Notice of General Meeting

 

TIDMTSE 
 
RNS Number : 1680Z 
Touchstone Group PLC 
16 September 2009 
 

 
 
 
 
 
Notice of General Meeting 
 
 Touchstone Group plc, the AIM-quoted provider of business software 
solutions and consultancy services announces its intention to convene a General 
Meeting, to be held on 12 October 2009, for the purpose of seeking shareholder 
approval for the cancellation of its trading on AIM, a tender offer share 
buyback of up to 3,861,500 ordinary shares at a price of 23 pence per share and 
a Takeover Code Rule 9 Waiver. An explanatory circular ("Circular") setting out 
the full details of these proposals, details of the Independent Director's 
recommendations, and reasons for their recommendations, together with a notice 
of General Meeting, has been posted to shareholders today. 
 
 
Extracts of the text of the Chairman's letter contained within the Circular are 
set out below. Definitions in this announcement shall bear the same meaning as 
those in the circular to Shareholders. 
 
 
For further information, please contact: 
 
 
Enquiries to: 
Keith Birch, Chief Executive Officer 
Chris Butler, Finance Director 
Touchstone Group plc      020 7121 4700 
 
 
Matt Davis 
Adam Rudd 
Brewin Dolphin (NOMAD) 0845 270 8600 
 
 
AIM Cancellation, Tender Offer, Rule 9 Waiver and Notice of General Meeting 
Introduction 
On 17 June 2009, the Company announced that it was evaluating proposals that 
would be put to Shareholders for their approval, which would encompass a 
cancellation of the AIM Admission and, depending upon the cash-flow needs of the 
business, a limited buy-back of Ordinary Shares at an appropriate price. 
On 8 July 2009, the Company further announced that the Board was at an advanced 
stage of its reflections and hoped to place detailed proposals before 
Shareholders over the following 4 to 6 weeks. 
The Board have now carefully considered the current position and propose that: 
  *  the AIM Admission should be cancelled; and 
  *  Brewin Dolphin under the Tender Offer purchase up to 3,861,500 Ordinary Shares 
  at a price of 23 pence per share which shares, or a corresponding number of 
  Ordinary Shares will, on the following Business Day, be purchased from Brewin 
  Dolphin by the Company and cancelled. This is to allow Shareholders who do not 
  wish to, or may not, hold shares in a company that is not publicly traded to 
  dispose of or reduce their interest in the Company. 
 
