Offer by Tayvin 300 Limited

RNS Number:3745P
Silk Industries PLC
04 September 2003


SILK INDUSTRIES PLC

Not for release, publication or distribution in whole or in part outside the
United Kingdom


Recommended Offer for Silk Industries PLC by Tayvin 300 Limited

by means of a Scheme of Arrangement (under Section 425 of the Companies Act
1985)


SUMMARY

* The board of Tayvin 300 Limited and the Independent Director of Silk
Industries PLC are pleased to announce that they have agreed the terms of a
recommended offer to acquire the whole of the issued and to be issued share
capital of Silk to be effected by way of a Scheme of Arrangement

* Recommended offer of 42 pence in cash for each Silk Share with a Loan
Note Alternative

* The Offer values the fully diluted share capital of Silk at
approximately #5.3 million

* The Offer represents a premium of 58.5 per cent over the closing
middle market price of 26.5 pence per Silk Share on 16 July 2003 (the last
dealing day prior to the date on which Silk announced it was in talks as regards
a possible offer)

* Tayvin is a company established and formed for the purpose of making
the Offer by the Management Team of Silk, headed by David Tooth, executive
chairman of Silk

* Silk announced on 28 August 2003 its preliminary results for the year
ended 30 April 2003


Words and expressions used in this summary are defined in the attached
announcement.

This summary should be read in conjunction with the full text of the attached
announcement.


Enquiries:

Sarah Kent, Brewin Dolphin Securities Limited
0161 214 5554

John L Jeremy, Independent Director, Silk Industries PLC
01787 467905

Brewin Dolphin Securities Limited, which is authorised and regulated by the
Financial Services Authority, is acting for Silk and no one else in connection
with the Scheme and will not be responsible to anyone other than Silk for
providing the protections afforded to clients of Brewin Dolphin nor for giving
advice in relation to the Scheme, the contents of this document or any
arrangements referred to herein. Brewin Dolphin Securities Limited has approved
and authorised the contents of this announcement for the purposes of section 21
of the Financial Services and Markets Act 2000.

Taylor Vinters is acting for Tayvin and no one else in connection with the
Scheme and will not be responsible to anyone other than Tayvin for providing the
protections afforded to clients of Taylor Vinters nor for providing advice in
relation to the Scheme, the contents of this document or any arrangements
referred to herein.

This announcement does not constitute an offer or an invitation to purchase any
securities. The Offer will not be made, directly or indirectly, outside the
United Kingdom and will not be capable of acceptance by any person resident in,
or a national of, a jurisdiction outside the United Kingdom. Accordingly, copies
of this announcement and any other documents relating to the Offer are not being
and must not be mailed or otherwise distributed outside the United Kingdom and
persons receiving such documents (including, without limitation, custodians,
nominees and trustees) must not distribute or send them outside the United
Kingdom.


SILK INDUSTRIES PLC

Recommended Offer for Silk by Tayvin by way of a Scheme of Arrangement

1. Introduction

On 17 July 2003 the Company announced that it was in preliminary talks on a
possible offer for the Company. Following those discussions, John Jeremy, the
Independent Director of Silk Industries PLC and Tayvin 300 Limited, a company
controlled by David Tooth, are pleased to announce that agreement has been
reached on the terms of a recommended offer to acquire the entire issued and to
be issued share capital of the Company to be effected by way of a Scheme of
Arrangement.

The Company also announced on 28 August 2003 its preliminary results for the
year ended 30 April 2003.

Definitions of certain expressions used in this announcement are set out in the
Appendix to this announcement.


2. Terms of the Offer

The Offer will be effected by way of a Scheme of Arrangement between Silk and
the Scheme Shareholders under section 425 of the Companies Act. The Proposals
are subject to the Conditions set out in paragraph 10 of this announcement. The
Scheme involves, inter alia, the cancellation of Silk Shares and Silk
Shareholders will be entitled to receive:

for every 100 Silk Shares     #42 in cash (equivalent to 42p per share)

The Scheme includes a Loan Note Alternative whereby as an alternative to
receiving the Cash Consideration, Scheme Shareholders will be entitled to elect
to transfer some or all of their Scheme Shares to Tayvin in exchange for the
issue of Loan Notes by Tayvin and cash on the following basis:-

for every 100 Silk Shares     #20 in cash and #45 nominal value of Loan Notes

The Loan Note Alternative is subject to conditions, further details of which are
set out in paragraph 11 below.

With reference to the financial effects of the Proposals set out in paragraph 13
below and taking into account the risks associated with the Loan Notes, the
consideration offered per Scheme Share to a Scheme Shareholder electing to
receive the Loan Note Alternative would not materially differ from the 42 pence
offered by way of the Cash Consideration.

