to be virtually completed by the end of 1994. When completed, future annual cost savings are expected to be approximately $11 million pre-tax, $7 million after tax, or $0.35 per share. Part of the savings generated by the program will be used to build the Company's profitability, as well as enhance the Company's flexibility to capitalise on attractive growth opportunities. The charge includes $9.7 million for severance, $4.8 million for facilities closing and moving, $1.7 million write down of current assets, and $0.8 million write down of net fixed assets. 5. SECOND-QUARTER RESULTS Set out below are extracts from the text of the unaudited statement of second- quarter results for Stanhome Inc. for the three months ended 30th June, 1994. CHAIRMAN'S STATEMENT "Stanhome is building momentum to achieve long-term profitable growth and, in turn, enhanced shareholder value. Over a year ago, we commenced a program to increase our Company's operating efficiencies to achieve important cost savings, and to allocate our resources more effectively. The effect of this effort is being realized in our enhanced financial performance. Stanhome is now positioned to take advantage of increasing growth opportunities on a global basis. Stanhome's successful second quarter, ended June 30, 1994, reflects the more efficient cost structure the Company is putting in place, and a particularly strong record performance by Enesco, the Company's Worldwide Giftware operation. Stanhome achieved operating profit of $20,834,000 and net income of $11,608,000 or $.59 per share fully diluted, on revenues of $188,592,000. This represents a strong turnaround from the 1993 second quarter ended June 30, when, inclusive of a $17,000,000 pre-tax restructuring charge for the implementation of a two year cost savings program, Stanhome incurred a net loss of $1,223,000, or $.06 per share, on revenues of $187,236,000. The restructuring charge amounted to $11,500,000 after tax, or $.58 per share. Operating profit for the 1993 second quarter, exclusive of the restructuring charge, was $18,719,000. Both our Worldwide Giftware and Worldwide Direct Response operations had record revenue and earnings performances for the second quarter. Our Worldwide Direct Selling operation, even with a lower sales base than a year ago, produced increased profits and was consistent with management's expectations. 31 Worldwide Giftware's record performance reflected a firming of the US retail marketplace, with strong demand for its Precious Moments and Cherished Teddies collectible product lines. The success of Enesco Giftware demonstrates the Group's expertise with respect to identifying consumer preferences, product design and sourcing. Sound management of inventories, consistent with demand, also contributed to the Group's profitability. Worldwide Direct Response's performance was achieved against an exceptionally strong 1993 second quarter. In 1993, the Hamilton Group experienced a sizable increase in volume relating to expanded shipment of products to consumers on credit, and to expanded use of Enesco product lines. Hamilton is proceeding with its strategy of broadening its product offerings. Worldwide Direct Selling's enhanced profitability on lower revenues is testimony to the cost efficiencies now being realized in that operation. Lower sales in the US, due in part to the economy and in part to cost efficiencies, combined with the sluggish business environment in Europe and unfavourable foreign currency exchange rates, were primarily responsible for the Group's lower revenues. Stanhome's enhanced profitability is indicative of how we are positioning the Company for profitable growth long-term as a worldwide marketing and distribution enterprise. Each of Stanhome's three businesses--Worldwide Giftware, Worldwide Direct Response and Worldwide Direct Selling--has a strong presence in its respective market. Each has attractive potential to grow globally. With the appropriate cost structures in place, we are achieving greater operating efficiencies and, in turn, greater profit margin potential which should result in building Stanhome's inherent value to you, the shareholder. The Company is continuing to purchase its stock under the repurchase program authorized by the Board of Directors; 1,149,000 shares remain to be purchased in this approved program following the purchase of 252,000 shares during the second quarter."
Second quarter ended 30th June, -------------------------------------- Percent 1994 1993 Change ----------- ----------- ------------ US$ millions Net Sales Worldwide Giftware.................. 91.0 82.3 11% Worldwide Direct Response........... 32.8 31.4 4 Worldwide Direct Selling............ 65.7 74.2 (11) Eliminations........................ (0.9) (0.7) ----------- ----------- -------- TOTAL NET SALES..................... 188.6 187.2 1 Cost of Sales....................... 74.5 72.9 2 ----------- ----------- -------- Gross profit........................ 114.1 114.3 -- Selling, general and administrative expense............................ 93.3 112.6 (17) ----------- ----------- -------- Operating profit Worldwide Giftware.................. 12.9 10.9 19 Worldwide Direct Response........... 2.3 2.2 1 Worldwide Direct Selling............ 8.0 7.6 5 Corporate........................... (2.3) (2.0) (14) ----------- ----------- -------- 20.9 18.7 11 Restructuring....................... -- (17.0) ----------- ----------- -------- TOTAL OPERATING PROFIT ............. 20.9 1.7 Net interest income................. 1.0 0.8 Sale of idle assets................. 0.03 -- Other assets amortization........... (0.6) (0.6) Net other items..................... 0.02 0.2 ----------- ----------- TOTAL OTHER INCOME.................. 0.4 0.4 Income before taxes................. 21.2 2.1 892 Income taxes........................ 9.6 3.4 ----------- ----------- NET INCOME.......................... 11.6 (1.2) =========== =========== Effective tax rate.................. 45% 157% Earnings per share.................. $ .59 $ .06 Average shares fully diluted........ 19,688 19,909 Dividends paid or provided for...... $ 4.8 $ 4.9 (2) Dividends per share................. 0.25 0.25
32
First six months ended 30th June, ----------------------------------------- Percent 1994 1993 Change ------------ ------------ ------------- US$ millions Net Sales Worldwide Giftware................ 177.8 158.8 12% Worldwide Direct Response......... 58.9 55.0 7 Worldwide Direct Selling.......... 125.1 138.7 (10) Eliminations...................... (1.4) (0.8) ------------ ------------ -------- Total net sales................... 360.4 351.7 2 COST OF SALES..................... 144.3 138.1 5 ------------ ------------ Gross profit...................... 216.1 213.7 1 Selling, general and administra- tive expense..................... 180.3 200.1 (10) ------------ ------------ Operating profit Worldwide Giftware................ 23.2 18.7 24 Worldwide Direct Response......... 3.8 3.6 6 Worldwide Direct Selling.......... 13.3 12.1 10 Corporate......................... (4.5) (3.8) (17) ------------ ------------ -------- 35.8 30.6 17 Restructuring..................... -- (17.0) ------------ ------------ TOTAL OPERATING PROFIT............ 35.8 13.6 163 Net interest income............... 1.7 1.5 Sale of idle assets............... 0.5 0.001 Other assets amortization......... (1.2) (1.1) Net other items................... (0.04) 0.3 ------------ ------------ TOTAL OTHER INCOME................ 0.9 0.7 Income before taxes............... 36.7 14.3 157 Income taxes...................... 17.0 9.2 ------------ ------------ NET INCOME........................ 19.7 5.0 291 ============ ============ Effective tax rate................ 46% 65% Earnings per share................ $ 1.00 $ .25 300 Average shares fully diluted...... 19,691 19,919 -- Dividends paid or provided for.... $ 9.7 $ 9.9 (2) Dividends per share............... 0.50 0.50
30th June ----------- 1994 1993 ----- ----- US$ millions ASSETS Cash and marketable securities.................................. 57.7 50.0 Receivables..................................................... 128.4 115.9 Inventories..................................................... 96.7 112.8 Prepaid expenses................................................ 47.7 42.3 ----- ----- TOTAL CURRENT ASSETS............................................ 330.5 321.0 Property, plant and equipment, net.............................. 44.4 46.4 Other assets.................................................... 69.9 66.2 ----- ----- 444.8 433.6 ===== ===== LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable......................................... $ 0.8 $ 3.3 Accounts payable................................................ 56.5 63.1 Federal, state and foreign taxes on income...................... 30.6 22.8 Accrued expenses................................................ 74.4 75.4 ----- ----- TOTAL CURRENT LIABILITIES....................................... 162.3 164.6 Foreign employee severance obligations.......................... 13.6 14.3 Pensions........................................................ 7.9 7.1 ----- ----- TOTAL LONG-TERM LIABILITIES..................................... 21.5 21.4 SHAREHOLDERS' EQUITY............................................ 260.8 247.4 ----- ----- 444.6 433.4 ===== =====
6. MATERIAL CHANGES Save as disclosed in this Appendix II there have been no material changes in the financial or trading position of Stanhome Inc. since 31st December, 1993, the date to which the latest published audited accounts were made up. 33 APPENDIX III FINANCIAL AND OTHER INFORMATION ON STANHOME 1. INCORPORATION AND REGISTERED OFFICE Stanhome was incorporated in England and Wales on 16th June, 1994 under the Companies Act 1985 as a public company. The registered office of Stanhome is Broadwalk House, 5 Appold Street, London EC2A 2HA. 2. DIRECTORS The directors of Stanhome are G. William Seawright and Allan G. Keirstead. 3. SHARE CAPITAL The authorised share capital of Stanhome is (Pounds)100,000 divided into 100,000 ordinary shares of (Pounds)1 each, 50,000 of which are issued and quarter paid up. All the shares are beneficially owned by Stanhome Inc. 4. BALANCE SHEET Set out below is the balance sheet of Stanhome as at 31st August, 1994. CURRENT ASSETS Cash at bank.................................................... (Pounds)12,500 -------------- Net assets...................................................... (Pounds)12,500 ============== SHARE CAPITAL Called up share capital......................................... (Pounds)12,500 ==============
Notes: (i) Stanhome has not traded since incorporation (save for the purchase of 3,145,331 Lilliput Shares on 1st September, 1994). (ii) No directors received remuneration from Stanhome for the period. (iii) The auditors received no remuneration for the period. 5. ACCOUNTS The financial information contained in paragraph 4 of this Appendix III does not comprise statutory accounts of Stanhome within the meaning of Section 240 of the Companies Act 1985. 34 APPENDIX IV FINANCIAL AND OTHER INFORMATION ON LILLIPUT 1. FINANCIAL STATEMENTS (A) CONSOLIDATED PROFIT AND LOSS ACCOUNTS A summary of the consolidated profit and loss account of Lilliput for the three financial periods ended 31st December, 1993, extracted from Lilliput's published audited accounts, is set out below:
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 TURNOVER........................... 16,506 13,581 15,162 Cost of Sales...................... (8,117) (6,960) (9,003) ------ ------ ------ Gross Profit....................... 8,389 6,621 6,159 Distribution costs................. (2,940) (2,576) (2,452) Administrative expenses............ (2,398) (1,916) (2,280) ------ ------ ------ (5,338) (4,492) (4,732) ------ ------ ------ OPERATING PROFIT................... 3,051 2,129 1,427 ------ ------ ------ Interest receivable................ 95 24 23 Interest payable................... (71) (145) (528) ------ ------ ------ 24 (121) (505) ------ ------ ------ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION................... 3,075 2,008 922 Tax on profit on ordinary activi- ties.............................. (1,094) (630) (284) ------ ------ ------ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION.......................... 1,981 1,378 638 Preference dividends............... (156) (115) (29) ------ ------ ------ PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS...................... 1,825 1,263 609 Ordinary dividends................. (413) (203) (73) ------ ------ ------ RETAINED PROFIT FOR THE YEAR....... 1,412 1,060 536 ====== ====== ====== EARNINGS PER ORDINARY SHARE........ 9.5p 6.7p 3.2p
(B) STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES The statement of recognised gains and losses of Lilliput for the year ended 31st December, 1993, extracted from Lilliput's published audited accounts is set out below:
31st December, 1993 -------------- (Pounds)'000 Profit on ordinary activities after taxation.................... 1,981 Exchange difference on retranslation of net assets of subsidiary undertaking.................................................... 13 ----- TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR.......... 1,994 =====
Reconciliation of shareholders' funds:
31ST DECEMBER, 1993 -------------- (Pounds)'000 Total recognised gains and losses............................... 1,994 Dividends....................................................... (569) Other movements: New shares issued.............................................. 3,082 Share issue costs.............................................. (603) Shares redeemed................................................ (1,519) ------ 2,385 Shareholders' funds at 4th January, 1993........................ 2,339 ------ SHAREHOLDERS' FUNDS AT 31ST DECEMBER, 1993...................... 4,724 ======
35 (C) CONSOLIDATED BALANCE SHEET The consolidated balance sheet of Lilliput as at 31st December, 1993, extracted from Lilliput's published audited accounts as at that date, is set out below:
31ST DECEMBER, 1993 -------------- (Pounds)'000 FIXED ASSETS Tangible assets............................................. 1,801 CURRENT ASSETS Stocks...................................................... 858 Debtors..................................................... 2,145 Cash at bank and in hand.................................... 4,021 ----- TOTAL CURRENT ASSETS........................................ 7,024 CREDITORS: amounts falling due within one year.............. 3,439 ----- NET CURRENT ASSETS.......................................... 3,585 ----- TOTAL ASSETS LESS CURRENT LIABILITIES....................... 5,386 CREDITORS: amounts falling due after more than one year..... (641) Provision for liabilities and charges....................... (21) ----- 4,724 ===== CAPITAL AND RESERVES Called up share capital..................................... 1,163 Share premium account....................................... 2,286 Profit and loss account..................................... 1,275 ----- 4,724 =====
(D) CONSOLIDATED STATEMENT OF CASHFLOWS The consolidated statement of cashflows of Lilliput for the year ended 31st December, 1993, extracted from Lilliput's published audited accounts, is set out below:
YEAR ENDED 31ST DECEMBER, 1993 -------------- (Pounds)'000 NET CASH INFLOW FROM OPERATING ACTIVITIES.................. 3,383 RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest received.......................................... 95 Interest paid.............................................. (71) Dividends paid............................................. (631) ------ NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE................................................ (607) ------ TAXATION Corporation tax paid....................................... (612) INVESTING ACTIVITIES Payments to acquire tangible fixed assets.................. (319) Receipts from sales of tangible fixed assets............... 23 ------ NET CASH OUTFLOW FROM INVESTING ACTIVITIES................. (296) ------ NET CASH INFLOW BEFORE FINANCING........................... 1,868 ====== FINANCING Issue of ordinary share capital............................ (3,082) Redemption of share capital................................ 1,519 Share issue costs.......................................... 603 Repayment of long term loans............................... 1 Repayments of capital element of finance lease rentals..... 51 ------ NET CASH INFLOW FROM FINANCING............................. (908) INCREASE IN CASH AND CASH EQUIVALENTS...................... 2,776 ------ 1,868 ======
(E) SELECTED NOTES EXTRACTED FROM LILLIPUT'S PUBLISHED AUDITED ACCOUNTS FOR THE THREE FINANCIAL PERIODS ENDED 31ST DECEMBER, 1993. (I) ACCOUNTING POLICIES (a) Basis of preparation The accounts are prepared under the historical cost convention and in accordance with applicable accounting standards. 36 (b) Basis of consolidation The group accounts consolidate the accounts of Lilliput and all its subsidiary undertakings drawn up to 31 December each year. The 1992 accounts were drawn up to 3rd January, 1993. No profit and loss account is presented for Lilliput as provided by Section 230 of the Companies Act 1985. (c) Research and development Research and development expenditure is written off as it is incurred. (d) Depreciation Depreciation is provided on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost or valuation, less residual value, of each asset on a straight line basis over its expected useful life. The expected useful lives are: Freehold buildings............... 50 years Leasehold land and buildings..... the term of the lease in equal annual instalments Plant, machinery and equipment... 4 to 5 years Motor vehicles................... 4 years