Under the Tender Offer, a maximum of 3,861,500 Ordinary Shares, representing 
approximately 30 per cent. of the current issued Ordinary Share Capital, may be 
purchased. Having reviewed the financial position of the Group, the Independent 
Directors have made the decision to limit the Tender Offer to 30 per cent. of 
the issued Ordinary Shares at a maximum aggregate price of GBP888,145 to ensure 
that the Group has sufficient cash reserves to meet its ongoing working capital 
requirements and commitments following completion of the Proposals. 
The Tender Offer is being made to Qualifying Shareholders who are on the 
Register at the Tender Offer Record Date. Qualifying Shareholders may tender any 
or all of their Ordinary Shares in the Tender Offer, but are not obliged to 
tender any of their Ordinary Shares if they do not wish to do so. The Company 
has received irrevocable undertakings not to tender any Ordinary Shares under 
the Tender Offer from Shareholders holding in aggregate 5,730,178 Ordinary 
Shares, representing approximately 44.5 per cent. of the current issued Ordinary 
Shares. The effect of these undertakings is that although the Tender Offer is 
limited to 30 per cent. of the issued Ordinary Shares, ignoring any Ordinary 
Shares held by Restricted Shareholders, the Qualifying Shareholders who may 
participate in the Tender Offer hold in aggregate 55.5 per cent. of the issued 
Ordinary Shares meaning that Qualifying Shareholders may tender at least 54.1 
per cent. of their holdings without being scaled back. 
However, in addition to the irrevocable undertakings not to tender Ordinary 
Shares referred to above, the Company has received letters of intention not to 
tender Ordinary Shares from the holders of 982,529 Ordinary Shares, representing 
a further 7.6 per cent. of the issued Ordinary Share Capital. 
On the assumption that all holders of Ordinary Shares in respect of whom 
irrevocable undertakings and letters of intention have been received, do not 
tender their Ordinary Shares, the remaining Qualifying Shareholders would hold 
in aggregate 47.9 per cent. of the issued Ordinary Share Capital. In these 
circumstances Qualifying Shareholders would be able to tender at least 62.7 per 
cent. of their holdings without being scaled back. 
Assuming that the Tender Offer is taken up in full, the Birch Concert Party and 
Keith Birch individually, would, in the absence of a waiver under Rule 9 of the 
Takeover Code, be required to make an offer to acquire the balance of the 
Ordinary Shares not owned by them. The Panel has agreed, however, to waive the 
obligation on the members of the Birch Concert Party to make a general offer, 
subject to approval by the Independent Shareholders on a poll. The Tender Offer 
is therefore conditional upon such approval being obtained from the Independent 
Shareholders. 
The approval of Shareholders to resolutions to implement the Proposals is being 
sought at the General Meeting to be held at 11.00 a.m. on 12 October 2009. 
Shareholders should note that unless all the Resolutions are approved at the 
General Meeting, the Tender Offer will lapse. However, if the resolution 
approving the Cancellation is passed, it is the Company's intention to proceed 
with the Cancellation whether or not the other Proposals are approved by 
Shareholders. 
Background to and reasons for the Proposals 
The Directors believe that the costs and regulatory requirements associated with 
maintaining the AIM Admission are a significant burden on the Company's 
financial resources. These costs include fees paid to the Company's nominated 
adviser and broker and registrars, annual fees paid to the London Stock Exchange 
plc, costs relating to public announcements, additional fees and expenses of 
Directors, accountants and lawyers engaged to provide accountancy and legal 
services in connection with maintaining the AIM Admission. The Company estimates 
that if the Cancellation takes place the Group will as a result save up to 
approximately GBP100,000 per annum. 
Furthermore, the Board believe that maintaining the AIM Admission is, and would 
continue to be, a significant burden and drain on management time. As at 
15 September 2009 (the latest practicable date prior to the date of this 
announcement), the Company had a market capitalisation of GBP2.64 million. Given 
the size of the Company, the Board believe that a disproportionate amount of 
management time is spent dealing with AIM related matters and issues. The Board 
believe that Shareholders would be better served if the Directors and key 
management were permitted to focus on the underlying business without the time 
drag and other commitments which the Directors believe are an inevitable part of 
operating in a public market arena. 
In addition to the direct and indirect costs involved in maintaining the AIM 
Admission, the Board consider few benefits accrue to the Company or Shareholders 
from the AIM Admission and in particular: 
  *  the Company has seen limited trading volume in Ordinary Shares, with an average 
  daily volume of approximately 19,275 shares over the three months ending 31 
  August 2009; 
  *  save for consideration shares issued to vendors of companies in connection with 
  acquisitions, the Company has rarely utilised AIM to raise equity capital for 
  its expansion and has no plans to do so; 
  *  the Board consider that, given its size, the Company is, without significant 
  corporate activity, currently unlikely to benefit from any new institutional 
  investors or additional analyst interest in the secondary market; 
  *  the Directors believe that the current share price fails to adequately value the 
  underlying Group operations and have little confidence that the underlying value 
  of Group operations will be fully appreciated whilst the Company retains its AIM 
  Admission. 
 