If Scheme Shareholders are considering making an election for the Loan Note
Alternative, their attention is particularly drawn to the section below headed
"Risks attached to the Loan Notes". Scheme Shareholders are strongly advised to
consult a stockbroker, bank manager, accountant or other independent financial
adviser authorised under the Financial Services and Markets Act 2000 who
specialises in advising on the acquisition of shares or other securities. Scheme
Shareholders are recommended to consider carefully, in the light of their
investment objectives and having taken advice appropriate to their own financial
circumstances, whether it would be appropriate to elect for the Loan Note
Alternative.

The Offer values the entire issued and to be issued share capital of Silk at
approximately #5.3 million. The Cash Consideration represents a premium of 58.5
per cent over the closing middle market price of 26.5 pence per Silk Share on 16
July 2003 (the last dealing day prior to the date on which Silk announced it was
in talks as regards a possible offer), and a premium of 69.4 per cent over the
average closing middle market ex-dividend price of a Silk Share for the 30 days
prior to 16 July 2003 (the last dealing day prior to the date on which Silk
announced it was in talks as regards a possible offer).

The Independent Director has noted the increase in the price of Silk Shares
since the Company announced its preliminary results on 28 August 2003, in which
the Chairman of the Company explained that an announcement detailing the
Proposals would follow shortly thereafter. The Cash Consideration represents a
premium of 33.5 per cent over the closing middle market price of 31.5p per Silk
Share on 27 August 2003 (the last dealing date prior to the date on which Silk
announced its preliminary results).

3.  Independence of Silk Directors


The directors of Silk at the date of this announcement are John Jeremy, David
King, Clive Reeks and David Tooth.

David Tooth and persons connected with him have conditionally agreed to transfer
all their shares in the capital of Silk to Tayvin, the consideration for which
will be the issue of B Loan Notes and shares in Tayvin to David Tooth and
persons connected with him. David Tooth will be the Executive Chairman of Tayvin
following implementation of the Scheme. Silk Shares held by David Tooth and
persons connected with him are therefore excluded from the Scheme. David Tooth
has agreed that as a result of his interest in Tayvin, he will not vote at the
Court Meeting nor take part in any of the discussions of Silk concerning the
Offer.

Each of David King and Clive Reeks will be appointed non-executive directors of
Tayvin following implementation of the Scheme under the terms of non-executive
directors' agreements, summaries of which will be contained in the Scheme
Circular. Accordingly, they have not taken part in any of the deliberations of
the board of Silk concerning the Offer. In addition, both David King and Clive
Reeks have indicated that they will be electing to receive Loan Notes in respect
of their Scheme Shares as referred to below. However, they will have no interest
in the share capital of Tayvin.


4.  Directors' intentions

The Independent Director has indicated to Tayvin that he will not be electing to
receive the Loan Note Alternative and will therefore receive Cash Consideration
in respect of his 50,000 Scheme Shares representing 0.4 per cent. of the issued
share capital of Silk.

In addition in order to facilitate the financing of the Cash Consideration of
the Offer and to ensure that the condition of the Scheme relating to the minimum
take up under the Loan Note Alternative is met (as referred to in paragraph 10
below), each of David King and Clive Reeks has indicated to Tayvin that he will
elect to receive the Loan Note Alternative in respect of their entire holdings
of Scheme Shares, which will amount to #1,846,856 in total of Loan Notes.


5. Recommendation

In view of the involvement of certain Directors in Tayvin the Independent
Director has taken sole responsibility for considering the Offer.

The Independent Director, having been so advised by Brewin Dolphin, considers
the terms of the Proposals to be fair and reasonable. In providing their advice,
Brewin Dolphin have taken into account the Independent Director's commercial
assessments.

The Independent Director considers that the resolutions to be proposed at the
Court Meeting and the EGM are in the best interests of the Independent
Shareholders as a whole. Accordingly the Independent Director unreservedly
recommends Scheme Shareholders to approve the Scheme at the Court Meeting and
vote in favour of the Proposals at the Court Meeting and the EGM, as he intends
to do in respect of his own holding of 50,000 Silk Shares, representing 0.4 per
cent of the existing issued share capital of Silk and 0.5 per cent of the Scheme
Shares entitled to vote at the Court Meeting.


6.  Background to the Offer and reasons for the Recommendation

Silk operates in a mature market where core performance in recent years has been
flat, having reduced from peak levels in the mid 1990s. As stated by David Tooth
in his Chairman's Statement included in the preliminary results for the year to
30 April 2003, the outlook for the silk businesses remains unsettled. The return
to tie wearing remains a feature of men's fashion, but that is balanced both by
the continued acceptance in many spheres of a casual dress code and by depressed
economic conditions.