(e) Leased Assets Assets held under hire purchase contracts and finance leases, which are those where substantially all the risks and rewards of ownership of the asset have passed to the Lilliput Group, are capitalised in the balance sheet and are depreciated over their useful lives. The interest element of the rental obligations is charged to the profit and loss account over the period of the contract or lease and represents a constant proportion of the balance of capital repayments outstanding. Rentals paid under operating leases are charged to income on a straight line basis over the term of the lease. (f) Stocks Stocks are stated at the lower of cost and net realiseable value. Cost comprises amounts incurred in bringing each product to its present location and condition as follows: Raw materials................................ purchase cost on a first-in, first-out basis Work in progress and finished goods.......... cost of direct materials and labour plus attributable overheads based on the normal level of activity
Net realiseable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. (g) Deferred Taxation Deferred taxation is provided using the liability method on all timing differences to the extent that they are expected to reverse in the future without being replaced, calculated at the rate at which it is anticipated the timing differences will reverse. (h) Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forward exchange contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date or, if appropriate, at the forward contract rate. Investments in overseas subsidiary undertakings are translated at the rate of exchange ruling at the date of the investment. All differences are taken to the profit and loss account. On consolidation, the accounts of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. The exchange difference arising on the retranslation of opening net assets is taken directly to reserves. All other translation differences are taken to the profit and loss account. (II) PENSIONS The Lilliput Group operates a defined contribution pension scheme. Contributions are charged to the profit and loss account as they become payable in accordance with the rules of the scheme. (III) TURNOVER AND SEGMENTAL ANALYSIS Turnover represents the amounts derived from the provision of goods and services which fall within the Lilliput Group's ordinary activities, stated net of value added tax. 37 All of the turnover, operating profit and net operating assets (i.e., excluding those assets and liabilities on which interest is earned or paid respectively) relate to the manufacture and sale of miniature cottages as collectibles and giftware, and are analysed as follows: (a) Turnover by geographical location
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 United Kingdom.................... 12,074 9,538 11,468 United States of America.......... 4,432 4,043 3,694 ------ ------ ------ 16,506 13,581 15,162 ====== ====== ======
(b) Turnover by destination
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 United Kingdom.................... 10,131 8,132 10,250 United States of America.......... 4,432 4,043 3,694 Continental Europe................ 1,313 906 888 Rest of World..................... 630 500 330 ------ ------ ------ 16,506 13,581 15,162 ====== ====== ======
(c) Profit
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 United Kingdom................. 2,854 1,923 1,233 United States of America....... 197 206 194 ----- ----- ----- Operating profit............... 3,051 2,129 1,427 Net interest................... 24 (121) (505) ----- ----- ----- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 3,075 2,008 922 ===== ===== =====
(d) Operating assets
Year ended 31st December, 1993 -------------- (Pounds)'000 United Kingdom............................................. 2,061 United States of America................................... 511 2,572 Unallocated net assets/(liabilities)....................... 2,152 TOTAL NET ASSETS........................................... 4,724 Unallocated net assets/(liabilities) comprise:............. Cash at bank and in hand................................... 4,021 Loans...................................................... (672) Corporation tax liabilities................................ (1,036) Proposed dividend.......................................... (140) Provision for deferred tax................................. (21) ------- 2,152 =======
(IV) OPERATING PROFIT IS STATED AFTER CHARGING/(CREDITING):
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Auditors' remuneration --audit services.............. 36 25 24 --non-audit services.......... 12 7 6 Depreciation of tangible fixed assets --owned....................... 303 193 219 --leased...................... 65 42 102 --Amortization of intangible fixed assets................. -- -- 58 Operating lease rentals --plant and machinery......... 12 8 5 --and buildings............... 172 169 123 --other....................... 119 132 189 Profit on disposal of tangible fixed assets................. (11) (9) (5) ==== ==== ===
In addition to the above, the auditors received (Pounds)80,000 during the year ended 31st December 1993 in respect of services associated with the share issue. 38 Reconciliation of operating profit to net cash inflow from operating activities
Year ended 31st December, 1993 ------------ (Pounds)'000 Operating profit..................................... 3,051 Depreciation and amortisation charges................ 368 Profit on sale of tangible fixed assets.............. (11) ----- 3,408 (Increase)/decrease in stocks........................ (441) Increase in debtors.................................. (108) Increase in creditors................................ 524 ----- NET CASH INFLOW FROM OPERATING ACTIVITIES............ 3,383 =====
(IV) DIRECTORS' REMUNERATION
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Fees.............................. 6 -- -- Other emoluments (including pen- sion contributions) Basic salaries.................... 365 289 324 Benefits.......................... 52 21 30 Performance related bonuses....... 6 121 94 Pension contributions............. 40 36 39 --- --- --- 469 467 487 === === ===
Benefits in kind comprise fully expensed cars which are stated at the Inland Revenue scale charge and medical cover stated at cost. For the year ended 31st December, 1992, performance related bonuses were payable to executive directors based on the achievement of targets set for return on operating assets. Five of the UK based directors waived their entitlement to performance related bonuses for the year ended 31st December, 1993. Had they not done so, they would have received bonuses totalling (Pounds)50,000. The bonus payable for that year relates to the achievement of targets set for profit before taxation at Lilliput's US subsidiary undertaking. On 26th August, 1993, J A Russell, A R Dunning, R E Freestone, D J Tate and P G Thomas were each granted options over 10,000 'B' ordinary shares at an exercise price of 50p per share. These options were exercised on 11th November, 1993. The emoluments of the chairman, who is also the highest paid UK director, are as follows:
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Salary............................. 83 58 62 Benefits........................... 13 5 6 --- --- --- 96 63 68 Performance related bonus.......... -- 29 25 --- --- --- 96 92 93 Pension contributions.............. 15 15 9 --- --- --- 111 107 102 === === === The emoluments (excluding pension contributions) of the directors, fell within the following ranges: Number Number Number Nil-(Pounds)5,000 .............. 2 1 2 (Pounds)20,001-(Pounds)25,000..... 1 -- -- (Pounds)45,001-(Pounds)50,000..... 3 -- -- (Pounds)55,001-(Pounds)60,000..... -- 3 -- (Pounds)60,001-(Pounds)65,000..... 1 -- 3 (Pounds)70,001-(Pounds)75,000..... -- 1 1 (Pounds)80,000-(Pounds)85,000..... -- -- -- (Pounds)90,001-(Pounds)95,000..... -- 1 1 (Pounds)95,001-(Pounds)100,000.... 2 -- -- (Pounds)100,001-(Pounds)105,000.... -- 1 --
39 (v) Employee information
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Wages and salaries.................. 5,571 4,880 5,849 Social security costs .............. 436 402 433 Other pension costs ................ 112 90 98 ------------ ------------ ------------ 6,119 5,372 6,380 ============ ============ ============
The average weekly number of employees during the year was made up as follows:
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------- ------- -------------- Number Number Number Manufacturing........................... 491 434 537 Office and management................... 74 61 61 ------- ------- --- 565 495 598 ======= ======= ===
(vi) Interest payable
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Bank loans, overdrafts and other loans wholly repayable within five years............................. 6 36 219 Bank loans not wholly repayable within five years................. 60 87 259 Finance charges payable under finance leases and hire purchase contracts......................... 5 22 50 ------------ ------------ ------------ 71 145 528 ============ ============ ============
(vii) Tax on profit on ordinary activities
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Based on the profit for the period: Corporation tax at 33% (1991: 33.4%).......................... 1,041 545 255 Overseas taxation................ 62 94 12 Deferred taxation................ (7) 10 6 ----- --- --- 1,096 649 273 Adjustments in respect of previ- ous years....................... (2) (19) 11 ----- --- --- 1,094 630 284 ===== === ===
(viii) Profit attributable to members of the parent company The profit dealt with in the accounts of the parent company was (Pounds)1,224,000 (1992: (Pounds)354,000). (ix) Dividends
Years ended 66 weeks ended 31st December, 5th January, 1993 1992 1992 ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Preference --paid............ 156 115 28 === === === Preferred ordinary--paid............ 273 -- -- --proposed........ -- 203 -- Ordinary --final proposed.. 140 -- 73 --- --- --- 413 203 73 === === ===
(x) Earnings per share Earnings per ordinary share are based on the profit for the year after deducting preference dividends and on 19,286,503 (1992: 18,867,970) ordinary shares, being the weighted average number of ordinary shares in issue, as adjusted, during the year. 40 (xi) Tangible fixed assets
Plant Land and Buildings machinery Short and Motor Freehold Leasehold equipment vehicles Total ------------ ------------ ------------ ------------ ------------ (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 COST: At 4th January, 1993.... 1,133 103 1,501 154 2,891 Exchange adjustment..... -- -- 4 -- 4 Additions............... 1 29 148 141 319 Disposals............... -- -- (15) (37) (52) ----- --- ----- --- ----- AT 31ST DECEMBER, 1993.. 1,134 132 1,638 258 3,162 ----- --- ----- --- ----- DEPRECIATION: At 4th January, 1993.... 88 30 814 97 1,029 Exchange adjustment..... -- -- 4 -- 4 Provided during the year................... 23 15 292 38 368 Disposals............... -- -- (10) (30) (40) ----- --- ----- --- ----- AT 31ST DECEMBER, 1993.. 111 45 1,100 105 1,361 ----- --- ----- --- ----- NET BOOK VALUE: At 31st December, 1993.. 1,023 87 538 153 1,801 ===== === ===== === ===== AT 4TH JANUARY, 1993.... 1,045 73 687 57 1,862 ===== === ===== === =====
Included in fixed assets above are the following amounts relating to assets acquired under finance leases and hire purchase contracts:
(Pounds)'000 ------------ Net book value At 31st December, 1993.......................................... 14 === At 4th January, 1993............................................ 96 ===
(xii) Investment in subsidiary undertakings
1993 ------------ (Pounds)'000 At 4th January,................................................ 1,843 Amount received from subsidiary undertakings................... (418) ----- AT 31ST DECEMBER,.............................................. 1,425 =====
Details of the investments in which Lilliput holds more than 10% of the nominal value of any class of share capital are as follows:
COUNTRY OF PROPORTION REGISTRATION (OR OF VOTING Subsidiary INCORPORATION) RIGHTS AND undertaking AND OPERATION HOLDING SHARES HELD Nature of business ----------- ---------------- ------- ----------- ------------------ Lilliput Lane Limited England and Ordinary shares 100% Manufacture of miniature cottages for sale as Wales collectibles and giftware Lilliput Inc US Common stock 100% Distribution of Lilliput Lane and other collectible/ giftware products Lilliput Creations England and Ordinary Shares 100% Dormant Limited Wales
(xiii) Stocks
31st December, 1993 -------------- (Pounds)'000 Raw materials and consumables................................. 101 Work in progress.............................................. 79 Finished goods................................................ 678 --- 858 ===
The difference between purchase price or production cost of stocks and their replacement cost is not material. (xiv) Debtors
31st December, 1993 -------------- (Pounds)'000 Trade debtors................................................. 1,868 Other debtors................................................. 76 Prepayments and accrued income ............................... 201 ----- 2,145 =====
41 (xv) Cash and cash equivalents Analysis of balances as shown in the Lilliput Group balance sheet and changes during the current and previous year:
31st December, 1993 1992 Change in Year ------------ ------------ -------------- (Pounds)'000 (Pounds)'000 (Pounds),000 Cash at bank and in hand........... 4,021 1,244 2,777 ===== ===== =====
1993 -------- (Pounds)'000 Balance at 4th January,............................................. 1,244 Net cash inflow before adjustments for the effect of foreign exchange rates..................................................... 2,776 Effect of foreign exchange rate changes............................. 1 ------- Balance at 31st December............................................ 4,021 =======
(xvi) Creditors: amounts falling due within one year
31st December, 1993 -------------- (Pounds)'000 Current instalments due on loans............................. 33 Obligations under finance leases and hire purchase contracts. 31 Trade creditors.............................................. 414 Corporation tax.............................................. 1,036 Other taxes and social security.............................. 598 Accruals(a).................................................. 825 Deferred income.............................................. 362 Dividends.................................................... 140 ----- 3,439 =====
(a) Included within accruals is (Pounds)19,000 relating to outstanding contributions payable to the pension scheme. (xvii) Creditors: amounts falling due after more than one year
31st December, 1993 -------------- (Pounds)'000 Bank loans................................................... 639 Obligations under finance leases and hire purchase contracts................................................... 2 --- 641 ===
(xviii) Bank loans
31st December, 1993 -------------- (Pounds)'000 Not wholly repayable within five years....................... 672 Amounts due within one year.................................. (33) --- 639 === Instalments not due within five years........................ 502 ===
Details of loans not wholly repayable within 5 years are as follows:
31st December, 1993 -------------- (Pounds)'000 Bank loan repayable over 15 years from 30th September, 1990 in monthly instalments of (Pounds)2,730 at an interest rate of 2% above base rate...................................... 256 Bank loan repayable over 20 years from 30th September, 1990 in monthly instalments of (Pounds)3,852 at an interest rate of 7.81%................................................... 416 --- 672 ===
42 Amounts due at 31st December, 1993 are repayable as follows:
31st December, 1993 -------------- (Pounds)'000 After five years............................................. 502 Between two and five years................................... 107 Between one and two years.................................... 30 --- 639 Within one year.............................................. 33 --- 672 ===
The bank loans are secured by a fixed charge over freehold properties and book debts and a floating charge over all other assets. Analysis of changes in group loan financing during the year:
(Pounds)'000 At 4th January,................................................ 673 Net cash outflow from financing................................ (1) --- AT 31ST DECEMBER,.............................................. 672 ===