The Board have considered other options with a view to returning value to 
Shareholders whilst the Company maintains its AIM Admission. The Board believe, 
however, that given the current financial climate coupled with the depressed 
market valuation, it is likely to be difficult to sell all or part of the Group 
at a valuation which adequately values the underlying business. 
If the Cancellation is approved by Shareholders, the Directors intend to operate 
the underlying business with a view to returning long term value to 
Shareholders. The Directors believe that returning value to Shareholders will be 
easier to achieve if the Cancellation is approved. For example, if the 
Cancellation is approved the Company would no longer be subject to the AIM 
Rules. This would enable the Company to consider selling an operating 
subsidiary, unit or asset in order to return value to Shareholders without the 
additional burden and costs of publishing a circular and obtaining Shareholder 
approval, which would be required if the transaction exceeded 75 per cent. of 
any of the AIM Rules class tests. 
For the reasons set out above, the Board have concluded that it would be in the 
best interests of the Company and Shareholders as a whole if the AIM Admission 
were to be cancelled. 
If the resolution to approve the Cancellation is passed, it is the intention of 
the Company to proceed with the Cancellation whether or not the other Proposals 
are approved. 
The Board recognise that some Shareholders may not be able or willing to 
continue to hold Ordinary Shares following the Cancellation. The Tender Offer 
gives such Shareholders (if they are Qualifying Shareholders) an opportunity, 
depending on the take up of the Tender Offer, to dispose of or reduce their 
interest in the Company. Those Qualifying Shareholders who wish to continue 
holding Ordinary Shares following the Cancellation may do so. 
Information on Touchstone 
Touchstone provides integrated business software and consultancy services to 
companies primarily in the UK. The Group provides a broad range of services and 
software applications including: ERP, CRM, Financial Management, 
Procurement/Spend Control, and Business Intelligence to clients in specialist 
sectors including: Commodity Trading, Construction, Energy, Financial Services, 
High Tech, Hospitality & Leisure, Not for Profit, Media & Publishing, 
Professional Services, Rental and Wealth Management. Clients include Speedy 
Hire, Jarvis, RNID and PwC. 
Trading update 
The Board have been encouraged by a number of new contract wins in recent months 
and Touchstone has also been selected as preferred supplier on several 
significant projects. However, whilst certain divisions are experiencing 
encouraging levels of demand, the Board believe that general market conditions 
remain challenging. The Board believe that the recent introduction of a more 
effective operational structure coupled with a review of overheads has ensured 
that the Group is in better shape and should be ideally placed to respond once 
general market conditions improve. The Board can also confirm that the Group is 
trading ahead of the comparative period last year and is in line with market 
expectations for the current financial period. 
Cancellation 
In accordance with the AIM Rules, the Cancellation is conditional on the consent 
of not less than 75 per cent. of the votes cast by Shareholders at a general 
meeting. Such consent will be sought through Resolution 1. Assuming Resolution 1 
is passed, the Cancellation is expected to take effect from 7.00 a.m. on 28 
October 2009. 
The principal effects that the Cancellation would have on Shareholders are as 
follows: 
  *  there would no longer be a formal market mechanism enabling Shareholders to 
  trade their Ordinary Shares through the market (although the existing CREST 
  facility is expected to remain in place and the Board intends to set up a 
  matched bargain settlement facility for the Ordinary Shares). Accordingly, while 
  the Ordinary Shares will remain freely transferable, they may be more difficult 
  to sell compared to shares of companies admitted to trading on AIM. It may also 
  be more difficult for Shareholders to determine the market value of their 
  shareholdings in the Company at any given time; 
  *  the Company would not be bound to announce material events, administrative 
  changes or material transactions nor to announce interim or final results; 
  *  the Company would no longer be required to comply with any of the additional 
  corporate governance requirements applicable to companies admitted to trading on 
  AIM; 
  *  the Company would no longer be subject to the Disclosure Rules and Transparency 
  Rules of the UK Financial Services Authority and would therefore no longer be 
  required specifically to disclose major shareholdings in the Company; 
  *  the Company would no longer be subject to the AIM Rules. Shareholders would 
  therefore no longer be afforded the protections given by the AIM Rules. Such 
  protections include the requirement to be notified of certain events including, 
  amongst other things, substantial transactions (the size of which results in a 
  10 per cent. threshold being reached under any one of the class tests) and 
  related party transactions and the requirement to obtain shareholder approval 
  for reverse takeovers (the size of which results in a 100 per cent. threshold 
  being reached under any one of the class tests) and fundamental changes in the 
  Company's business including disposals exceeding 75 per cent. under any of the 
  class tests; and 
  *  the Cancellation might have either positive or negative taxation consequences 
  for Shareholders. 
 
However, following the Cancellation: 
  *  the Company would remain subject to English company law, which requires 
  shareholder approval for certain matters; 
  *  the Company would remain a public limited company and will still be required to 
  hold annual general meetings; 
  *  the Company intends to continue to have at least one non-executive director to 
  help oversee corporate governance; 
  *  the Company intends to continue to communicate information about the Company 
  (including annual accounts and updates as to significant new contract wins) to 
  its Shareholders; 
  *  the Company intends to provide a bi-annual business update for Shareholders; and 
  *  as a public limited company, the Company would remain subject to the provisions 
  of the Takeover Code. 
 