In addition Silk is extremely small for a company on the Official List and
trading on the London Stock Exchange's main market. Only 43 per cent of the Silk
Shares are held outside the control of the Board, or not linked to the Board
through trusts. The Silk Shares held by outside shareholders are valued at #1.4
million (based on a share price of 26.5p per Silk Share as at 16 July 2003, the
last dealing day prior to the date on which Silk announced it was in talks as
regards a possible offer).

There is very little trading in the Company's shares with only around 500 trades
in the twelve months to the end of July 2003 with the average transaction below
#1,500.

This illiquidity and the low market capitalisation of the Company have been
contributing factors in the lack of demand for Silk Shares from institutional
investors who would see such an investment as carrying a disproportionately high
risk. If such an investor were able to accumulate a sufficiently large
investment to justify their management time, such a holding would represent a
large percentage of the issued share capital of Silk.

The Company has been on the Official List since 1995. Despite its listing, the
lack of liquidity in the stock, the lack of interest from substantial investors
and the relatively small market capitalisation of the Company has led the
Independent Director to the conclusion that Silk does not fit happily in the
quoted sector.


The Independent Director is therefore of the view that it would be in the best
interests of the Shareholders as a whole for a privatisation of the Company to
take place in such a way as to facilitate an exit for Independent Shareholders
at a satisfactory price.

7.   Current trading and outlook


The Company announced on 28 August 2003 its preliminary results for the year
ended 30 April 2003.

8.   Management and employees


Apart from David Tooth, all of the Directors will resign from the Board when the
Scheme has become effective.

Tayvin has given assurances to the Independent Director that the existing
employment rights, including pension rights, of the employees of Silk will be
fully safeguarded.

9.  Silk Share Option Schemes


Under the rules of each of the Silk Share Option Schemes, upon a change of
control of Silk, Optionholders will have a period of time in which they may
exercise their options. Any shares issued to Optionholders upon exercise of
their options will not be included in, and will therefore be outside, the
Scheme. However, the amendments to the Articles of Association to be proposed at
the EGM and referred to later in this announcement will provide that any person
receiving Silk Shares after the Record Time is obliged to transfer them to
Tayvin and receive the Cash Consideration which they would have received had
their shares been part of the Scheme. Accordingly, the Loan Note Alternative
will not be available to Silk Shares issued as a result of the exercise of
options after the Record Time.

There are no options granted pursuant to the Company's 1997 Unapproved Share
Option Scheme.

10.  Structure of the Proposals


Introduction

The Scheme, which requires Court approval, involves the cancellation of the
Cancellation Shares and the issue of New Silk Shares (credited as fully paid) to
Tayvin. At the same time, Silk Shareholders will receive (subject to valid
elections under the Loan Note Alternative), cash on the basis set out in
paragraph 2 above. The reserve arising on the cancellation of the Cancellation
Shares will be applied in paying up New Silk Shares to be issued to Tayvin.
Shareholders who elect to transfer some of their shares to Tayvin under the Loan
Note Alternative will receive Loan Notes issued by Tayvin on the basis set out
in paragraph 2 together with cash.


The Meetings

Before the Court's approval can be sought, the Scheme of Arrangement will
require approval by Silk Shareholders (other than the Excluded Shareholders) at
the Court Meeting and the passing of a special resolution by Silk Shareholders
to implement the Scheme at the EGM. A Scheme Shareholder's entitlement to attend
and vote at the Meetings and the number of votes which may be cast at them will
be determined by reference to their holding of Silk Shares as shown in the
register of members of Silk at the time specified in the notice of the relevant
meeting.


The Court Meeting

The Court Meeting is to be held at the direction of the Court to seek the
approval of the Scheme Shareholders (other than the Excluded Shareholders) for
the Scheme. At the Court Meeting, voting will be by poll. Each member present in
person or by proxy will be entitled to one vote for each Scheme Share held. The
approval required at the Court Meeting is a majority in number of the Scheme
Shareholders who vote either in person or by proxy, representing three-fourths
or more in value of the Scheme Shares voted either in person or by proxy, at the
Court Meeting.


The EGM

The EGM will be convened for the same date to consider and, if thought fit, pass
a special resolution (which requires a vote in favour of not less than three
fourths of the votes cast) necessary to enable effect to be given to the Scheme.

It is also proposed to amend the Company's Articles of Association to ensure
that any Silk Shares issued to any person other than Tayvin, and/or its
nominees, on or after the Record Time will be automatically exchanged for cash
on the same terms as Scheme Shares cancelled under the Scheme.