(xix) Obligations under leases and hire purchase contracts
31st December, 1993 -------------- (Pounds)'000 Amounts payable.............................................. Within one year.............................................. 31 Between one and two years.................................... 3 --- 34 Less: finance charges allocated to future periods............ (1) --- 33 ===
Finance leases and hire purchase contracts are analysed as follows:
31st December, 1993 -------------- (Pounds)'000 Current obligations........................................... 31 Non-current obligations....................................... 2 --- 33 ===
Analysis of changes in finance leasing during the year:
1993 ------------ (Pounds)'000 At 4th January,................................................ 84 Capital element of finance lease rental payments............... (51) ---- AT 31ST DECEMBER,.............................................. 33 ====
Annual commitment of the Lilliput Group under non-cancellable operating leases are as follows:
31st December, 1993 Land and buildings Other ------------------ -------------- (Pounds)'000 (Pounds)'000 OPERATING LEASES WHICH EXPIRE Within one year............................ -- 18 Between two and five years................. 112 78 Over five years............................ 74 -- --- --- 186 96 === ===
43 (xx) Provisions Deferred taxation provided in the accounts and the amounts not provided are as follows:
31st December, 1993 Provided Not provided ------------ -------------- (Pounds)'000 (Pounds)'000 Capital allowances in advance of depreciation... 25 241 Short term timing differences................... (4) -- --- --- 21 241 === ===
(xxi) Share capital
31st December, 1993 -------------- (Pounds)'000 AUTHORISED Ordinary shares of 5p each.................................... 3,000
31st December, 1993 ----------------------------- No. in thousands (Pounds)'000 ALLOTTED, CALLED UP AND FULLY PAID Ordinary shares of 5p each..................... 23,269 1,163 ====== =====
On 8th April, 1993, Lilliput purchased 100,000 of the 'A' ordinary shares in issue at a price of 50p per share. On 26th August, 1993 the authorised share capital was increased from (Pounds)1,757,245 to (Pounds)1,759,745 by the creation of 50,000 new 'B' ordinary shares. On 11th November, 1993: . 1,057,000 'B' ordinary shares were issued at par; . 50,000 'B' ordinary shares were issued at 50p per share; . 82,618 'A' ordinary shares were issued at par; . the authorised share capital of Lilliput was increased from (Pounds)1,759,745 to (Pounds)2,030,762 by the creation of 542,033,625 new preferred ordinary shares; . (Pounds)240,267 of the amount standing to the credit of the share premium account and reserves was capitalised by the issue of 480,533,625 preferred ordinary shares credited as fully paid at par, on the basis of 99 new preferred ordinary shares for every one such share held; . every 100 preferred ordinary shares were consolidated into one preferred ordinary share of 5p; . all of the preferred ordinary shares, "A' ordinary shares and "B' ordinary shares were converted into and redesignated as ordinary shares; . the authorised share capital of Lilliput was increased from (Pounds)2,030,762 to (Pounds)4,468,767 by the creation of 48,760,109 new ordinary shares; and . 2,222,214 ordinary shares were issued at a price of 135p per share. (Pounds)526,180 of the amount standing to the credit of reserves was capitalised and applied in paying up in full at par 10,523,603 ordinary shares. All of the redeemable preference shares and deferred shares were redeemed at par and the authorised share capital was reduced by (Pounds)1,468,767. On 25th November, 1993, all of the ordinary shares were listed on the Stock Exchange, issued as fully paid at a price of 135p per share. Analysis of changes in share capital during the year:
1993 ------------ (Pounds)'000 At 4th January................................................. 1,700 Net cash outflow from financing................................ (1,304) Capitalisation of reserves..................................... 767 ------ At 31st December............................................... 1,163 ======
44 (xxii) Reserves
Share Capital premium redemption Profit & loss account account account ------------ ------------ ------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 At 4th January 1993............................................................ 140 -- 499 Exchange difference on retranslation of net assets of subsidiary undertaking... -- -- 13 Shares redeemed................................................................ -- 5 (50) Arising on share issues........................................................ 2,912 -- -- Share issue costs.............................................................. (603) -- -- Capitalisation of reserves..................................................... (163) (5) (599) Retained profit for the year................................................... -- -- 1,412 ----- --- ----- AT 31ST DECEMBER, 1993......................................................... 2,286 -- 1,275 ===== === =====
(xxiii) Net cash inflow from share movements
Year ended 31st December, 1993 -------------- (Pounds)'000 Nominal value of shares issued.............................................................................. 170 Share premium............................................................................................... 2,912 ------- 3,082 Share issue costs........................................................................................... (603) Shares redeemed............................................................................................. (1,519) ------- 960 =======
(xxiv) Capital commitments
31st December, 1993 -------------- (Pounds)'000 Contracted for but not provided in the accounts............................................................. 3 === AUTHORISED BY THE DIRECTORS BUT NOT CONTRACTED FOR.......................................................... 349 ===
(xxv) Pension commitments The Lilliput Group operates a defined contribution scheme for all qualifying employees. The assets of the scheme are held separately from those of the Lilliput Group in an independently administered fund. 2. INTERIM RESULTS Set out below is the unaudited interim statement of Lilliput for the six months ended 30th June, 1994. CHAIRMAN'S STATEMENT TRADING RESULTS Turnover in the six months ended 30th June, 1994 increased to (Pounds)7.5 million (1993: (Pounds)7.1 million) and pre-tax profits were (Pounds)1.13 million (1992: (Pounds)1.08 million). Earnings per share remain unchanged at 3.2p. The Board has declared an interim dividend of 1.65p (net) per share, an increase of 14 per cent. over the notional interim dividend of 1.45p (net) per share for the same period last year. This dividend will be paid to shareholders on the register on 29th September, 1994. Sales in the US have continued to be affected by the difficult trading conditions in the US collectibles market that I referred to in my Chairman's statement accompanying the preliminary announcement of the Group's 1993 results. US sales for the period were 16 per cent. below 1993 levels and this has reduced profits by approximately (Pounds)150,000. The Board has thoroughly reviewed the product offering and special requirements of the American market over the last six months. New product concepts are expected to be launched in early 1995 that should widen the appeal of the Lilliput Lane brand and open up new channels of distribution. Sales elsewhere have continued to improve at a steady rate with sales in the UK 7 per cent. ahead of the same period last year and sales in other export markets 25 per cent. ahead. At the end of 1993 the Board took steps to increase production levels in order to meet the peak demand experienced at Christmas. These increased levels of production have been maintained as part of a specific strategy to ensure an adequate supply of product for Lilliput's retailers and to provide them with higher levels of service. This has resulted in an increase in the level of stocks held by Lilliput and a consequent one-off reduction in the level of stocks held by retailers. However this does provide us with the ability to respond quickly to the expected increased demand in the second half of this year. 45 Membership of the Collectors' Club has continued to grow and worldwide membership now stands at 72,400 compared to 68,539 at 31st December, 1993. CURRENT TRADING AND PROSPECTS Although there are signs that the UK economy is strengthening we are finding, in common with many businesses, that the strength of the recovery is fragile. The second half is the seasonally more important half of Lilliput's year both in terms of sales and profits and the Board remains optimistic about the outcome for the full year. GROUP PROFIT AND LOSS ACCOUNT
Half year ended Half year ended Year ended 30th June, 1994 30th June, 1993 31st Dec., 1993 --------------- --------------- --------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Turnover................................................................ 7,500 7,106 16,506 Cost of sales........................................................... (3,782) (3,543) (8,117) ------ ------ ------ Gross profit............................................................ 3,718 3,563 8,389 Distribution costs...................................................... (1,477) (1,320) (2,940) Administrative expenses................................................. (1,183) (1,161) (2,398) ------ ------ ------ (2,660) (2,481) (5,338) ------ ------ ------ Operating profit........................................................ 1,058 1,082 3,051 ------ ------ ------ Interest receivable..................................................... 97 38 95 Interest payable........................................................ (29) (38) (71) ------ ------ ------ 68 -- 24 ------ ------ ------ Profit on ordinary activities before taxation........................... 1,126 1,082 3,075 Tax on profit on ordinary activities.................................... (377) (404) (1,094) ------ ------ ------ Profit on ordinary activities after taxation............................ 749 678 1,981 Preference dividends.................................................... -- (87) (156) ------ ------ ------ Profit attributable to equity shareholders.............................. 749 591 1,825 Ordinary dividends...................................................... (384) (108) (413) ------ ------ ------ RETAINED PROFIT FOR THE PERIOD.......................................... 365 483 1,412 ====== ====== ====== Earnings per ordinary share (note 3).................................... 3.2p 3.2p 9.5p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half year ended Half year ended Year ended 30th June, 1994 30th June, 1993 31st Dec., 1993 --------------- --------------- --------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Profit on ordinary activities after taxation ............................. 749 678 1,981 Exchange differences on retranslation of net assets of subsidiary undertaking.............................................................. (25) -- 13 ----- ----- ------ Total recognised gains and losses relating to the period ................. 724 678 1,994 ===== ===== ====== Reconciliation of shareholders' funds Total recognised gains and losses ........................................ 724 678 1,994 Dividends ................................................................ (384) (195) (569) Other movements New shares issued ....................................................... -- -- 3,082 Share issue costs ....................................................... -- -- (603) Shares redeemed ......................................................... -- (50) (1,519) ----- ----- ------ 340 433 2,385 Shareholders' funds at beginning of period................................ 4,724 2,339 2,339 ----- ----- ------ SHAREHOLDERS' FUNDS AT END OF PERIOD...................................... 5,064 2,772 4,724 ===== ===== ======
46 GROUP BALANCE SHEET
30TH JUNE, 1994 30TH JUNE, 1993 31ST DEC., 1993 --------------- --------------- --------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Fixed assets Tangible assets......................................................... 1,885 1,881 1,801 Current assets Stocks.................................................................. 1,208 748 858 Debtors................................................................. 2,494 2,356 2,145 Cash at bank and in hand................................................ 3,724 993 4,021 ------------ ------------ ------------ 7,426 4,097 7,024 Creditors: amounts falling due within one year........................... 3,600 2,531 3,439 ------------ ------------ ------------ Net current assets....................................................... 3,826 1,566 3,585 ------------ ------------ ------------ Total assets less current liabilities.................................... 5,711 3,447 5,386 Creditors: amounts falling due after more than one year.................. (626) (673) (641) Provision for liabilities and charges.................................... (21) (2) (21) ------------ ------------ ------------ 5,064 2,772 4,724 ============ ============ ============ Capital and reserves Called up share capital................................................. 1,163 1,695 1,163 Share premium account................................................... 2,286 140 2,286 Capital redemption reserve.............................................. -- 5 -- Profit and loss account................................................. 1,615 932 1,275 ------------ ------------ ------------ 5,064 2,772 4,724 ============ ============ ============
GROUP STATEMENT OF CASH FLOWS
HALF YEAR ENDED HALF YEAR ENDED YEAR ENDED 30TH JUNE, 1994 30TH JUNE, 1993 31ST DEC., 1993 --------------- --------------- --------------- ...................................................................... (Pounds)'000 (Pounds)'000 (Pounds)'000 Net cash inflow from operating activities (note 2)....................... 149 408 3,383 Returns on investment and servicing of finance Interest received........................................................ 97 38 95 Interest paid............................................................ (29) (38) (71) Dividends paid........................................................... (140) (289) (631) ------------ ------------ ------------ Net cash outflow from returns on investments and servicing of finance................................................................. (72) (289) (607) ------------ ------------ ------------ Taxation Corporation tax paid..................................................... (114) (153) (612) Investing activities Payments to acquire tangible fixed assets................................ (257) (161) (319) Receipts from sales of tangible fixed assets............................. 25 6 23 ------------ ------------ ------------ Net cash outflow from investing activities............................... (232) (155) (296) ------------ ------------ ------------ Net cash (outflow)/inflow before financing............................... (269) (189) 1,868 ============ ============ ============ Financing Issue of ordinary share capital.......................................... -- -- (3,082) Redemption of share capital.............................................. -- 50 1,519 Share issue costs........................................................ -- -- 603 Repayment of long term loans............................................. 15 (10) 1 Repayments of capital element of finance lease rentals................... 30 22 51 ------------ ------------ ------------ Net cash outflow/(inflow) from financing................................. 45 62 (908) (Decrease)/increase in cash and cash equivalents......................... (314) (251) 2,776 ------------ ------------ ------------ (269) (189) 1,868 ============ ============ ============
47 NOTES TO THE INTERIM ACCOUNTS AS AT 30TH JUNE, 1994 1. BASIS OF PREPARATION The interim accounts have been prepared on the basis of the accounting policies set out in the Group's 1993 Annual Report. Fixed annual charges are apportioned to the interim period on the basis of time elapsed. Other expenses are accrued in accordance with the same principles used in the preparation of the annual accounts. The taxation charge is calculated by applying the directors' best estimate of the annual effective tax rate to the profit for the period. 2. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
HALF YEAR ENDED HALF YEAR ENDED YEAR ENDED 30TH JUNE, 1994 30TH JUNE, 1993 31ST DEC., 1993 --------------- --------------- --------------- (Pounds)'000 (Pounds)'000 (Pounds)'000 Operating profit................................................. 1,058 1,082 3,051 Depreciation charges............................................. 148 138 368 Profit on sale of tangible fixed assets.......................... -- (2) (11) ------------ ------------ ------------ 1,206 1,218 3,408 (Increase)/decrease in stocks.................................... (370) (332) (441) (Increase)/decrease in debtors................................... (424) (336) (108) (Decrease)/increase in creditors................................. (263) (142) 524 ------------ ------------ ------------ 149 408 3,383 ============ ============ ============