The Board continues to believe that dividends should be paid in accordance with 
the Group's cash flow requirements whilst maintaining an appropriate level of 
dividend cover and sufficient cash reserves for future investment opportunities. 
 The Board would anticipate future dividend policy to be at least in line with 
the Company's public market record. To this end, the Group's dividend record 
shows that dividends of approximately GBP3.35 million have been distributed to 
Shareholders in the ten year period since 1998 when the Company became a 
publicly traded company. Over the same period, distributable profits (being 
adjusted profits after tax) have been approximately GBP15.5 million giving a 
dividend to distributable profits ratio of approximately 22 per cent. 
Subject to existing contractual obligations, the Board intend to pay management 
and employees' salaries and benefits that are commensurate with industry 
practice and, assuming the Cancellation occurs, the Company's status as an 
off-market company. 
Whilst the Board believe that the Cancellation is in the best interests of the 
Company and the Shareholders as a whole, it recognises that the Cancellation may 
make it more difficult for Shareholders to buy and sell Ordinary Shares should 
they so wish. Accordingly, the Board intends to set up a matched bargain 
settlement facility to enable Shareholders to trade the Ordinary Shares. Under 
this facility, it is intended that Shareholders or persons wishing to trade 
Ordinary Shares will be able to leave an indication with the facility provider 
that they are prepared to buy or sell at an agreed price. If the matched bargain 
settlement facility is able to match that order with an opposite sell or buy 
instruction, the facility provider will contact both parties and then effect the 
bargain. Shareholders who do not have their own broker may need to register with 
the facility provider as a new client. This can take some time to process and 
therefore Shareholders who consider they are likely to use this facility are 
encouraged to commence it at the earliest opportunity. Once the facility has 
been arranged, details will be made available to Shareholders on the Company's 
website at www.touchstone.co.uk. 
Shareholders who are in any doubt about their tax position should consult their 
own professional independent adviser immediately. 
Shareholders should be aware that if the Cancellation takes effect, they will at 
that time cease to hold shares in a Company whose shares are admitted to trading 
on AIM and the matters set out above will automatically apply to the Company 
from the date of the Cancellation. 
Tender Offer 
The Tender Offer is being made available to all Qualifying Shareholders who are 
on the Register on the Tender Offer Record Date. Qualifying Shareholders have 
the opportunity to tender some or all of their Ordinary Shares (subject to the 
maximum aggregate number of Ordinary Shares which may be purchased under the 
Tender Offer of 3,861,500 Ordinary Shares) for 23 pence in cash per Ordinary 
Share. The Ordinary Shares purchased under the Tender Offer (or a corresponding 
number of Ordinary Shares) will be cancelled once purchased by the Company 
pursuant to the terms of the Repurchase Agreement. 
The Company has received irrevocable undertakings not to tender any Ordinary 
Shares under the Tender Offer from Qualifying Shareholders holding in aggregate 
5,730,178 Ordinary Shares, representing approximately 44.5 per cent. of the 
issued Ordinary Shares. In practical terms, this means that although the Tender 
Offer has been limited to 30 per cent. of the Ordinary Shares, such Ordinary 
Shares can be tendered only by Qualifying Shareholders holding 55.5 per cent. of 
the current issued share capital of the Company (subject to the maximum 
aggregate number of Ordinary Shares which may be purchased pursuant to the 
Tender Offer of 3,861,500 Ordinary Shares). 
However, in addition to the irrevocable undertakings not to tender Ordinary 
Shares referred to above, the Company has received letters of intention not to 
tender Ordinary Shares from the holders of 982,529 Ordinary Shares, representing 
a further 7.6 per cent. of the issued Ordinary Share Capital. 
On the assumption that all holders of Ordinary Shares in respect of whom 
irrevocable undertakings and letters of intention have been received, do not 
tender their Ordinary Shares, the remaining Qualifying Shareholders would hold 
in aggregate 47.9 per cent. of the issued Ordinary Share Capital. In these 
circumstances Qualifying Shareholders would be able to tender at least 62.7 per 
cent. of their holdings without being scaled back. 
Qualifying Shareholders do not have to tender any Ordinary Shares if they do not 
wish to do so. 
Full details of the Tender Offer, including the terms and conditions on which it 
is made, are set out in Part 2 of the Circular and, in the case of certificated 
Ordinary Shares only, the accompanying Tender Form. 
The Independent Directors consider that the Tender Offer: 
  *  provides an opportunity for Qualifying Shareholders to tender their Ordinary 
  Shares prior to the Cancellation; 
  *  allows Qualifying Shareholders the opportunity to dispose of Ordinary Shares, in 
  a tax-efficient manner (depending on their individual circumstances), free of 
  dealing costs and stamp duty (which will be borne by the Company); 
  *  gives Qualifying Shareholders the ability to tender all or some Ordinary Shares 
  held by them (but subject in either case to scaling back in the event that the 
  Tender Offer is over-subscribed) or to tender none of their Ordinary Shares, 
  depending on their own liquidity requirements and their view of the prospects of 
  the Company going forward; and 
  *  provides a return of cash now, compared to the alternative of being exposed to 
  the financial risks of the ongoing operations of the Company. 
 