Conditions to the Proposals

The Proposals are conditional, inter alia upon:

(a)  the Scheme becoming effective by not later than 31 December 2003
or such later date as Silk and Tayvin may agree and the Court may approve,
failing which the Scheme will lapse;

(b)  the approval by a majority in number of the Silk
Shareholders who vote either in person or by proxy, representing three-fourths
or more in value of the Silk Shares voted, either in person or by proxy, at the
Court Meeting;

(c) the passing of the special resolution required to approve or
implement the Scheme at the EGM;

(d) the sanctioning of the Scheme (with or without modification) and
confirmation of the reduction of capital involved therein by the Court (in
either case, with or without modification agreed to by Silk and Tayvin) and the
delivery of an office copy of the Court Order to the Registrar of Companies in
England and Wales and the registration of such Court Order by him; and

(e) Elections under the Loan Note Alternative being received for at least
#1,845,000 of Loan Notes. Scheme Shareholder's attention is drawn to paragraph 4
of this announcement which discloses the Director's intentions to elect for Loan
Notes.


Once the necessary approvals from Silk Shareholders (other than, in the case of
the Court Meeting, the Excluded Shareholders) have been obtained and all
conditions have been satisfied or (where applicable) waived, the Scheme will
become effective following sanction by the Court upon registration of the Court
Order by the Registrar of Companies in England and Wales.


Once effective, the Scheme of Arrangement will be binding on all Scheme
Shareholders, including those who did not vote, or who voted against it, at the
Court Meetings and those who could not be traced.


11. The Loan Note Alternative


As an alternative to receiving the Cash Consideration, Scheme Shareholders
(other than Overseas Shareholders) will be entitled to transfer some or all of
their Scheme Shares in exchange for Loan Notes and cash in each case subject to
the terms and conditions of the Loan Note Alternative, on the following basis:

Scheme Shareholders may elect to receive the Loan Note Alternative on the
following basis:

for every 100 Scheme Shares       #20 cash and #45 nominal value of Loan Notes

Attention is drawn to the section entitled "Financial effects of the Proposals"
below which indicates that the consideration per Scheme Share for a Scheme
Shareholder electing to receive the Loan Note Alternative would not materially
differ from the 42 pence offered by way of the Cash Consideration.

Scheme Shareholders have a guaranteed minimum entitlement to the Loan Note
Alternative in respect of 55 Scheme Shares out of each 100 they so elect. Scheme
Shareholders can elect to receive the Loan Note Alternative in respect of any
number of Scheme Shares they hold.

The maximum number of Loan Notes available under the Loan Note Alternative is
#2,346,856 in aggregate value. If elections for the Loan Note Alternative would
result in the issue of Loan Notes exceeding this amount, elections will be
scaled down pro rata (but to no lower than each person's guaranteed minimum
entitlement) and shares not transferred pursuant to the Loan Note Alternative
will be cancelled for 42 pence per Scheme Share. The minimum amount of Loan
Notes capable of issue is #1.00 in nominal value. Accordingly, if elections for
the Loan Note Alternative are made in respect of Scheme Shares which would
result in less than #1.00 in nominal value of Loan Notes being issued, such
Scheme Shares will instead be cancelled for 42 pence per Scheme Share.

The attention of Scheme Shareholders considering making an election for the Loan
Note Alternative is particularly drawn to the section below headed "Risks
attached to the Loan Notes". In addition, they are strongly advised to consult a
stockbroker, bank manager, accountant or other independent financial adviser
authorised under the Financial Services and Markets Act 2000 who specialises in
advising on the acquisition of shares or other securities. Scheme Shareholders
are recommended to consider carefully, in the light of their investment
objectives and having taken advice appropriate to their own financial
circumstances, whether it would be appropriate for them to elect for the Loan
Note Alternative.


Overseas Persons will not be entitled to elect to receive Loan Notes and will
only be entitled to receive the Cash Consideration.


12.  Risks attached to the Loan Notes

Further details of the Loan Notes are contained in paragraph 17. However, Scheme
Shareholders (excluding Overseas Persons) are advised to consider the following
factors before electing for the Loan Note Alternative:


1.  the Loan Notes are not guaranteed, therefore there can be
no assurance that the principal sum will ever be paid;

2.  the Loan Notes will not be listed on any stock exchange,
nor is it the intention of Tayvin to offer any trading facility for the Loan
Notes;

3.  save upon the death of the Loan Note holder, the Loan
Notes will not be transferable in any circumstances;

4.  the security for the Loan Notes will be subordinated to
any security provided to the Bank;

5.  the total bank debt of Tayvin (approximately #4,650,000 is
being made available under the Bank Facility) will rank in priority to the Loan
Notes. No redemption of Loan Notes will be made unless such redemption is a
permitted payment under the terms of the Bank Facility arrangements.