3. EARNINGS PER ORDINARY SHARE Earnings per ordinary share are based on the profit attributable to equity shareholders for the period and on 23,269,420 (1993: 18,716,189) ordinary shares, being the weighted average number of ordinary shares in issue, as adjusted, during the period. 4. PAYMENT OF DIVIDEND The interim dividend of 1.65p per share will be paid on 14th October, 1994 to holders of ordinary shares on the register at the close of business on 29th September, 1994. 5. CIRCULATION This statement will be available from Lilliput's registered office at Skirsgill, Penrith, Cumbria, CA11 0DP. 6. REPORT OF THE AUDITORS To the members of Lilliput Group plc We have reviewed the interim financial information for the six months ended 30th June, 1994 set out on pages 45 to 48 which is the responsibility of, and has been approved by, the Directors. Our responsibility is to report on the results of our review. Our review was carried out having regard to the Bulletin "Review of Interim Financial Information", issued by the Auditing Practices Board. This review consisted principally of obtaining an understanding of the process for the preparation of the interim financial information, applying analytical procedures to the underlying financial data, assessing whether accounting policies have been consistently applied, and making enquiries of Group management responsible for financial and accounting matters. The review excluded audit procedures such as tests of controls and vertification of assets and liabilities, and was therefore substantially less in scope than an audit performed in accordance with Auditing Standards. Accordingly, we do not express an audit opinion on the interim financial information. On the basis of our review: In our opinion the interim financial information has been prepared using accounting policies consistent with those adopted by Lilliput Group plc in its financial statements for the year ended 31st December, 1993; and We are not aware of any material modifications that should be made to the interim financial information as presented. Ernst & Young Chartered Accountants Registered Auditor Manchester 1st September, 1994 48 3. MATERIAL CHANGES Save as disclosed in this Appendix IV and the letter from the Chairman & Chief Executive of Lilliput set out on pages 5 to 7 of this document, there have been no material changes in the financial or trading position of Lilliput since 31st December, 1993, the date to which the latest published audited accounts were made up. 4. STATUTORY INFORMATION The above financial information relating to the Lilliput Group does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the three financial periods ended 31st December, 1993, all of which carry unqualified audit reports, have been delivered to the Registrar of Companies. 49 APPENDIX V ADDITIONAL INFORMATION 1. RESPONSIBILITY The Directors of Lilliput, whose names appear in paragraph 2 below, accept responsibility for the information contained in this document relating to Lilliput and its subsidiaries, themselves and their immediate families. The Directors of Stanhome Inc., whose names appear in paragraph 1 of Appendix II, and the Directors of Stanhome, whose names appear in paragraph 2 of Appendix III, accept responsibility for all the other information contained in this document. To the best of the knowledge and belief of the Directors of Stanhome Inc. and the Directors of Lilliput (who have taken all reasonable care to ensure that such is the case) the information contained herein for which they are respectively responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. 2. DIRECTORS The Directors of Lilliput are as follows: J A Russell FCA............................................... Chairman & Chief Executive R E Freestone FCA, ATII....................................... Finance Director D J Tate MBE.................................................. Technical Director A R Dunning................................................... Sales Director J M Hill MBA.................................................. Marketing Director P G Thomas.................................................... Production Director A J J Simonds-Gooding......................................... Non-executive Director P J Folkman MBA............................................... Non-executive Director
3. DISCLOSURE OF INTERESTS AND DEALINGS In this document "disclosure period" means the period commencing on 1st September, 1993 being the date 12 months prior to the commencement of the Offer Period and ending on 8th September, 1994, being the latest practicable date prior to the posting of this document. (A) SHAREHOLDINGS AND DEALINGS IN STANHOME OR STANHOME INC. SHARES Neither Lilliput, nor any person acting in concert with Lilliput, nor any of the Directors of Lilliput, nor any member of their immediate families owns or controls or is interested in (beneficially or otherwise), nor has any arrangement in relation to any Stanhome or Stanhome Inc. shares or in any securities convertible into, rights to subscribe for or options (including traded options) for such shares nor has any such person dealt for value therein during the disclosure period. (B) SHAREHOLDINGS AND DEALINGS IN LILLIPUT SHARES (i) As at the close of business on 8th September, 1994 (the latest practicable date prior to the posting of this document), Stanhome held 3,145,331 Lilliput Shares. (ii)During the disclosure period dealings for value by Stanhome and persons deemed to be acting in concert with Stanhome in Lilliput Shares were as follows:
Number of Lilliput Price Per Date Party Transaction Shares Share(p) ---- ------------------------ ----------- --------- --------- 1st September, 1994 Goldman Sachs Equity Securities (U.K.)....... Purchase 3,145,331 158 1st September, 1994 Goldman Sachs Equity Securities (U.K.)....... Sale 3,145,331 158 1st September, 1994 Stanhome..................................... Purchase 3,145,331 158
(iii)Irrevocable undertakings to accept the Offer have been received as follows, representing in each case the entire holding of Lilliput Shares of the relevant person:
NUMBER OF LILLIPUT SHARES Name IRREVOCABLY COMMITTED ---- ------------------------- David John Tate.................................... 2,646,659 Robert Edward Freestone............................ 15,000 Paul Goring Thomas................................. 90,000 Andrew Reginald Dunning............................ 15,000 Anthony JJ Simonds-Gooding......................... 9,135 The North of England Venture Fund Limited.......... 2,963,705 John Alan Russell.................................. 300,000 Lazard Funds (Nominees) Limited.................... 755,059 Coutts Corporate Trustee Nominees Limited.......... 1,056,966 Midland Bank Trust Company Limited................. 580,446 Sandra Tate........................................ 1,185,245 Karen Elaine Freestone............................. 165,000 Lucinda Petrie Dunning............................. 165,000 Karen Elizabeth Thomas............................. 90,000 Heather M Russell.................................. 300,000
50 (iv) Irrevocable undertakings to accept the Offer in respect of options held under the Lilliput Share Option Schemes have been received as follows:
NUMBER OF LILLIPUT SHARES HELD UNDER OPTION AND Name IRREVOCABLY COMMITTED ---- ------------------------- Jane M Hill........................................ 25,000 Robert Edward Freestone............................ 76,785 Paul Goring Thomas................................. 76,428 Andrew Reginald Dunning............................ 75,714 John Alan Russell.................................. 251,785
(v) During the disclosure period the persons referred to in paragraphs (iii) and (iv) above have dealt for value in Lilliput Shares as follows:
Number of Lilliput Price per Date Party Transaction Shares Share(p) ---- ------------------------ ------------ --------- --------- 24th November, 1993 J A Russell............. Subscription 407,000 5 24th November, 1993 J A Russell............. Subscription 10,000 50 24th November, 1993 A R Dunning............. Subscription 150,000 5 24th November, 1993 A R Dunning............. Subscription 10,000 50 24th November, 1993 R E Freestone........... Subscription 150,000 5 24th November, 1993 R E Freestone........... Subscription 10,000 50 24th November, 1993 D J Tate................ Subscription 10,000 50 24th November, 1993 P G Thomas.............. Subscription 150,000 5 24th November, 1993 P G Thomas.............. Subscription 10,000 50 24th November, 1993 D J Tate................ Purchase 512,953 2 25th November, 1993 J A Russell............. Sale 614,800 135 25th November, 1993 A R Dunning............. Sale 235,200 135 25th November, 1993 R E Freestone........... Sale 235,200 135 25th November, 1993 P G Thomas.............. Sale 235,200 135 25th November, 1993 D J Tate................ Sale 302,642 135 25th November, 1993 D J Tate and S Tate..... Sale 1,319,580 135 The North of England 25th November, 1993 Venture Fund Limited.... Sale 2,222,223 135 Midland Bank Trust 25th November, 1993 Company Limited......... Sale 690,952 135 Lazard Funds (Nominees) 25th November, 1993 Limited................. Sale 898,815 135 Coutts Corporate Trustee 25th November, 1993 Nominees Limited........ Sale 1,258,198 135 25th November, 1993 A J J Simonds-Gooding... Purchase 9,135 135 28th March, 1994 J A Russell............. Sale 14,666 130 28th March, 1994 A R Dunning............. Sale 17,824 130 28th March, 1994 R E Freestone........... Sale 17,824 130 28th March, 1994 P G Thomas.............. Sale 17,824 130 29th March, 1994 J A Russell............. Purchase 14,666 130 29th March, 1994 A R Dunning............. Purchase 17,824 130 29th March, 1994 R E Freestone........... Purchase 17,824 130 29th March, 1994 P G Thomas.............. Purchase 17,824 130
The dealings shown above represent all dealings for value in Lilliput Shares of the Directors of Lilliput and their immediate families during the disclosure period. (vi) The interests, all of which are beneficial unless otherwise stated, of the Directors of Lilliput and their immediate families in Lilliput Shares (as shown in the register required to be kept under Section 325 of the Companies Act 1985) at 8th September, 1994 were as follows:
Director Lilliput Shares Lilliput Shares under option** -------- --------------- ------------------------------ J A Russell................... 600,000 251,785 A R Dunning................... 180,000 75,714 R E Freestone................. 180,000 76,785 J M Hill...................... -- 25,000 D J Tate...................... 3,831,904 -- P G Thomas.................... 180,000 76,428 P J Folkman*.................. 2,963,705 -- A J J Simonds-Gooding......... 9,135 --
-------- * By virtue of being connected with The North of England Venture Fund Limited ("NEV"), P J Folkman is treated as being interested in the 2,963,705 Lilliput Shares in which NEV is interested. ** As provided in paragraphs (vii) and (viii) below. (vii) The options granted under the terms of the Lilliput Group plc Executive Share Option Scheme are exercisable at a price of 135p per share normally between 24th November, 1996 and 24th November, 2003.
Director Total -------- ------- J A Russell.......................................................... 250,000 A R Dunning.......................................................... 75,000 R E Freestone........................................................ 75,000 J M Hill............................................................. 25,000 P G Thomas........................................................... 75,000
51 (viii)There are currently options outstanding over 316,096 Lilliput Shares under the Lilliput Group plc Savings Related Share Option Scheme, which in normal circumstances would be exercisable at a price of 98p per share between 1st March, 1999 and 31st August, 1999. In the light of the Offer, only options over approximately 35,000 Lilliput Shares will rank for the cash cancellation proposal referred to in the letter from Goldman Sachs on page 9 of this document. (ix) During the Offer Period Albert E. Sharp & Co have dealt for value in Lilliput Shares on behalf of discretionary clients as follows:
Lilliput Price per Date Transaction Shares Share(p) ---- ----------- -------- --------- 1st September, 1994........................... Sale 21,000 157 1st September, 1994........................... Sale 42,500 158 1st September, 1994........................... Sale 60,000 158.5 2nd September, 1994........................... Sale 80,000 158
On 7th September, 1994, Albert E. Sharp & Co held 44,257 Lilliput Shares on behalf of discretionary clients. (C) GENERAL (i) Save as disclosed in this paragraph 3, neither Stanhome nor Stanhome Inc., nor any of the Directors of Stanhome or Stanhome Inc., nor any members of their immediate families, nor any person acting in concert with Stanhome Inc., nor any person who has irrevocably undertaken to accept the Offer, owned or controlled or (in the case of Directors of Stanhome, Stanhome Inc. and their immediate families) was interested in any relevant securities on 8th September, 1994 (the last possible date prior to the posting of this document) nor has any such person dealt for value therein during the disclosure period. (ii) Save as disclosed in this paragraph 3, none of the Directors of Lilliput nor any member of their immediate families was interested in any relevant securities on 8th September, 1994 nor has any such person dealt for value therein during the disclosure period and no bank, stockbroker, financial or other professional adviser (other than an exempt market-maker) to Lilliput (nor any person controlling, controlled by, or under the same control as such bank, stockbroker, financial or other professional adviser) nor any subsidiary of Lilliput nor any pension fund of Lilliput or of any of its subsidiaries, nor any person whose investments are managed on a discretionary basis by a fund manager (other than an exempt fund manager) which is controlled by, controls or is under the same control as Lilliput or any bank, stockbroker, financial or other professional adviser, to Lilliput, owned or controlled any relevant securities on 8th September, 1994 nor has any such person dealt for value therein during the period from 1st September, 1994 to 8th September, 1994 (being the last possible date prior to the posting of this document). (iii) Neither Stanhome, Stanhome Inc. nor any of their associates nor any person acting in concert with Stanhome Inc. nor Lilliput nor any of its associates has any arrangement in relation to relevant securities. For these purposes "arrangement" includes any indemnity or option arrangements and any agreement or understanding, formal or informal, of whatever nature, relating to relevant securities which may be an inducement to deal or refrain from dealing. (iv) References in this paragraph 3 to: (a) an "associate" are to:- (1) subsidiaries and associated companies of Stanhome or Stanhome Inc. or Lilliput and companies of which any such subsidiaries or associated companies are associated companies; (2) banks, financial and other professional advisers (including stockbrokers) to Stanhome or Stanhome Inc. or Lilliput or a company covered in (1) above, including persons controlling, controlled by or under the same control as such banks, financial or other professional advisers; (3) the Directors of Stanhome or Stanhome Inc. or Lilliput and the directors of any company covered in (1) above (together in each case with their close relatives and related trusts); (4) the pension funds of Stanhome or Stanhome Inc. or Lilliput or a company covered in (1) above; and (5) (in relation to Stanhome or Stanhome Inc.) an investment company, unit trust or other person whose investments an associate (as otherwise defined in this paragraph (a)) manages on a discretionary basis, in respect of the relevant investment accounts; (b) a "bank" does not apply to a bank whose sole relationship with Stanhome or Stanhome Inc. or Lilliput or a company covered in paragraph (a)(1) above is the provision of normal commercial banking services or such activities in connection with the Offer as handling acceptances and other registration work; and (c) "relevant securities" means Lilliput Shares and securities convertible into, rights to subscribe for and options (including traded options) in respect thereof. (v) For the purposes of this paragraph 3, ownership or control of 20 per cent. or more of the equity share capital of a company is regarded as the test of associated company status and "control" means a holding, or aggregate holdings, of shares carrying 30 per cent. or more of the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting, irrespective of whether the holding or aggregate holding gives de facto control. 4. MARKET QUOTATIONS The following table shows the middle market quotations for Lilliput Shares, as derived from the Stock Exchange Daily Official List, on the first dealing day of each month from April 1994 to September 1994 inclusive, on 31st August, 1994 (being the last business day before the commencement of the Offer Period) and on 8th September, 1994, (being the last possible date before the posting of this document):