The current issued share capital of the Company at 15 September 2009, being the 
last Business Day prior to the posting of the Circular, was 12,871,686 Ordinary 
Shares (excluding Ordinary Shares held in treasury). 
If the Tender Offer is fully taken up by Qualifying Shareholders, resulting in 
the purchase of 3,861,500 Ordinary Shares: 
  *  there will be a reduction in the issued Ordinary Share Capital to 9,010,186 
  Ordinary Shares (excluding Ordinary Shares held in treasury); and 
  *  the distributable reserves of the Company, as referenced in the audited accounts 
  of the Company for the year ended 31 March 2009, will be reduced from 
  approximately GBP1.39 million to approximately GBP501,855 (excluding 
  professional fees incurred in connection with the Proposals and stamp duty). The 
  distributable reserves of the Group, as referenced in the audited accounts of 
  the Company for the year ended 31 March 2009, will be reduced from approximately 
  GBP4.85 million to approximately GBP3.96 million (excluding professional fees 
  incurred in connection with the Proposals and stamp duty). 
 
The Tender Offer is conditional, amongst other things, on the passing of each of 
the Resolutions, including Resolution 1 approving the Cancellation. 
Under the Tender Offer: 
  *  Brewin Dolphin will purchase Ordinary Shares that are validly tendered up to a 
  maximum number of 3,861,500 Ordinary Shares (equivalent to an aggregate value of 
  approximately GBP888,145); 
  *  all Qualifying Shareholders are being given the opportunity to participate; 
  *  Qualifying Shareholders can tender none, all or some of their Ordinary Shares 
  (subject to scaling back in the event that the Tender Offer is over-subscribed); 
  *  all Ordinary Shares purchased by Brewin Dolphin will be purchased at a price of 
  23 pence per Ordinary Share (subject to rounding down to the nearest penny) free 
  of commissions and dealing charges; 
  *  all Ordinary Shares purchased by Brewin Dolphin (or a corresponding number of 
  Ordinary Shares) will be subsequently purchased by the Company at a price of 23 
  pence per Ordinary Share under the terms of the Repurchase Agreement; and 
  *  all Ordinary Shares purchased by the Company from Brewin Dolphin under the terms 
  of the Repurchase Agreement will be cancelled and will not rank for any 
  dividends declared after, or whose record date is after, the date of the 
  Circular. 
 