6.  the Loan Notes are not repayable as to principal before
the date which is five years and three months after the Effective Date save that
Loan Note holders may request for up to #50,000 (in aggregate) of Loan Notes to
be redeemed each year on a pro rata basis, subject to the consent of both Tayvin
and the Bank;

7.  holders of Loan Notes do not have a right to appoint a
director to the board of Tayvin and there is only an obligation on Tayvin to
provide certain financial information on Tayvin to a Loan Note representative;

8.  the value of the Loan Notes will be subject to similar
market and trading risks as are faced by Silk currently;

9.  there can be no assurances as to the tax treatment of the
Loan Notes. Scheme Shareholders are recommended to seek their own tax advice;

10. the non-payment of interest under the Loan Notes may not
constitute an event of default under the terms of the Loan Notes; and

11. the nature of the Loan Notes is such that they will rank
behind the Bank in relation to all lending, both now and in respect of any
future lending without limit.

13. Financial effects of the Proposals

The following tables set out, for illustrative purposes only and on the bases
and assumptions set out in the notes below, the financial effects of acceptance
of the Proposals on capital value for a holder of one Silk Share, if the
Proposals become effective:

                                                 Shareholder who Shareholder who
                                                       elects to       elects to
                                                     receive the     receive the
                                                            Cash       Loan Note
                                                   Consideration     Alternative
                                                           (p)             (p)
Value of the portion of the total consideration
receivable under the Offer satisfied by cash              42.0            20.0

Estimated value of 45p nominal value of Loan                 -            22.0
Notes receivable under the Offer (at 48.9p per
#1.00 - see Note 1 below)
                                                         ------          ------
                                                          42.0            42.0


Notes


1.  The estimated value of the Loan Notes portion of the total
consideration receivable under the offer is based on a Brewin Dolphin estimated
value of 48.9p per #1 nominal value of Loan Notes had such Loan Notes been in
issue as at 3 September 2003, being the latest practicable date prior to this
announcement.

2.  No account has been taken of any liability to taxation.

3.  The table does not reflect the impact of the minimum nominal value
of Loan Notes of #1.00 as set out in paragraph 11 of this letter.

Taking into account the risks associated with the Loan Notes and by reference to
the market conditions prevailing on 3 September 2003 (being the latest
practicable date prior to the announcement), the value per Scheme Share for a
Scheme Shareholder electing to receive Loan Notes would not materially differ
from the 42 pence offered to Scheme Shareholders by way of Cash Consideration
under the Offer.


14.    Information on Tayvin, the interests of Tayvin in Silk and financing

Tayvin is a private limited company which was incorporated in England and Wales
on 17 February 2003 with registered number 04667190 and was established at the
direction of the Management Team for the purpose of making an offer to acquire
Silk. Tayvin has not carried on any business since incorporation or entered into
any material obligation other than in connection with the Proposals.


The board of Tayvin

The directors of Tayvin as at the date of this announcement are as follows:

David Tooth (Chairman)
Doreen Clarke
Steven Stewart Clayton
Rosemarie Croft
Andrew Henry
Mark Hubert
Thomas Charles Jeggo
Tro Manoukian
Stephen Nixon
Ian Richard Stevenson
Terence Welsh (also Company Secretary)

It is intended that David King and Clive Reeks will be appointed as
non-executive directors of Tayvin with effect from the Effective Date.

Interests of Tayvin in Silk

Tayvin will acquire 1 Silk Share prior to the implementation of the Scheme.
Conditional upon the Scheme becoming effective, Tayvin has conditionally agreed
to acquire 2,973,061 Silk Shares from David Tooth, Executive Chairman of Silk
and persons connected or deemed to be connected to him in exchange for the issue
of 1,950,000 ordinary shares of #1.00 each in Tayvin and #500,000 B Loan Notes.


Bank facilities

Tayvin has entered into a facility letter with the Bank for the provision of up
to #3,350,000 to finance the Cash Consideration due under the Proposals and to
provide for associated fees and expenses. It will not be available for the
refinancing of existing debt or to provide working capital after completion of
the acquisition. In addition Tayvin has also been provided with a working
capital facility from the Bank of up to #1.3 million.

It is a condition of the Scheme that elections from Scheme Shareholders in
respect of at least #1,845,000 of Loan Notes must be received in order that
Tayvin has sufficient cash available to fund the Cash Consideration. Taylor
Vinters, who are advising Tayvin in relation to the legal aspects of the Offer,
has confirmed that sufficient resources are available to Tayvin to satisfy full
acceptance of the Offer.