Date Middle Market Quotation(p) - ---- -------------------------- 5th April............................................ 131 3rd May.............................................. 120 1st June............................................. 106 1st July............................................. 90 1st August........................................... 91 31st August.......................................... 92 1st September........................................ 160 8th September........................................ 160
52 5. SERVICE AGREEMENTS (a) The following are particulars of the current service agreements, all dated 11th November 1993, between the Directors of Lilliput and Lilliput or any of its subsidiaries which do not expire, or cannot be terminated by the employing company, within twelve months:
Annual Employing Name Notice Period Salary Company ---- ------------- --------------- --------- J A Russell.......................... 2 years (Pounds)100,000 Lilliput A R Dunning.......................... 1 year (Pounds)50,000 Lilliput R E Freestone........................ 1 year (Pounds)50,000 Lilliput J M Hill............................. 1 year (Pounds)45,000 Lilliput D J Tate............................. 2 years (Pounds)60,000 Lilliput P G Thomas........................... 1 year (Pounds)50,000 Lilliput
There is a bonus arrangement in place for the executive Directors of Lilliput in respect of the current financial year (the "Relevant Year"). The bonus, payable to each such Director, will be a percentage of his/her annual salary (as set out above) related to the percentage increase in earnings per Lilliput Share for the Relevant Year in excess of the aggregate of (a) the percentage increase in the retail prices index for the Relevant Year and (b) 3 per cent. Whether or not a bonus is payable calculated as aforesaid, the Remuneration Committee of the Lilliput Board of Directors may in its sole discretion approve the payment of a limited bonus in accordance with the bonus arrangement to the executive Directors or any of them. The total bonus paid for the Relevant Year for each relevant Director shall not exceed 50 per cent of his/her annual salary. Any bonus arrangements for subsequent years are to be determined by the Remuneration Committee. (b) Save as disclosed herein: (i) there are no service agreements in force between any Director or proposed Director of Lilliput and Lilliput or any of its subsidiaries which do not expire or cannot be terminated by Lilliput or its relevant subsidiary within the next 12 months without payment of compensation (other than statutory compensation); (ii) none of the service agreements described above were entered into during the 6 months preceding the date of this document nor have any amendments been made to any of such service agreements during that period. 6. MATERIAL CONTRACTS The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Lilliput Group since 1st September, 1992 and are or may be material: (i) an agreement dated 11th November, 1993 between Lilliput, the executive Directors of Lilliput, W D Dodd, The North of England Venture Fund Limited, Coutts & Co and Lazard Venture Funds (Managers) Limited, whereby a subscription agreement dated 22nd August, 1990 (pursuant to which an equity investment of (Pounds)1.2 million was made in Lilliput) was terminated; and (ii) an agreement dated 12th November, 1993 between Lilliput, the shareholders of Lilliput, the Directors of Lilliput and NatWest Markets whereby, in connection with the admission of Lilliput Shares to the Official List of the Stock Exchange, NatWest Markets, as agent for National Westminster Bank Plc, underwrote the sale of 9,814,823 existing Lilliput Shares and the issue of 2,222,214 new Lilliput Shares, in each case at 135p per share, by way of a placing and an intermediaries offer. Lilliput paid commissions in respect of the new Lilliput Shares so issued and advisory fees to NatWest Markets and the brokers. 7. FINANCING The Offer is to be financed by means of facilities made available to Stanhome by Mellon Bank, N.A., Banca Popolare di Milano, Chemical Connecticut Corporation and The First National Bank of Boston. By a facility advisement letter agreement dated 30th August 1994 Mellon Bank, N.A. agreed to make available to Stanhome an aggregate facility amount of $25,000,000 on the terms and conditions therein described. Stanhome Inc. has entered into a guarantee agreement dated 6th September, 1994 in favour of Mellon Bank, N.A. in respect of this facility. The other three banks have confirmed to Goldman Sachs by means of letters dated 30th August, 1994, that facilities have been made available to Stanhome. Those facilities are as follows: Banca Popolare di Milano............................................ $15,000,000 Chemical Connecticut Corporation.................................... $15,000,000 The First National Bank of Boston................................... $25,000,000
Neither repayment of, nor security for, any liability (contingent or otherwise) of Stanhome will depend to any significant extent on the business of Lilliput, although the payment of interest by Stanhome in respect of the above facilities will depend upon the receipt by Stanhome of income from Lilliput or upon finance being received by Stanhome from elsewhere in the Stanhome Group. Goldman Sachs is satisfied that Stanhome has the necessary financial resources for it to implement the Offer in full. Full acceptance of the Offer would involve the payment of approximately (Pounds)38.2 million in cash by Stanhome (assuming exercise of all outstanding options under the Lilliput Share Option Schemes). 8. OTHER INFORMATION (a) The expenses of, and incidental to, the preparation and circulation of the Offer will be paid by Stanhome. (b) No proposal exists in connection with the Offer whereby any payment or other benefit shall be made or given to any Director of Lilliput as compensation for loss of office or as consideration for or in connection with his loss of office. (c) (i) Save as disclosed herein, no agreement, arrangement or understanding exists between Stanhome or any party acting in concert with Stanhome and any of the directors or recent directors, shareholders or recent shareholders of Lilliput having any connection with or dependence on the Offer. 53 (ii) Stanhome Inc. has entered into an arrangement with John Russell, Chairman & Chief Executive of Lilliput, dated 30th August, 1994 whereby, assuming the Offer becomes or is declared wholly unconditional, Mr Russell will become President and Chief Executive Officer of the European Giftware Group and Managing Director of Stanhome, for a period of up to 5 years, at a salary of (Pounds)120,000, subject to annual review. Mr Russell would continue on his current bonus scheme during 1994 and would move, in 1995, to the worldwide Stanhome Inc. Management Incentive Plan. (d) There is no agreement, arrangement or understanding whereby the beneficial ownership of any of the Lilliput Shares acquired by Stanhome in pursuance of the Offer will be transferred to any other person, save that Stanhome reserves the right to transfer any such shares to any member of the Stanhome Group. (e) NatWest Markets has given and has not withdrawn its written consent to the issue of this document with the inclusion herein of the references to its name in the form and context in which it appears. (f) The contents of this document, for which the Directors of Stanhome Inc., the Directors of Stanhome and the Directors of Lilliput are responsible on the basis stated in paragraph 1 of this Appendix, have been approved by Goldman Sachs for the purposes of section 57 of the Financial Services Act 1986, a member of The Securities and Futures Authority. 9. SOURCES Unless otherwise stated, financial information concerning Stanhome Inc. and Lilliput has been derived from the annual report and amounts for the relevant company for the relevant periods. The financial information concerning Stanhome has been derived from its statutory books and bank records. 10. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the offices of Ashurst Morris Crisp, Broadwalk House, 5 Appold Street, London EC2A 2HA throughout the period during which the Offer remains open for acceptance: (a) the Memorandum and Articles of Association of Stanhome and the Restated Articles of Organisation (as amended) and By-Laws of Stanhome Inc.; (b) the Memorandum and Articles of Association of Lilliput; (c) the audited consolidated accounts of Stanhome Inc. for the two years ended 31st December, 1993 and the interim results for the six months ended 30th June, 1994; (d) the audited consolidated accounts of Lilliput for the two years ended 31st December, 1993 and the interim results for the six months ended 30th June, 1994; (e) the service agreements of the Directors of Stanhome Inc. of more than one year's duration and the Directors' service agreements referred to in paragraph 5 above; (f) the material contracts referred to in paragraph 6 above; (g) the financing documents referred to in paragraph 7 above; (h) a letter recording the arrangements between Stanhome Inc. and John Russell referred to in paragraph 8(c) above; (i) the letter of consent referred to in paragraph 8(e) above; (j) the irrevocable undertakings to accept the Offer referred to in paragraph 3 above; and (k) this document and the Form of Acceptance. 54 Printed by RR Donnelley Financial, 16077 EX-2.B 3 FORM OF ACCEPTANCE Exhibit 2(b) THIS FORM IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR OWN FINANCIAL ADVICE IMMEDIATELY FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. This Form should be read in conjunction with the accompanying Offer Document dated 9th September, 1994 (the "Offer Document"). The expressions used in this Form shall, unless the context otherwise requires, bear the same meanings as in the Offer Document. The terms and conditions of the Offer, as contained or referred to in the Offer Document, are deemed to be incorporated in and form part of this Form. - ------------------------------------------------------------------------------- FORM OF ACCEPTANCE IN RESPECT OF THE RECOMMENDED CASH OFFER BY GOLDMAN SACHS INTERNATIONAL ON BEHALF OF STANHOME PLC A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC - ------------------------------------------------------------------------------- ACCEPTANCES SHOULD BE DESPATCHED AS SOON AS POSSIBLE BUT IN ANY EVENT SO AS TO BE RECEIVED NOT LATER THAN 3.00 P.M. ON 30TH SEPTEMBER, 1994. The Offer referred to in this Form is not being made directly or indirectly in, and neither the Offer Document nor this Form is being, and must not be, mailed or otherwise distributed or sent, in whole or in part, into or from the United States or Canada. - ------------------------------------------------------------------------------- ACTION TO BE TAKEN Please read pages 2 and 4 of this Form, where detailed instructions on how to complete the Form are set out, and complete and sign, where indicated, on page 3. Send the completed and signed Form (accompanied by your share certificate(s) and/or other document(s) of title) by post or by hand to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ using the enclosed reply-paid envelope or by hand only to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, 15 Featherstone Street, London EC1Y 8QS, as soon as possible, and in any event so as to be received not later than 3.00 p.m. on 30th September, 1994. If your share certificate(s) and/or other document(s) of title is/are not readily available or is/are lost, the Form should nevertheless be completed, signed and returned as stated above and the certificate(s) and/or other document(s) of title forwarded as soon as possible thereafter. Do not detach any part of this Form. If you have any questions as to how to complete this Form, please contact The Royal Bank of Scotland plc, Registrar's Department, New Issues Section by telephoning 0272 370666. - ------------------------------------------------------------------------------- PAGE 2 HOW TO COMPLETE THIS FORM TO ACCEPT THE OFFER COMPLETE BOXES [1] AND [3] AND SIGN BOX [2] - -------------------------------------------------------------------------------- +++ +++ + + To accept the Offer insert If no number, or a number + 1 + in Box [1] the number of greater than your entire + + Lilliput Shares in respect holding of Lilliput Shares, +++ +++ of which you wish to accept is inserted in Box [1], and the Offer. you have signed Box [2], you will be deemed to have YOU MUST THEN ALSO SIGN BOX accepted the Offer in [2] IN THE PRESENCE OF AN respect of your entire INDEPENDENT WITNESS AND holding of Lilliput Shares. COMPLETE BOX [3]. - -------------------------------------------------------------------------------- +++ +++ + + You must sign Box [2] UK CORPORATIONS--A UK + 2 + regardless of which other corporation must execute the + + Box(es) you complete. Form of Acceptance as a +++ +++ deed, by the signatures of INDIVIDUALS--Each signature two Directors or a Director by an individual must be and the Secretary who should made in the presence of one state the capacity in which independent witness who must they sign. also sign Box [2] where indicated. The witness must FOREIGN CORPORATIONS--A be 18 years of age or over. foreign corporation must The witness must not be execute the Form of another joint holder. The Acceptance as a deed by the witness should state his or signature or signatures of a her name and sign where person or persons who, in indicated. The same witness accordance with the laws of may witness each signature the territory in which the of joint holders. foreign corporation was incorporated, act under the authority (express or implied) of that foreign corporation. - -------------------------------------------------------------------------------- +++ +++ + + To accept the Offer complete + 3 + Box [3] in BLOCK CAPITALS + + with the full name and +++ +++ address of the registered holder and in the case of Lilliput Shares jointly held, the full name and address of the first- registered holder together with the names and addresses of all joint holders. Please enter a daytime telephone number in the box provided where you may be contacted in the event of a query regarding the completion of this Form. - -------------------------------------------------------------------------------- +++ +++ + + If you want the + 4 + consideration and/or other + + documents to be sent to +++ +++ someone other than the first-registered holder at the address set out in Box [3] (e.g. your bank manager or stockbroker), you should also complete Box [4]. - -------------------------------------------------------------------------------- PAGE 3 +++ +++ + For Stock Exchange or + + Registrar's use + +++ +++ PLEASE COMPLETE THIS FORM AS EXPLAINED ON PAGE 2 The provisions of the Offer Document are incorporated in and form part of this Form of Acceptance. TO ACCEPT THE OFFER COMPLETE BOXES [1] AND [3] AND SIGN BOX [2] - ------------------------------------------------------------------------ +++ +++ Please insert the number +++ +++ + + of Lilliput Shares in respect + Number of + + 1 + of which you wish to accept + Lilliput + + + the Offer. + Shares + +++ +++ +++ +++ - ------------------------------------------------------------------------ +++ +++ SIGN BELOW TO ACCEPT THE OFFER + + + 2 + Signed as a deed by: In the presence of: + + -------------------- ------------------- +++ +++ 1. ................. ................ ................ Signature of Signature of Name of individual witness witness 2. ................. ................ ................ Signature of Signature of Name of individual witness witness 3. ................. ................ ................ Signature of Signature of Name of individual witness witness 4. ................. ................ ................ Signature of Signature of Name of individual witness witness Executed as a deed by: ---------------------- ................... ................ ................ Name of Signature of Name of corporation Director Director ................ ................ Signature of Name of second second Director/Secretary Director/Secretary (delete as (delete as appropriate) appropriate) - ------------------------------------------------------------------------ +++ +++ FULL NAME(S) AND ADDRESS(ES) (TO BE COMPLETED IN BLOCK + + CAPITALS) + 3 + + + First holder +++ +++ ------------ 1. Forename(s)............ 3. Forename(s).............. Surname Surname (Mr/Mrs/Miss/Title)....... (Mr/Mrs/Miss/Title)......... Full address.............. Full address................ .......................... ............................ .......................... ............................ Postcode.................. Postcode.................... Joint holders ------------- 2. Forename(s)............ 4. Forename(s).............. Surname Surname (Mr/Mrs/Miss/Title)....... (Mr/Mrs/Miss/Title)......... Full address.............. Full address................ .......................... ............................ .......................... ............................ Postcode.................. Postcode.................... +++ +++ + + + PLEASE INSERT YOUR DAYTIME TELEPHONE + + NUMBER IN CASE OF QUERY: + +++ +++ - ------------------------------------------------------------------------ +++ +++ +++ +++ + + + Please complete this Box if you wish the consideration + + 4 + + and/or other documents to be sent to someone other + + + + than the first-registered holder at the address set + +++ +++ + out in Box [3] + + + + Name................................................... + + Address................................................ + + ......................................Postcode......... + +++ +++ (TO BE COMPLETED IN BLOCK CAPITALS) FOR OFFICE USE ONLY - ------------- H - ------------- C - ------------- Q - ------------- ACCEPTANCE NO. - ------------- SHARES ACCEPTED - ------------- CASH CONSIDERATION (POUNDS) - ------------- CHEQUE NO. - ------------- Page 4 ADDITIONAL NOTES REGARDING THE COMPLETION OF THIS FORM. IN ORDER TO BE EFFECTIVE THIS FORM MUST, EXCEPT AS MENTIONED BELOW, BE SIGNED AS A DEED BY THE REGISTERED HOLDER OR, IN THE CASE OF A JOINT HOLDING, BY ALL THE JOINT HOLDERS, OR UNDER A POWER OF ATTORNEY AND IN ACCORDANCE WITH THE NOTES ON PAGE 2. A CORPORATION MUST EXECUTE THIS FORM AS A DEED IN ACCORDANCE WITH THE NOTES ON PAGE 2. In order to avoid delay and inconvenience to yourself, the following points may assist you:- 1.IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY) Send this Form by the quickest means (e.g. air mail), but not into the United States or Canada, to the holder for execution or, if he has executed a power of attorney, have this Form signed by the attorney. In the latter case, the power of attorney should be lodged with this Form for noting. NO OTHER SIGNATURES ARE ACCEPTABLE. 2.IF YOU HAVE SOLD ALL YOUR HOLDING You should at once send this Form and the Offer Document to the stockbroker, bank or other agent through whom the sale was effected for transmission to the purchaser. 3.IF THE SOLE HOLDER HAS DIED If probate or letters of administration have been registered with Lilliput, this Form must be signed by the personal representative(s) of the deceased. If probate or letters of administration have been granted but have not been registered with Lilliput, the personal representative(s) should sign this Form and forward it to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section at one of the addresses given below with the share certificate(s) and with a sealed copy of the probate or letters of administration as soon as possible. If probate or letters of administration have not been granted, the personal representative(s) should sign this Form and forward it to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section at one of the addresses given below with the share certificate(s). However, a sealed copy of the probate or letters of administration must be lodged with The Royal Bank of Scotland plc, Registrar's Department, New Issues Section at one of the addresses given below before the consideration due under the Offer can be forwarded to the personal representative(s). 4.IF ONE OF THE JOINT HOLDERS HAS DIED This Form is valid if signed by all the surviving joint holders and lodged with the death certificate, probate or letters of administration of the deceased. 5.IF THE SHARE CERTIFICATE(S) IS/ARE HELD BY YOUR STOCKBROKER OR OTHER AGENT If your share certificate(s) and/or other document(s) of title are with your stockbroker or other agent, you should complete this Form and arrange for it to be lodged by such agent with the relevant document(s). If the share certificate(s) is/are not readily obtainable, lodge this Form duly completed together with a note saying e.g. "certificate(s) to follow", and arrange for the certificate(s) to be forwarded as soon as possible thereafter. It is helpful for your agent to be informed of the full terms of the Offer. 6.IF THE SHARE CERTIFICATE HAS BEEN LOST Complete and lodge this Form together with a letter of explanation and any certificate(s) available, with The Royal Bank of Scotland plc, Registrar's Department, New Issues Section at one of the addresses given below. You should then write to the Registrars of Lilliput, The Royal Bank of Scotland plc, Securities Services--Registrars, Owen House, 8 Bankhead Crossway North, Edinburgh EH11 4BR for a letter of indemnity which should be completed in accordance with the instructions given. When completed, the letter of indemnity must be lodged with The Royal Bank of Scotland plc, Registrar's Department, New Issues Section at one of the addresses given below. 7.IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE SHARE CERTIFICATE, E.G.: (a) name on the certificate...................................James Smith correct name.............................................James Smythe complete and lodge this Form with the correct name and accompanied by a letter from your stockbroker, bank or solicitor confirming that the person described on the certificate and the person who has signed this Form are one and the same; (b)incorrect address write the correct address on this Form; (c)change of name lodge your Marriage Certificate or the deed poll with this Form for noting. THE CONSIDERATION DUE TO YOU UNDER THE OFFER CANNOT BE SENT TO YOU UNTIL ALL RELEVANT DOCUMENTS HAVE BEEN PROPERLY COMPLETED AND LODGED EITHER BY POST WITH THE ROYAL BANK OF SCOTLAND PLC, REGISTRAR'S DEPARTMENT, NEW ISSUES SECTION, PO BOX 859, CONSORT HOUSE, EAST STREET, BEDMINSTER, BRISTOL BS99 1XZ OR BY HAND ONLY WITH THE ROYAL BANK OF SCOTLAND PLC, REGISTRAR'S DEPARTMENT, NEW ISSUES SECTION, 15 FEATHERSTONE STREET, LONDON EC1Y 8QS. Printed by RR Donnelley Financial--16078 EX-2.C 4 UNCONDITIONAL ACCEPTANCE Exhibit 2(c) - -------------------------------------------------------------------------------- [LETTERHEAD OF GOLDMAN SACHS APPEARS HERE] - -------------------------------------------------------------------------------- NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR PART IN OR INTO THE UNITED STATES OF AMERICA OR CANADA 3rd October, 1994 Stanhome plc ("Stanhome") RECOMMENDED CASH OFFER for Lilliput Group plc ("Lilliput") Acceptances of the Offer On 31st August, 1994, the day before the announcement of the Offer, neither Stanhome, nor any person acting in concert with Stanhome, owned, controlled or held any options to purchase any Lilliput shares. As at 3.00pm on Friday, 30th September, 1994, the first closing date of the Offer, Stanhome had purchased 6,504,219 Lilliput shares representing 28.0 per cent. of the issued ordinary share capital of Lilliput and had received acceptances in respect of 15,239,746 Lilliput shares representing 65.5 per cent. of the issued ordinary share capital. In aggregate, as at 3.00pm on Friday, 30th September, 1994, Stanhome therefore owned or had received acceptances over 21,743,965 Lilliput shares, representing 93.4 per cent. of the issued ordinary share capital of Lilliput. In addition, Stanhome has purchased a further 170,000 shares representing 0.7 per cent. of Lilliput's issued ordinary share capital which are still awaiting settlement. The Offer has been declared fully unconditional and will remain open until further notice. Enquiries Stanhome Tel: 0101 413 562 3631 G. William Seawright - President and Chief Executive Goldman Sachs International Tel: 071 774 4366 Richard Gnodde Goldman Sachs International ("GSI"), which is a member of the Securities and Futures Authority, is acting for Stanhome Inc. and its subsidiaries and no one else in connection with the Offer and will not be responsible to anyone other than Stanhome Inc. and its subsidiaries for providing the protections offered to customers of GSI nor for providing advice in relation to the Offer. EX-2.D 5 NON-ASSENTING SHARES Exhibit 2(d) Stanhome plc +++ +++ + + + + To: + + + + +++ +++ THE COMPANIES ACT 1985 NOTICE TO NON-ASSENTING SHAREHOLDERS Pursuant to section 429(4) of the Companies Act 1985 as inserted by Schedule 12 to the Financial Services Act 1986. A takeover offer ("the Offer") was made on 9th September, 1994 by Goldman Sachs International on behalf of Stanhome plc ("Stanhome") for the whole of the issued and to be issued ordinary share capital of Lilliput Group plc ("the Company"). Stanhome has, within 4 months of making the Offer, acquired or contracted to acquire not less than nine-tenths in value of the shares of the Company to which the Offer relates. Stanhome gives notice that it now intends to exercise its right under section 429 Companies Act 1985 to acquire shares held by you in the Company. The terms of the Offer are 160p in cash for each ordinary share of 5p of the Company and so in proportion for any other number of ordinary shares of the Company. NOTE: You are entitled under section 430C of the Companies Act 1985 to make application to the Court within 6 weeks of the date of this notice for an order either that Stanhome shall not be entitled and bound to acquire your shares or that different terms to those of the Offer shall apply to the acquisitions. If you are contemplating such an action you may wish to seek legal advice. Signed .............................. Secretary of Stanhome plc Date: 11th October, 1994 All enquiries or communications in connection with the above notice should be addressed to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster Bristol, BS99 1XZ. Telephone number: 0117 937 0666. THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR OWN FINANCIAL ADVICE IMMEDIATELY FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. STANHOME PLC 11th October, 1994 To the holders of Lilliput shares who have not accepted the Offer Dear Sir or Madam, OFFER BY STANHOME PLC ("STANHOME") TO ACQUIRE THE ENTIRE ISSUED AND TO BE ISSUED ORDINARY SHARE CAPITAL OF LILLIPUT GROUP PLC ("LILLIPUT") The offer made by Goldman Sachs International on behalf of Stanhome on 9th September, 1994 ("the Offer") to acquire all the issued and to be issued ordinary shares of 5p each in Lilliput not already owned by the Stanhome Group was declared unconditional in all respects on Monday, 3rd October, 1994. At that time acceptances from the holders of approximately 65.49 per cent. of Lilliput's issued ordinary share capital had been received, and Stanhome had purchased approximately 27.95 per cent. Stanhome therefore owns or controls approximately 93.4 per cent. of Lilliput's issued ordinary share capital. The terms of the offer were 160p in cash for each Lilliput ordinary share. According to our records we have not received your acceptance of the Offer and we therefore enclose the statutory notice under section 429 of the Companies Act 1985 informing you that Stanhome will apply the procedure under that section compulsorily to acquire your ordinary shares in Lilliput. Upon completion of the compulsory acquisition Stanhome intends to institute proceedings to remove Lilliput's listing on the London Stock Exchange. If you have lost or mislaid your Form of Acceptance, further copies can be obtained from The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O Box 859, Consort House, East Street, Bedminster, Bristol, BS99 1XZ. If you do not accept the Offer in the normal way your shares will in any event be compulsorily acquired pursuant to section 429 of the Companies Act 1985. Yours faithfully [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] For and on behalf of Stanhome REGISTERED IN ENGLAND NO. 2939658 Broadwalk House, 5 Appold Street, London EC2A 2HA EX-2.E 6 NOTICE AND RCO-SAVINGS Exhibit 2(e) NOTICE TO OPTIONHOLDERS UNDER THE LILLIPUT GROUP PLC SAVINGS-RELATED SHARE OPTION SCHEME (THE "SAYE SCHEME") +++ +++ + + + + To: + + + + +++ +++ A takeover offer ("the Offer") was made on 9th September, 1994 by Goldman Sachs International on behalf of Stanhome plc ("Stanhome") for the whole of the issued and to be issued ordinary share capital of Lilliput Group plc ("the Company"). Stanhome has, within 4 months of making the Offer, acquired or contracted to acquire not less than nine-tenths in value of the shares of the Company to which the Offer relates. Stanhome gives notice under rule 7.2 of the SAYE Scheme that it now intends to exercise its right under section 429 Companies Act 1985 compulsorily to acquire shares in the Company. Pursuant to Rule 7.2 of the SAYE Scheme your option will remain exercisable until 12th November, 1994 and shall thereafter lapse and cease to be of any further value. Signed [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] Director of Stanhome plc Date: 11th October, 1994 All enquiries or communications in connection with the above notice should be addressed to The Royal Bank of Scotland plc, Registrar's Department, New Issue Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ. Telephone number: 0117 937 0666. THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING FORM OF ACCEPTANCE AND SURRENDER AND THE OFFER DOCUMENT, A COPY OF WHICH HAS ALREADY BEEN SENT TO YOU. NEITHER THIS DOCUMENT NOR THE OFFER DOCUMENT NOR ANY DOCUMENT IN CONNECTION WITH EITHER MAY BE DISTRIBUTED OR SENT IN, INTO OR FROM, THE UNITED STATES AND DOING SO MAY RENDER INVALID ANY PURPORTED ACCEPTANCE. LILLIPUT GROUP plc, SKIRSGILL, PENRITH, CUMBRIA CA11 0DP TO THE HOLDERS OF OPTIONS UNDER THE LILLIPUT GROUP PLC SAVINGS-RELATED OPTION SCHEME 11th October, 1994 DEAR OPTIONHOLDER, RECOMMENDED CASH OFFER ON BEHALF OF STANHOME PLC ("STANHOME") A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC ("LILLIPUT") I refer to the offer (the "Offer") which has been made on behalf of Stanhome to acquire the whole of the issued and to be issued share capital of Lilliput. A copy of the Offer Document was sent to you on 9th September, 1994 and the Offer was declared unconditional in all respects on 3rd October, 1994. Appendix I to this document sets out the courses of action available to you and Appendix II summarises the tax implications of those courses of action. In the accompanying letter to you from Stanhome you will find details of a separate offer to you by Stanhome under which you may surrender your options for a cash payment (the "Proposal"). You will also find a notice of Stanhome's intention to exercise rights of compulsory acquisition pursuant to section 429 of the Companies Act 1985 indicating what will happen to the shares acquired if you choose to exercise your option and do not take up the Proposal. If you have any questions in respect of the Offer as it affects your options please contact Rob Freestone the Company Secretary on 01768 212 670. THE BOARD OF LILLIPUT, WHICH HAS BEEN SO ADVISED BY NATWEST MARKETS, CONSIDERS THE TERMS OF THE PROPOSAL TO BE FAIR AND REASONABLE. The decision as to which course of action to take is a matter for you alone. However, failure to take any action may result in your options lapsing and becoming worthless. YOURS SINCERELY, [SIGNATURE OF JOHN A. RUSSELL APPEARS HERE] J A RUSSELL CHAIRMAN STANHOME PLC 11th October, 1994 To participants in The Lilliput Group plc Savings-Related Share Option Scheme (the "SAYE Scheme") DEAR OPTIONHOLDER, RECOMMENDED CASH OFFER ON BEHALF OF STANHOME PLC ("STANHOME") A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC ("LILLIPUT") You will have received a copy of the Offer Document in which it was stated that a cash cancellation proposal would in due course be put to Optionholders under the Lilliput Share Option Schemes who have not exercised their options during the Offer Period. On 3rd October, 1994 the Offer was declared wholly unconditional and Stanhome now controls over 90 per cent. of the issued and to be issued shared capital of Lilliput which is the subject of the Offer. You will see from Appendix I to this document on page 4 of this document, the alternative courses of action available to holders of options under the SAYE Scheme. We are writing to propose to you the separate offer under which you may surrender your option for a cash payment (the "Proposal"). THE PROPOSAL Under the Proposal, you may elect to surrender your option in return for a cash payment. We hereby offer to pay you a cash payment in consideration of the surrender of any option held by you. The cash sum will be calculated by multiplying the number of Lilliput Shares that can be purchased with the proceeds of your related share save account with the Halifax Building Society ("the Sharesave Account") standing to the credit of that account at the close of business on 11th October, 1994 by 160p and deducting therefrom the total subscription price which would have been payable on exercise of the option. If you accept the Proposal you will avoid the two-stage process of having to exercise your option and subsequently being required to sell your shares to Stanhome. HALIFAX BUILDING SOCIETY SHARESAVE ACCOUNT You should note that acceptance of the Proposal does not require you to close your Sharesave Account nor for any amounts to be deducted from your Sharesave Account. If you wish, your Sharesave Account can be continued until maturity of the related savings contract or, as the case may be, closed in accordance with any instructions you may give to the Halifax Building Society. The ability to continue the Sharesave Account may be of particular significance for those Optionholders who wish to take advantage of the tax reliefs available in relation to the bonus payable upon maturity of the savings contract underlying the Sharesave Account. WORKED EXAMPLE OF THE PROPOSAL An Optionholder has an option over Lilliput Shares exercisable at 98p per Lilliput Share. On the date of the Proposal the balance of the Optionholder's Sharesave Account is (Pounds)196. This amount would allow the 2 Optionholder to acquire 200 Lilliput Shares. The Optionholder may therefore accept the Proposal in respect of options over 200 Lilliput Shares and would receive the following consideration under the Proposal:-
