After considering the available alternatives, the Board believes that the capital reduction is the most suitable and effective proposal to ensure that the Company's dividend policy remains unaffected by the transition from UK Generally Accepted Accounting Principles to International Financial Reporting Standards which, on top of the non-cash charges to profit and loss made in the year ended March 31, 2004, will have a negative impact on the Group's consolidated profit and loss reserve. Whilst this would not legally prevent the continued payment of dividends by the Company in the near term, the Board's ability to pay dividends may well be impacted in the future. The reduction of the Company's share premium account and the cancellation of the capital redemption reserve will lead to a corresponding increase in the distributable reserves of the Company and the Group.
It is not the intention that these newly generated distributable reserves will be used to pay dividends above the level of the normal policy of the Company. The capital reduction will have no impact on the Company's cash position or on its net assets. It will also have no impact upon the nominal value of the Company's ordinary shares.
The capital reduction is conditional on the approval of the Company's shareholders by special resolution at an extraordinary general meeting to be held on February 23, 2005, and on confirmation by the High Court. A circular detailing the proposals is being posted to shareholders today.
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