15. Inducement fee

As an inducement to Tayvin to make the Offer, Silk has agreed to pay an
inducement fee to Tayvin of up to #52,000 in the event that either a superior
offer is received from a third party which becomes wholly unconditional or the
recommendation of the Independent Director is withdrawn or adversely modified,
or Tayvin's funders refuse to provide funding or if Scheme Shareholders fail to
approve the Scheme at the Meetings (provided that no member of the Management
Team entitled to vote fails to vote).

16. The Directors and the effect of the Scheme on their interests

Except for David Tooth, the effect of the Scheme on the interests of the
Directors does not differ from its effect on the like interests of any other
Scheme Shareholders. It is intended that David King and Clive Reeks will be
appointed as non-executive directors of Tayvin with effect from the Effective
Date. In addition, both David King and Clive Reeks have indicated that they will
be electing to receive Loan Notes in respect of their Scheme Shares as referred
to in paragraph 4 of this announcement. They will have no interest in the share
capital of Tayvin.

17. Particulars of the Loan Notes

The Loan Notes, which will be governed by English law will be secured
obligations of Tayvin and will be issued, credited as fully paid, in integral
multiples of #1 nominal value. Fractions will be ignored and rounded downwards.
The Loan Notes are not guaranteed or convertible. The maximum number of Loan
Notes available under the Loan Note Alternative is #2,346,856 in aggregate
value.

The Loan Notes are not transferable and no application has been made, nor is
intended to be made, for them to be listed or dealt with on any recognised
investment exchange.

The Loan Notes will bear interest from the date of issue to the relevant holder
of Loan Notes, payable subject to any requirements to deduct tax therefrom,
quarterly in arrears.

The Loan Notes are to be redeemed in full in 2009 provided there is no event of
default under the Bank Facility. They may also be repayable early (together with
any interest) provided such payment is permitted under the Bank Facility.
Holders of Loan Notes may request for up to #50,000 (in aggregate) of Loan Notes
to be redeemed each year. Such redemption is subject to Tayvin having sufficient
monies available to do so and subject to the prior written consent of the Bank.
Any application for early repayment in excess of #50,000 (in aggregate) will be
scaled down pro rata as between the holders of Loan Notes (but will be subject
to any scaling back between B Loan Notes assuming that early repayment in
respect of B Loan Notes has also been applied for as referred to below).

The Company may, after 12 months from their date of issue, redeem any number of
Loan Notes (in minimum amounts of #1,000). Any such redemption is subject to the
Bank's prior written consent.

The Loan Note holders do not have a right to appoint a director to the board of
Tayvin. There is however an obligation upon Tayvin to provide certain financial
information to the Loan Note representative. A majority in value of the Loan
Note holders may change the Loan Note representative.

Although the Loan Notes are to be secured by way of a debenture over the assets
of Tayvin and over the assets of the Company, such debentures are fully
subordinated to any security granted in favour of the Bank. The Bank will be
granted a debenture over the Company and the assets of the Company, legal
charges over the properties owned by the Company and also a cross-company
guarantee between Silk and Tayvin and the assignment of the benefit of a key man
insurance policy taken out over the life of David Tooth. In addition, the
security may only be enforced with the prior written consent of the Bank.

Tayvin has also entered into an inter-creditor agreement with the Bank under
which the ranking priority as between the Bank and the holders of the Loan Notes
and the B Loan Notes are determined. Under the terms of the agreement, the Loan
Notes will rank pari passu with the B Loan Notes on any winding up of the
Company but behind the Bank.

The rights over the security granted by Tayvin and the Company under the Loan
Notes are to be exercised by a security trustee. A majority in value of the Loan
Note holders may change the security trustee at any time.

Under the terms of the Bank Facility, no monies can be paid out to the Loan Note
holders whilst there is either an event of default or a potential event of
default. Not only will this include such events as the insolvency of Tayvin it
would also relate to the breach of any financial covenant by Tayvin as a result
of making such a payment.

Tayvin has also created #500,000 worth of B Loan Notes. These are to be issued
to Mr Tooth and his connected persons as part consideration for the transfer of
such shares in the Company to Tayvin.

The B Loan Notes are to rank pari passu with the Loan Notes in all respects save
for the interest rate payable. The holders of B Loan Notes may apply for up to
#20,000 (in aggregate) of Loan Notes to be redeemed each year. Such redemption
is subject to Tayvin having sufficient monies available to do so and subject to
the prior written consent of the Bank. Any application for early repayment in
excess of #20,000 (in aggregate) will be scaled down pro rata as between the
holders of B Loan Notes (but subject to any pro rata scaling back between the
holders of Loan Notes assuming that early repayment in respect of Loan Notes has
also been applied for).