(Pounds) Cash sum 200 X 160p 320 less 200 X 98p (196) ----- Net cash sum 124 =====
No account has been taken of any liability to taxation in the above example. TAXATION You should note that by electing to surrender your option in accordance with the Proposal you will be subject to income tax in the current year of assessment at your highest marginal rate on the proceeds of surrender of your options (that is, on the net cash sum which you receive). If you were to exercise your option in accordance with the terms of the SAYE Scheme, to the extent that such exercise is permitted by the rules of the SAYE Scheme, rather than accept the Proposal, the tax consequences are likely to be essentially the same. IF YOU ARE IN ANY DOUBT ABOUT YOUR TAX POSITION YOU ARE ADVISED TO CONSULT AN INDEPENDENT PROFESSIONAL ADVISER IMMEDIATELY. PROCEDURE FOR ACCEPTANCE OF THE PROPOSAL To accept the Proposal you must ascertain from Rob Freestone, the Company Secretary of Lilliput, the number of shares you could subscribe for as at 11th October, 1994. To accept the Proposal you should complete the accompanying Form. This should be signed and returned with the relevant option certificate as soon as possible, but in any event so as to reach Rob Freestone at Lilliput Group plc, Skirsgill, Penrith, Cumbria CA11 0DP no later than close of business on 12th November, 1994. The Proposal will close at close of business on 12th November, 1994 unless Stanhome has previously agreed to extend this time limit. SETTLEMENT SETTLEMENT WILL NOT BE MADE UNTIL AFTER RECEIPT OF A VALID COMPLETED FORM AND YOUR OPTION CERTIFICATE. IF YOU ACCEPT THE PROPOSAL AND YOUR VALIDLY COMPLETED FORM AND OPTION CERTIFICATE ARE RECEIVED NOT LATER THAN 14TH OCTOBER, 1994, A CHEQUE WILL BE DESPATCHED TO YOU ON OR BEFORE 21ST OCTOBER, 1994. OTHERWISE, CHEQUES WILL BE DESPATCHED NOT LATER THAN 21 DAYS AFTER RECEIPT OF A VALID AND COMPLETED FORM TOGETHER WITH YOUR OPTION CERTIFICATE. COMPULSORY ACQUISITION You will find enclosed a notice of our intention to exercise rights of compulsory acquisition pursuant to section 429 of the Companies Act 1985 as regards all Lilliput Shares. Pursuant to Rule 7.2 of the SAYE Scheme your option shall remain exercisable until 12th November, 1994 and shall thereafter lapse and cease to be of any further value. The extent to which you may exercise your option under the SAYE Scheme will depend on the amount of savings you have made. No interest will be payable and in order to exercise you will have to close your Sharesave Account, which you could otherwise have continued to maturity as explained above. To the extent that an option is exercisable under the rules of the SAYE Scheme, the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired under section 429 of the Companies Act 1985. The tax consequences of this course of action are set out in Appendix II to this document. Yours faithfully [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] for Stanhome plc Broadwalk House, 5 Appold Street, London EC2A 2HA 3 APPENDIX I 1. INTRODUCTION The definitions set out in Appendix III are used in this description of your rights. The Offer made on behalf of Stanhome for Lilliput is to pay 160 pence in cash for each Lilliput Share. The following courses of action are open to you under and subject to the Rules of the SAYE Scheme:- (i) you may take up the Proposal set out in the accompanying letter from Stanhome; or (ii) you may exercise your option and become a Lilliput Shareholder. The Lilliput Shares issued pursuant to such exercise will then be compulsorily acquired by Stanhome. You have a limited period in which to exercise your option if you are permitted to do so under the rules of the SAYE Scheme. This is explained in paragraph 3 below; or (iii) you may do nothing in which case your option will lapse on 12th November, 1994 and cease to be of any further value. The taxation consequences of these courses of action are set out in Appendix II. 2. THE PROPOSAL Stanhome is offering you a cash sum in consideration of the cancellation of your option. The terms and conditions of the Proposal are set out in the accompanying letter. For each option to acquire a Lilliput Share which would be capable of being exercised and in respect of which you validly accept the Proposal, you will be paid 160p less the exercise price per share of that option. You need not close your Sharesave Account and if you maintain it you will continue to obtain favourable tax treatment in respect of it. 3. EXERCISE OF OPTIONS To the extent that you are permitted to exercise your option and become a Lilliput Shareholder, you should be aware that pursuant to Rule 7.2 of the SAYE Scheme your right to exercise your option will cease on 12th November, 1994, as Stanhome has exercised its rights under section 429 of the Companies Act 1985 compulsorily to acquire any remaining Lilliput Shares. Any option not exercised by 12th November, 1994 will lapse and cease to be of any further value. You may not exercise your option with a sum exceeding the total repayment due to you under your Sharesave Account. If you exercise your option the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired on the terms set out in the Offer Document by Stanhome under section 429 of the Companies Act 1985. Further details of the Offer are given in the Offer Document. 4. IF YOU TAKE NO ACTION If you take no action, your option will lapse on 12th November, 1994. 5. TAXATION A summary of the tax implications of the courses of action described above is set out in Appendix II. The precise implications for you will, however, depend on your particular circumstances. If you are in any doubt, you should consult a professional tax adviser. 6. GENERAL If you have any questions concerning the proposals set out in this document, you should refer them to Rob Freestone at Lilliput. 4 APPENDIX II TAXATION The following is a summary of the likely United Kingdom taxation implications of the courses of action described in this letter for optionholders resident for tax purposes in the United Kingdom. The precise implications for you will, however, depend on your particular circumstances and, if you are in any doubt as to your tax position, you should consult a professional adviser. This applies in particular to any optionholder not resident nor ordinarily resident for tax purposes in the United Kingdom. You should also refer to the taxation paragraphs of the Offer Document for general taxation information relating to the Offer. 1. ACCEPTANCE OF THE PROPOSAL (I.E. CASH CANCELLATION OF OPTIONS) If you accept the Proposal you will be subject to income tax on the value of the consideration you receive (that is, the cash sum) in return for cancelling your option. 2. EXERCISE OF OPTIONS AND COMPULSORY ACQUISITION If you exercise your option you will be subject to income tax on the amount by which the market value of the Lilliput Shares acquired on exercise of your option exceeds the option exercise price. If you exercise your option, the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired by Stanhome on the terms set out in the Offer Document. You may, depending on your personal circumstances, be liable for Capital Gains Tax ("CGT"). The amount of any gain chargeable to CGT will be based on the proceeds of sale of your Lilliput Shares less your allowable acquisition costs of those shares. The allowable acquisition cost of your shares will equal the market value of the shares on the date of exercise. Liability to CGT is particularly dependent on your personal circumstances. You should be aware that, if you already hold Lilliput Shares, the disposal of those shares may trigger an overall CGT liability even though some of the shares forming part of the pool have been acquired at full market value. You will only be liable to CGT to the extent that your total chargeable gains (less allowable capital losses) for the entire tax year 1994/95 exceed the annual exempt amount which is, for individuals, (Pounds)5,800 for the tax year 1994/95. 3. TAX RETURNS IF YOU HAVE TO PAY INCOME TAX ON MONEY RECEIVED WHEN YOU EXERCISE YOUR OPTION OR ACCEPT THE PROPOSAL YOU MUST GIVE DETAILS OF THE MONEY RECEIVED ON YOUR INCOME TAX RETURN FOR THE TAX YEAR ENDING 5TH APRIL, 1995. IF YOU DO NOT NORMALLY COMPLETE AN INCOME TAX RETURN IT IS INCUMBENT UPON YOU TO DO SO IN RESPECT OF THIS ADDITIONAL INCOME. YOU ARE STRONGLY ADVISED TO PUT ASIDE SUFFICIENT MONEY TO ENABLE YOU TO MEET THE INCOME TAX WHICH YOU MAY BE REQUIRED TO REPAY IN DUE COURSE. 5 APPENDIX III 1. In this document and the accompanying Form, the following expressions have the following meanings unless the context requires otherwise: "Lilliput Share Option together, the SAYE Scheme and The Lilliput Schemes" Group plc Executive Share Option Scheme; "Form" the Form of Acceptance and Surrender enclosed with this document; "Lilliput" Lilliput Group plc; "Lilliput Shares" the fully-paid ordinary shares of 5 pence each in Lilliput; "Offer Document" the offer document dated 9th September 1994 containing the Recommended Cash Offer; "Optionholders" holders of options under the SAYE Scheme; "Recommended Cash Offer" the recommended cash offer made by Goldman Sachs on behalf of Stanhome to acquire Lilliput Shares as set out in the Offer Document; "Stanhome" Stanhome plc, a wholly owned subsidiary of Stanhome Inc. Save as aforesaid, the definitions used in the Offer Document also apply in this document and the Form. 2. The Form, including the instructions and notes thereon, shall be deemed an integral part of the Proposal. 3. Accidental omission to despatch this document to, or any failure to receive the same by, any person to whom the Proposal is made or should be made shall not invalidate the Proposal in any way. 4. Acceptances will not be acknowledged. All documents or remittances sent by or to an acceptor, or as he may direct, will be sent through the post at his risk. 5. The Proposal and acceptance shall be governed by and construed in accordance with English law. 6. All acceptances of the Proposal will be irrevocable. 7. NatWest Markets has given and not withdrawn its consent to the issue of this document with the reference to its name in the form and context in which it appears. 8. The issue of this document has been approved by a duly authorised committee of the Board of Stanhome. The directors of Stanhome accept responsibility for the information contained in this document (other than that relating to Lilliput) and, to the best of the knowledge and belief of such directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they take responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. 9. The issue of this document has been approved by a duly authorised committee of the Board of Lilliput. The directors of Lilliput accept responsibility for the information contained in this document regarding Lilliput and, to the best of the knowledge and belief of such directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they take responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. 10.So far as the directors of Stanhome and the directors of Lilliput are aware, there has been no material change to the information contained in the Offer Document. 11.The copy of the Rules of the Lilliput Share Option Schemes will be available for inspection at Ashurst Morris Crisp Broadwalk House, 5 Appold Street, London EC2A 2HA during normal business hours on all weekdays (Saturdays and public holidays excepted) until 12th November, 1994. 12.Goldman Sachs International, a member of The Securities and Futures Authority has approved the contents of this letter for the purposes of Section 57 of the Financial Services Act 1986. 6 Printed by RR Donnelley Financial, 39234 EX-2.F 7 ACCEPT AND SURRENDER-SAV Exhibit 2(f) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. It should be read in conjunction with the accompanying document dated 11th October, 1994 containing the Proposal (the "Document"). If you are in any doubt about the action you should take, you should consult an independent financial adviser authorised under the Financial Services Act 1986. The definitions which apply in the Document also apply where relevant in this Form. - -------------------------------------------------------------------------------- FORM OF ACCEPTANCE AND SURRENDER RELATING TO THE PROPOSAL BY STANHOME PLC A SUBSIDIARY OF STANHOME INC. MADE TO THE HOLDERS OF OPTIONS UNDER THE LILLIPUT GROUP PLC SAVINGS-RELATED SHARE OPTION SCHEME - -------------------------------------------------------------------------------- HOW TO COMPLETE THIS FORM 1. To accept the Proposal you must sign and date the Form in the place indicated. 2. Having completed this Form, duly signed, it should be forwarded with your option certificate to Rob Freestone at Lilliput Group plc, Skirsgill, Penrith, Cumbria CA11 0DP. Acceptances may not be treated as valid unless this Form is received properly completed together with your option certificate by not later than close of business on 12th November, 1994 (unless Stanhome has previously agreed to extend the time limit). 3. If you accept the Proposal and your validly completed Form and option certificate are received not later than 14th October, 1994, a cheque will be despatched to you on or before 21st October, 1994. Otherwise, cheques will be despatched not later than 21 days after receipt of a valid and completed Form and your option certificate. 4. If you are in any doubt about how to fill in this Form please telephone Rob Freestone the Company Secretary, at Lilliput on 01768 212 670. FORM OF ACCEPTANCE AND SURRENDER To: Stanhome plc Lilliput Group plc I (full name)............................................................... of (address)................................................................ ............................................................................ being a participant in The Lilliput Group plc Savings-Related Share Option Scheme hereby accept the Proposal contained in the Document and accordingly agree to surrender the option listed below in consideration of a cash payment, calculated in accordance with the formula set out in the Proposal. I also agree that I have no further rights under the SAYE Scheme in respect of such option. Option granted on 5th January, 1994 at an exercise price of 98p per Lilliput Share. Signed ................................. Date ................................... Printed by RR Donnelley Financial--39240 EX-2.G 8 NOTICE AND RCO-EXEC Exhibit 2(g) NOTICE TO OPTIONHOLDERS UNDER THE LILLIPUT GROUP PLC EXECUTIVE SHARE OPTION SCHEME (THE "EXECUTIVE SCHEME") +++ +++ + + + + To: + + + + +++ +++ A takeover offer ("the Offer") was made on 9th September, 1994 by Goldman Sachs International on behalf of Stanhome plc ("Stanhome") for the whole of the issued and to be issued ordinary share capital of Lilliput Group plc ("the Company"). Stanhome has, within 4 months of making the Offer, acquired or contracted to acquire not less than nine-tenths in value of the shares of the Company to which the Offer relates. Stanhome gives notice under rule 6.2 of the Executive Scheme that it now intends to exercise its right under section 429 Companies Act 1985 compulsorily to acquire shares in the Company. Pursuant to Rule 6.2 of the Executive Scheme your option will remain exercisable until 12th November, 1994 and shall thereafter lapse and cease to be of any further value. Signed [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] Director of Stanhome plc Date: 11th October, 1994 All enquiries or communications in connection with the above notice should be addressed to The Royal Bank of Scotland plc, Registrar's Department, New Issues Section, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ. Telephone number: 0117 937 0666. THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING FORM OF ACCEPTANCE AND SURRENDER AND THE OFFER DOCUMENT, A COPY OF WHICH HAS ALREADY BEEN SENT TO YOU. NEITHER THIS DOCUMENT NOR THE OFFER DOCUMENT NOR ANY DOCUMENT IN CONNECTION WITH EITHER MAY BE DISTRIBUTED OR SENT IN, INTO OR FROM, THE UNITED STATES AND DOING SO MAY RENDER INVALID ANY PURPORTED ACCEPTANCE. LILLIPUT GROUP plc, SKIRSGILL, PENRITH, CUMBRIA CA11 0DP TO THE HOLDERS OF OPTIONS UNDER THE LILLIPUT GROUP PLC EXECUTIVE SHARE OPTION SCHEME 11th October, 1994 DEAR OPTIONHOLDER, RECOMMENDED CASH OFFER ON BEHALF OF STANHOME PLC ("STANHOME") A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC ("LILLIPUT") I refer to the offer (the "Offer") which has been made on behalf of Stanhome to acquire the whole of the issued and to be issued share capital of Lilliput. A copy of the Offer document