The Independent Directors reserve the right to terminate the Tender Offer at any 
time on or before announcement of the result of the Tender Offer if, having been 
advised by Brewin Dolphin; they conclude that its implementation is no longer in 
the best interests of the Company and Independent Shareholders as a whole or if 
the purchase of Ordinary Shares by the Company may have adverse fiscal 
consequences (whether by reason of any change in legislation, practice, 
circumstances or otherwise) for the Company and/or Independent Shareholders as a 
whole which were unexpected. 
If the Tender Offer is terminated, the Company will make an announcement through 
a Regulatory Information Service that such is the case. 
City Code on Takeovers and Mergers 
Dispensation from Rule 9 of the Takeover Code 
Under Rule 9 of the Takeover Code, any person who acquires an interest (as 
defined in the Takeover Code) in shares which, taken together with shares in 
which he is already interested and in which persons acting in concert with him 
are interested, carries 30 per cent. or more of the voting rights of a company 
which is subject to the Takeover Code, is normally required to make a general 
offer to all the remaining shareholders to acquire their shares. 
An offer under Rule 9 must be in cash and at the highest price paid by the 
person required to make the offer, or any person acting in concert with him, for 
any interest in shares of the company during the 12 months prior to the 
announcement of the offer. 
Under Rule 37 of the Takeover Code, when a company purchases its own voting 
shares, any resulting increase in the percentage of shares carrying voting 
rights in which a person or group of persons acting in concert is interested 
will be treated as an acquisition for the purpose of Rule 9 of the Takeover Code 
(although a shareholder who is neither a director nor acting (or presumed to be 
acting) in concert with a director will not normally incur an obligation to make 
a general offer under Rule 9). 
The current interests in Ordinary Shares of the Birch Concert Party and the 
percentages of the voting rights in the Company attributable to such interests 
are: 
+-----------------------------------------+----------------+------+---------+ 
| Person                                  |         No. of |      |       % | 
|                                         |       Ordinary |      |         | 
|                                         |         Shares |      |         | 
+-----------------------------------------+----------------+------+---------+ 
|                                         |                |      |         | 
+-----------------------------------------+----------------+------+---------+ 
| Keith Birch*                            |      2,846,797 |      |  22.117 | 
+-----------------------------------------+----------------+------+---------+ 
| David Birch                             |      1,628,257 |      |  12.650 | 
+-----------------------------------------+----------------+------+---------+ 
| Philip Birch**                          |      1,127,624 |      |   8.760 | 
+-----------------------------------------+----------------+------+---------+ 
| Catherine Birch                         |            500 |      |   0.004 | 
+-----------------------------------------+----------------+------+---------+ 
| Christopher Birch                       |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
| James Birch                             |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
| Joanna Birch                            |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
|                                         |                |      |         | 
+-----------------------------------------+----------------+------+---------+ 
| Total                                   |      5,603,178 |      |  43.531 | 
+-----------------------------------------+----------------+------+---------+ 
|                                         |                |      |         | 
+-----------------------------------------+----------------+------+---------+ 
| * The interests of Keith Birch include 98,250 Ordinary Shares (0.76% of   | 
| the issued Ordinary Share Capital) held as trustee of the TCL Settlement  | 
| Trust 1998.                                                               | 
+---------------------------------------------------------------------------+ 
| ** The interests of Philip Birch include 30,000 Ordinary Shares (0.23% of | 
| the issued Ordinary Share Capital) held as trustee for his three          | 
| children: Christopher Birch, James Birch and Joanna Birch.                | 
+-----------------------------------------+----------------+------+---------+ 
If the Company repurchases Ordinary Shares pursuant to the Tender Offer and at 
such time the voting rights attributable to the interests in Ordinary Shares of 
the Birch Concert Party continued to exceed 30 per cent. of the voting rights of 
the Company or as a result of the Tender Offer an individual's interest 
increased to more than 30 per cent. of such voting rights, an obligation under 
Rule 9 of the Takeover Code would arise on one or more of the members of the 
Birch Concert Party to make a cash offer for the current issued Ordinary Shares 
not already owned by them. 
If the maximum possible number of Ordinary Shares is purchased pursuant to the 
Tender Offer (being 3,861,500 Ordinary Shares) and assuming no disposals of 
Ordinary Shares by any member of the Birch Concert Party and no issues of 
Ordinary Shares by the Company in the meantime, the interests in Ordinary Shares 
of the Birch Concert Party and the percentages of the voting rights in the 
Company attributable to such interests would be: 
+-----------------------------------------+----------------+------+---------+ 
| Person                                  |         No. of |      |       % | 
|                                         |       Ordinary |      |         | 
|                                         |         Shares |      |         | 
+-----------------------------------------+----------------+------+---------+ 
|                                         |                |      |         | 
+-----------------------------------------+----------------+------+---------+ 
| Keith Birch                             |      2,846,797 |      |    31.6 | 
+-----------------------------------------+----------------+------+---------+ 
| David Birch                             |      1,628,257 |      |   18.07 | 
+-----------------------------------------+----------------+------+---------+ 
| Philip Birch                            |      1,127,624 |      |   12.51 | 
+-----------------------------------------+----------------+------+---------+ 
| Catherine Birch                         |            500 |      |   0.005 | 
+-----------------------------------------+----------------+------+---------+ 
| Christopher Birch                       |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
| James Birch                             |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
| Joanna Birch                            |              0 |      |       0 | 
+-----------------------------------------+----------------+------+---------+ 
|                                         |                |      |         | 
+-----------------------------------------+----------------+------+---------+ 
| Total                                   |      5,603,178 |      |   62.18 | 
+-----------------------------------------+----------------+------+---------+ 
 