18. De-listing and cancellation of trading

If the Scheme becomes effective, Tayvin intends to procure the making of an
application by Silk for the cancellation of the listings of Silk Shares on the
Official List of the UK Listing Authority and on the London Stock Exchange's
market for listed securities and to re-register Silk as a private company under
the relevant provisions of the Act. It is expected that such cancellations will
take effect no earlier than 20 business days after the date on which the Scheme
becomes effective.

19. General

The Scheme Circular containing the full details of the Proposals and the Form of
Proxy and Forms of Election will be posted to Silk Shareholders as soon as
practicable.

It is currently anticipated that the Court Meeting and the EGM will be held at
the end of October 2003, with the Court hearing anticipated in early November.
Full details of the expected timetable will be contained in the Scheme Document.
The definitions of certain expressions and words used in this announcement are
contained in the Appendix.

Save as disclosed in this announcement, neither Tayvin, nor anyone acting or
deemed to be acting in concert with Tayvin, owns or controls any Silk Shares or
rights over such shares.

The availability of the Offer to persons who are citizens, nationals or
residents of countries outside the UK may be affected by the laws of the
relevant jurisdictions. Persons who are citizens, nationals or residents of
countries outside the UK should inform themselves of, and observe, any
applicable legal requirements.

This announcement does not constitute an offer or an invitation to purchase any
securities. The Offer will not be made, directly or indirectly outside the
United Kingdom. Accordingly, copies of this announcement and any other document
relating to the Offer, are not being, and must not be, mailed or otherwise
distributed or sent outside the United Kingdom.

The directors of Tayvin accept responsibility for the information contained in
this announcement, relating to Tayvin, the directors of Tayvin, members of their
immediate families, related trusts and persons connected with them. To the best
of the knowledge and belief of the directors of Tayvin (who have taken all
reasonable care to ensure that such is the case), such information is in
accordance with the facts and does not omit anything likely to affect the import
of such information.

The directors of Silk accept responsibility for the information contained in
this announcement which relates to Silk, the directors of Silk, members of their
immediate families, related trusts and persons connected with them. To the best
of the knowledge and belief of the directors of Silk (who have taken all
reasonable care to ensure that such is the case), such information is in
accordance with the facts and does not omit anything likely to affect the import
of such information.


Enquiries:

Sarah Kent                          0161 214 5554
Brewin Dolphin

John L Jeremy                       01787 467905
Independent Director


Brewin Dolphin Securities Limited, which is authorised and regulated by the
Financial Services Authority, is acting for Silk and no one else in connection
with the Scheme and will not be responsible to anyone other than Silk for
providing the protections afforded to clients of Brewin Dolphin nor for giving
advice in relation to the Scheme, the contents of this document or any
arrangements referred to herein. Brewin Dolphin Securities Limited has approved
and authorised the contents of this announcement for the purposes of section 21
of the Financial Services and Markets Act 2000.

Taylor Vinters is acting for Tayvin and no one else in connection with the
Scheme and will not be responsible to anyone other than Tayvin for providing the
protections afforded to clients of Taylor Vinters nor for providing advice in
relation to the Scheme, the contents of this document or any arrangements
referred to herein.

The Offer will not be made, directly or indirectly, outside the United Kingdom
and will not be capable of acceptance by any person resident in, or a national
of, a jurisdiction outside the United Kingdom. Accordingly, copies of this
announcement and any other documents relating to the Offer are not being and
must not be mailed or otherwise distributed outside the United Kingdom and
persons receiving such documents (including, without limitation, custodians,
nominees and trustees) must not distribute or send them outside the United
Kingdom.


                                      APPENDIX

Definitions

The following definitions apply throughout this document unless the context
otherwise requires:

"Act"               Companies Act 1985 as amended

"Bank"              the Governor and Company of Bank of Scotland

"Bank Facility"     the loan facility to be made available to Tayvin by the
                    Bank

"B Loan Notes"      9.5% redeemable secured B loan notes 2009 to be issued by
                    Tayvin

"Brewin Dolphin"    Brewin Dolphin Securities Limited

"Cancellation       Scheme Shares other than the Loan Note Elected Shares in
Shares"             issue at the Record Date

"Cash               42 pence payable by Tayvin for each Scheme Share cancelled
Consideration"

"Companies Act"     the Companies Act 1985, as amended

"Conditions"        the conditions to the implementation of the Proposals
                    (including the Scheme)