was sent to you on 9th September, 1994 and the Offer was declared unconditional in all respects on 3rd October, 1994. Appendix I to this document sets out the courses of action available to you and Appendix II summarises the tax implications of those courses of action. In the accompanying letter to you from Stanhome, you will find details of a separate offer to you by Stanhome under which you may surrender your option for a cash payment (the "Proposal"). You will also find a notice of Stanhome's intention to exercise rights of compulsory acquisition pursuant to section 429 of the Companies Act 1985 indicating what will happen to the shares acquired if you choose to exercise your option and do not take up the Proposal. If you have any questions in respect of the Offer as it affects your option please contact Rob Freestone, the Company Secretary, on 01768 212 670. THE BOARD OF LILLIPUT, WHICH HAS BEEN SO ADVISED BY NATWEST MARKETS, CONSIDERS THE TERMS OF THE PROPOSAL TO BE FAIR AND REASONABLE. The decision as to which course of action to take is a matter for you alone. However, failure to take any action may result in your option lapsing and becoming worthless. YOURS SINCERELY, [SIGNATURE OF JOHN A. RUSSELL APPEARS HERE] J A RUSSELL CHAIRMAN STANHOME PLC 11th October, 1994 To participants in The Lilliput Group plc Executive Share Option Scheme (the "Executive Scheme") DEAR OPTIONHOLDER, RECOMMENDED CASH OFFER ON BEHALF OF STANHOME PLC ("STANHOME") A SUBSIDIARY OF STANHOME INC. FOR LILLIPUT GROUP PLC ("LILLIPUT") You will have received a copy of the Offer Document in which it was stated that a cash cancellation proposal would in due course be put to Optionholders under the Lilliput Share Option Schemes who have not exercised their options during the Offer Period. On 3rd October, 1994 the Offer was declared wholly unconditional and Stanhome now controls over 90 per cent. of the issued and to be issued shared capital of Lilliput which is the subject of the Offer. You will see from Appendix I to this document, on page 4 of this document, the alternative courses of action available to holders of options under the Executive Scheme. We are writing to propose to you the separate offer under which you may surrender your option for a cash payment (the "Proposal"). THE PROPOSAL Under the Proposal, you may elect to surrender your option in return for a cash payment. This may assist Optionholders who do not wish to raise the funds necessary to pay for the exercise of their options to the extent that such exercise is permitted by the rules of the Executive Scheme. We hereby offer to pay you a cash payment in consideration of the surrender of any option held by you. The cash sum will be calculated by multiplying the number of Lilliput Shares over which such option would be exercisable, were it to be validly exercised on the date upon which the completed Form relating to your option is received, by 160p and deducting therefrom the total subscription price which would have been payable on exercise of the option. If you accept the Proposal you will avoid the two-stage process of having to exercise your option and subsequently having to sell your shares to Stanhome. WORKED EXAMPLE OF THE PROPOSAL An Optionholder who surrenders an option over 10,000 Lilliput Shares exercisable at 135p per Lilliput Share would receive the following consideration under the Proposal:-
(Pounds) Cash sum 10,000 X 160p 16,000 less 10,000 X 135p (13,500) ------ Net cash sum 2,500 ======
No account has been taken of any liability to taxation in the above example. 2 TAXATION You should note that by electing to surrender your option in accordance with the Proposal you will be subject to income tax in the current year of assessment at your highest marginal rate on the proceeds of surrender of your option (that is, on the net cash sum which you receive). If you were to exercise your option in accordance with the terms of the Executive Scheme, to the extent that such exercise is permitted by the Rules of the Executive Scheme, rather than accept the Proposal, the tax consequences are likely to be essentially the same. IF YOU ARE IN ANY DOUBT ABOUT YOUR TAX POSITION YOU ARE ADVISED TO CONSULT A PROFESSIONAL TAX ADVISER IMMEDIATELY. PROCEDURE FOR ACCEPTANCE OF THE PROPOSAL To accept the Proposal you must complete the accompanying Form. This should be signed and returned with the relevant option certificate as soon as possible, but in any event so as to reach Rob Freestone at Lilliput Group plc, Skirsgill, Penrith, Cumbria CA11 0DP not later than close of business on 12th November, 1994. The Proposal will close at close of business on 12th November, 1994 unless Stanhome has previously agreed to extend this time limit. SETTLEMENT SETTLEMENT WILL NOT BE MADE UNTIL AFTER RECEIPT OF A VALID COMPLETED FORM AND YOUR OPTION CERTIFICATE. IF YOU ACCEPT THE PROPOSAL AND YOUR VALIDLY COMPLETED FORM AND OPTION CERTIFICATE ARE RECEIVED NOT LATER THAN 14TH OCTOBER, 1994 A CHEQUE WILL BE DESPATCHED TO YOU ON OR BEFORE 21ST OCTOBER, 1994. OTHERWISE, CHEQUES WILL BE DESPATCHED NOT LATER THAN 21 DAYS AFTER RECEIPT OF A VALID AND COMPLETED FORM AND YOUR OPTION CERTIFICATE. COMPULSORY ACQUISITION You will find enclosed a notice of our intention to exercise rights of compulsory acquisition pursuant to section 429 of the Companies Act 1985 as regards all Lilliput Shares. Pursuant to Rule 6.2 of the Executive Scheme your option will remain exercisable until 12th November, 1994 and shall thereafter lapse and cease to be of any further value. To the extent that options are exercisable under the rules of the Executive Scheme, the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired under section 429 of the Companies Act 1985. The tax consequences of this course of action are set out in Appendix II to this document. YOURS FAITHFULLY [SIGNATURE OF G. WILLIAM SEAWRIGHT APPEARS HERE] FOR STANHOME PLC Broadwalk House, 5 Appold Street, London EC2A 2HA 3 APPENDIX I 1. INTRODUCTION The definitions set out in Appendix III are used in this description of your rights. The Offer made on behalf of Stanhome for Lilliput is to pay 160 pence in cash for each Lilliput Share over which an option is held by you. The following courses of action are open to you under and subject to the Rules of the Executive Scheme:- (i) you may take up the Proposal set out in the accompanying letter from Stanhome; or (ii) you may exercise your option and become a Lilliput Shareholder. The Lilliput Shares issued pursuant to such exercise will then be compulsorily acquired by Stanhome. You have a limited period in which to exercise your option if you are permitted to do so under the rules of the Executive Share Scheme. This is explained in paragraph 3 below; or (iii) you may do nothing in which case your options will lapse on 12th November, 1994 and cease to be of any further value. The taxation consequences of these courses of action are set out in Appendix II. 2. THE PROPOSAL Stanhome is offering you a cash sum in consideration of the cancellation of your option. The terms and conditions of the Proposal are set out in the accompanying letter. For each Lilliput Share over which an option is held by you in respect of which you accept the Proposal, you will be paid 160p less the exercise price per share of your option. 3. EXERCISE OF OPTIONS To the extent that you are permitted to exercise your options and become a Lilliput Shareholder, you should be aware that pursuant to Rule 6.2 of the Executive Scheme your right to exercise your options will cease on 12th November, 1994, as Stanhome has exercised its rights under section 429 of the Companies Act 1985 compulsorily to acquire any remaining Lilliput Shares. Any option not exercised by then will lapse and cease to be of any further value. If you exercise your option the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired on the terms set out in the Offer Document by Stanhome under section 429 of the Companies Act 1985. Further details of the Offer are given in the Offer Document. 4. IF YOU TAKE NO ACTION If you take no action, your option will lapse on 12th November, 1994. 5. TAXATION A summary of the tax implications of the courses of action described above is set out in Appendix II. The precise implications for you will, however, depend on your particular circumstances. If you are in any doubt, you should consult a professional tax adviser. 6. GENERAL If you have any questions concerning the proposals set out in this document, you should refer them to Rob Freestone at Lilliput. 4 APPENDIX II TAXATION The following is a summary of the likely United Kingdom taxation implications of the courses of action described in this letter for optionholders resident for tax purposes in the United Kingdom. The precise implications for you will, however, depend on your particular circumstances and, if you are in any doubt as to your tax position, you should consult a professional adviser. This applies in particular to any optionholder not resident or ordinarily resident for tax purposes in the United Kingdom. You should also refer to the taxation paragraphs of the Offer Document for general taxation information relating to the Offer. 1. ACCEPTANCE OF THE PROPOSAL (IE CASH CANCELLATION OF OPTIONS) If you accept the Proposal you will be subject to income tax on the value of the consideration you receive (that is, the cash sum) in return for cancelling your option. 2. EXERCISE OF OPTIONS AND COMPULSORY ACQUISITION If you exercise your option you will be subject to income tax on the amount by which the market value of the Lilliput Shares acquired on exercise of your options exceeds the option exercise price. If you exercise your option, the Lilliput Shares issued pursuant to such exercise will be compulsorily acquired by Stanhome on the terms set out in the Offer Document. You may, depending on your personal circumstances, be liable for Capital Gains Tax, ("CGT"). The amount of any gain chargeable to CGT will be based on the proceeds of sale of your Lilliput Shares less your allowable acquisition costs of those shares. The allowable acquisition cost of your shares will equal the market value of the shares on the date of exercise. Liability to CGT is particularly dependent on your personal circumstances. You should be aware that if you already hold Lilliput Shares, the disposal of those shares may trigger an overall CGT liability even though some of the shares forming part of the pool have been acquired at full market value. You will only be liable to CGT to the extent that your total chargeable gains (less allowable capital losses) for the entire tax year 1994/95 exceed the annual exempt amount which is, for individuals, (Pounds)5,800 for the tax year 1994/95. 3. TAX RETURNS IF YOU HAVE TO PAY INCOME TAX ON MONEY RECEIVED WHEN YOU EXERCISE YOUR OPTION OR ACCEPT THE PROPOSAL YOU MUST GIVE DETAILS OF THE MONEY RECEIVED ON YOUR INCOME TAX RETURN FOR THE TAX YEAR ENDING 5TH APRIL, 1995. IF YOU DO NOT NORMALLY COMPLETE AN INCOME TAX RETURN IT IS INCUMBENT UPON YOU TO DO SO IN RESPECT OF THIS ADDITIONAL INCOME. YOU ARE STRONGLY ADVISED TO PUT ASIDE SUFFICIENT MONEY TO ENABLE YOU TO MEET THE INCOME TAX WHICH YOU MAY BE REQUIRED TO REPAY IN DUE COURSE. 5 APPENDIX III 1. In this document and the accompanying Form, the following expressions have the following meanings unless the context requires otherwise:- "Lilliput Share Option together, the Executive Scheme and The Lilliput Schemes" Group plc Savings-Related Share Option Scheme; "Form" the Form of Acceptance and Surrender enclosed with this document; "Lilliput" Lilliput Group plc; "Lilliput Shares" the fully-paid ordinary shares of 5 pence each in Lilliput; "Offer Document" the offer document dated 9th September, 1994 containing the Recommended Cash Offer; "Optionholders" holders of options under the Executive Scheme; "Recommended Cash Offer" the recommended cash offer made by Goldman Sachs on behalf of Stanhome to acquire Lilliput Shares as set out in the Offer Document; "Stanhome" Stanhome plc, a wholly owned subsidiary of Stanhome Inc. Save as aforesaid, the definitions used in the Offer Documents also apply in this document and the Form. 2. The Form, including the instructions and notes thereon, shall be deemed an integral part of the Proposal. 3. Accidental omission to despatch this document to, or any failure to receive the same by, any person to whom the Proposal is made or should be made, shall not invalidate the Proposal in any way. 4. Acceptances will not be acknowledged. All documents or remittances sent by or to an acceptor, or as he may direct, will be sent through the post at his risk. 5. The Proposal and acceptance shall be governed by and construed in accordance with English law. 6. All acceptances of the Proposal will be irrevocable. 7. NatWest Markets has given and not withdrawn its consent to the issue of this document with the reference to its name in the form and context in which it appears. 8. The issue of this document has been approved by a duly authorised committee of the Board of Stanhome. The directors of Stanhome accept responsibility for the information contained in this document (other than that relating to Lilliput) and, to the best of the knowledge and belief of such directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document, for which they take responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. 9. The issue of this document has been approved by a duly authorised committee of the Board of Lilliput. The directors of Lilliput accept responsibility for the information contained in this document regarding Lilliput and, to the best of the knowledge and belief of such directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they take responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. 10. So far as the directors of Stanhome and the directors of Lilliput are aware, there has been no material change to the information contained in the Offer Document. 11. The copy of the Rules of the Lilliput Share Option Schemes will be available for inspection at Ashurst Morris Crisp, Broadwalk House, 5 Appold Street, London EC2A 2HA during normal business hours on all weekdays (Saturdays and public holidays excepted) until 12th November, 1994. 12. Goldman Sachs International, a member of The Securities and Futures Authority, has approved the contents of this letter for the purposes of Section 57 of the Financial Services Act 1986. 6 Printed by RR Donnelley Financial, 39238 EX-2.H 9 ACCEPT AND SURRENDER-EXEC. Exhibit 2(h) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. It should be read in conjunction with the accompanying document dated 11th October, 1994 containing the Proposal (the "Document"). If you are in any doubt about the action you should take, you should consult an independent financial adviser authorised under the Financial Services Act 1986. The definitions which apply in the Document also apply, where relevant, in this Form. - -------------------------------------------------------------------------------- FORM OF ACCEPTANCE AND SURRENDER RELATING TO THE PROPOSAL BY STANHOME PLC A SUBSIDIARY OF STANHOME INC. MADE TO THE HOLDERS OF OPTIONS UNDER THE LILLIPUT GROUP PLC EXECUTIVE SHARE OPTION SCHEME - -------------------------------------------------------------------------------- HOW TO COMPLETE THIS FORM 1. To accept the Proposal you must sign and date the Form in the place indicated. 2. Having completed this Form, duly signed, it should be forwarded with your option certificate to Rob Freestone at Lilliput Group plc, Skirsgill, Penrith, Cumbria CA11 0DP. Acceptances may not be treated as valid unless this Form is received, properly completed together with your option certificate by not later than close of business on 12th November, 1994 (unless Stanhome has previously agreed to extend the time limit). 3. If you accept the Proposal and your validly completed Form and option certificate are received not later than 14th October, 1994, a cheque will be despatched to you on or before 21st October, 1994. Otherwise, cheques will be despatched not later than 21 days after receipt of a valid and completed Form and your option certificate. 4. If you are in any doubt about how to fill in this Form please telephone Rob Freestone the Company Secretary at Lilliput on 01768 212 670. FORM OF ACCEPTANCE AND SURRENDER To: Stanhome plc Lilliput Group plc I (full name)............................................................... of (address)................................................................ ............................................................................ being a participant in The Lilliput Group Executive Share Option Scheme hereby accept the Proposal contained in the Document and accordingly agree to surrender the option listed below in consideration of a cash payment, calculated in accordance with the formula set out in the Proposal. I also agree that I have no further rights under the Executive Scheme in respect of such option. Option granted on 24th November, 1993 at an exercise price of 135p per Lilliput Share. Signed ................................. Date ................................... Printed by RR Donnelley Financial -- 39241 -----END PRIVACY-ENHANCED MESSAGE-----