Statement of reasons

This notice applies to acts or omissions occurring on or after 17 January 2007 and expires on 17 January 2008.

The Takeovers Panel has exempted Pen Investments Limited (Pen Ltd) from compliance with rule 22 of the Takeovers Code.

Rule 22 of the Code provides (among other things) that, if rule 8(4) of the Code applies, an offeror must obtain a report from an independent adviser certifying that, in the adviser's opinion, rule 8(4) has been complied with. Rule 8(4) applies if non-voting securities are included in a full offer and provides that the consideration and terms offered for non-voting securities must be fair and reasonable in comparison with the consideration and terms offered for voting securities.

The exemption applies to a proposed takeover offer by Pen Ltd for all of the parcels of shares and mortgage bonds issued by St John Balanced Property Fund Limited (St John).

The shares and mortgage bond that make up each relevant parcel cannot be transferred independently of each other. The consideration proposed to be offered by Pen Ltd is related to each parcel and does not distinguish between the components of the parcel.

The exemption from rule 22 of the Code in respect of the offer means that Pen Ltd does not have to obtain a report from an independent adviser certifying that the terms and conditions offered for the shares in each parcel are fair and reasonable in comparison to the terms and conditions offered for the mortgage bond in each parcel.

The Panel considers that it is appropriate to grant the exemption because—

• •all security holders in St John to whom the offer is being made hold a parcel or parcels of shares and mortgage bonds that cannot be separated and these shares and mortgage bonds do not have a value that is independent of the value of the parcel of which they form part; and

• •those security holders cannot decide to sell only the shares or only the mortgage bonds that the security holder holds.

The Panel considers that the exemption from rule 22 of the Code is consistent with the objectives of the Code because it will not result in shareholders being treated unfairly or being prevented from ultimately deciding for themselves the merits of the offer.