"Court"             the High Court of Justice in England and Wales

"Court Meeting"     the meeting of Scheme Shareholders, other than the Excluded
                    Shareholders, (and any adjournment thereof) convened
                    pursuant to an order of the Court pursuant to section 425 of
                    the Companies Act, for the purpose of considering and, if
                    thought fit, approving the Scheme (with or without
                    amendment)

"Directors" or      the directors of Silk at the date of this announcement
"Board"

"Effective Date"    the date on which the Scheme becomes effective in accordance
                    with its terms

"EGM" or            the extraordinary general meeting of Silk to be held
"Extraordinary      immediately after the Court Meeting
General Meeting"

"Excluded           Tayvin, the members of the Management Team and their
Shareholders"       connected persons

"Independent        John L Jeremy
Director"

"Independent        the Silk Shareholders, other than members of the Management
Shareholders"       Team or persons connected with them and Tayvin

"Loan Notes"        6% redeemable secured A loan notes 2009 to be issued by
                    Tayvin pursuant to the Loan Note Alternative

"Loan Note          the alternative whereby Scheme Shareholders (other than
Alternative"        Overseas Persons) may elect to receive, subject to certain
                    terms and conditions, Loan Notes in exchange for some or all
                    of their Scheme Shares under the Scheme instead of receiving
                    the Cash Consideration to which they would otherwise be
                    entitled upon the cancellation of their Scheme Shares under
                    the Scheme if appropriate (subject to scaling back)

"Loan Note Elected  Scheme Shares (if any) in respect of which (a) valid
Shares"             elections have been made under the Loan Note Alternative in
                    accordance with its terms and (b) Loan Notes are to be
                    issued in accordance with the Loan Note Alternative

"Loan Note Form of  the form of election and authority relating to the Loan Note
Election"           Alternative

"London Stock       London Stock Exchange plc
Exchange"

"Management Team"   Kenneth A Shapiro together with the directors of Tayvin at
                    the date of this announcement

"Meetings"          the Court Meeting and the EGM

"New Silk Shares"   new Silk Shares to be issued by Silk to Tayvin as part of
                    the Scheme.

"Offer"             proposed acquisition by Tayvin of all the issued and to be
                    issued share capital of Silk by means of the Scheme, subject
                    to the Conditions

"Official List"     the Official List of the UK Listing Authority

"Optionholders"     holders of options granted pursuant to the Silk Share Option
                    Schemes

"Overseas Persons"  Silk Shareholders on the register of members of Silk at the
or "Overseas        Record Time with a registered address outside the United
Shareholders"       Kingdom or whom Silk reasonably believes to be a citizen,
                    resident or national of a jurisdiction outside the United
                    Kingdom

"Proposals"         the proposals to be considered at the Meetings, including
                    the proposed acquisition of Silk by Tayvin of all the issued
                    and to be issued share capital of Silk by means of the
                    Scheme

"Record Time"       6.00 pm on the business day immediately preceding the date
                    of the commencement of the hearing by the Court of the
                    petition to sanction the Scheme

"Scheme" or "Scheme the proposed scheme of arrangement under section 425 of the
of Arrangement"     Act between the Company and Scheme Shareholders, with or
                    subject to any modification thereof or in addition thereto
                    or condition approved or imposed by the Court and agreed by
                    Silk and Tayvin

"Scheme Circular"   the document to be sent to Silk Shareholders containing
                    details of the Proposals including the Scheme and convening
                    the Meetings

"Scheme             the holders of Scheme Shares
Shareholders"

"Scheme Shares"     Silk Shares
                    in issue on the date of the document;
                    (if any) issued after the date of this document and prior to
                    the Record Time;
                    (if any) issued at or after the Record Time and prior to the
                    Record Time either on terms that the original or any
                    subsequent holder thereof shall be bound by the Scheme or in
                    respect of which the holder thereof shall have agreed to be
                    bound by the Scheme; and
                    excluding Silk Shares held by David Tooth and persons
                    connected with him.

"Silk" or           Silk Industries PLC (incorporated in England and Wales under
"Company"           company number 2322023)

"Silk Share Option  the 1997 Sharesave Scheme, the Share Option Scheme and the
Schemes"            1997 Unapproved Share Option Scheme

"Silk               holders of Silk Shares
Shareholders"

"Silk Shares"       ordinary shares of 10 pence in the capital of the Company

"Tayvin"            Tayvin 300 Limited, registered in England and Wales with
                    registered number 04667190

"United Kingdom" or the United Kingdom of Great Britain and Northern Ireland
"UK"

"UK Listing         the Financial Services Authority in its capacity as
Authority"          competent authority for the purposes of the Financial
                    Services and Markets Act 2000





                      This information is provided by RNS
            The company news service from the London Stock Exchange

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