 
 
 
The Panel has agreed, however, to waive the obligation to make a general offer 
that would otherwise arise as a result of the repurchase by the Company of its 
shares pursuant to the Tender Offer, subject to the approval of the Independent 
Shareholders on a poll. Accordingly, Resolution 3 is being proposed at the 
General Meeting and will be taken on a poll. 
Following completion of the Tender Offer, the members of the Birch Concert Party 
will between them hold more than 50 per cent. of the Company's voting share 
capital and may, accordingly, increase their aggregate interests in Ordinary 
Shares without incurring any obligation under Rule 9 to make a general offer. 
However, individual members of the Birch Concert Party will not be able to 
increase their percentage interest in Ordinary Shares through or between a Rule 
9 threshold without Panel consent. 
If the Birch Concert Party's holding in the Company is reduced at any point in 
the future to less than 50 per cent., whilst remaining interested in 30 per 
cent. or more of the Company's voting share capital, any subsequent increase in 
the Birch Concert Party's interest in Ordinary Shares would be subject to Rule 9 
of the Takeover Code. 
Brewin Dolphin Rule 9 Waiver 
In addition under the Tender Offer Brewin Dolphin will purchase, as principal, 
voting shares in the Company which could result in Brewin Dolphin coming to have 
an interest in such shares carrying 30 per cent or more of the voting rights of 
the Company. Brewin Dolphin has unconditionally undertaken that, promptly 
following such purchase, it will sell all those shares, acquired pursuant to the 
Tender Offer, to the Company for cancellation and the Company has 
unconditionally undertaken to buy all such shares. Brewin Dolphin has undertaken 
that so far as they are interested in the tendered shares that they will not 
exercise any rights attached to those shares. Accordingly, a waiver has been 
obtained from the Panel in respect of the application of Rule 9 to the purchase 
by Brewin Dolphin of the ordinary shares under the Tender Offer. 
 
 
The intentions of the Birch Concert Party 
The members of the Birch Concert Party have each confirmed to the Company that 
they are not proposing, following any increase in their percentage interests in 
Ordinary Shares or voting rights as a result of a repurchase of Ordinary Shares 
by the Company in connection with the Tender Offer, to seek any significant 
change in the composition of the Board or the general nature of the Company's 
business. 
The members of the Birch Concert Party have also each confirmed that their 
intentions regarding the future of the Company's business, their intentions 
regarding the locations of the Company's places of business and their intentions 
regarding the continued employment of its employees and management (and those of 
its subsidiaries) will not be altered as a result of any increase in their 
percentage interests in Ordinary Shares or voting rights as a result of a 
repurchase of Ordinary Shares by the Company in connection with the Tender Offer 
nor will there be any redeployment of the fixed assets of the Company as a 
result of such an increase. 
 
 
 
 
 
 
The members of the Birch Concert Party 
Keith Birch 
Keith Birch joined Touchstone Limited (previously "Touchstone Computers 
Limited") in May 1982 and became Managing Director in 1986. In June 1998, 
Touchstone Limited became a wholly owned subsidiary of the Company pursuant to a 
share exchange and Keith became Managing Director of the Company. He is 
responsible for the Group's growth during this period and development as an IT 
group. 
David Birch 
David Birch joined Touchstone Limited (previously "Touchstone Computers 
Limited") in January 1986 and became a director of the Company and Company 
Secretary in 1998. Prior to this David was an executive at William Davies 
Limited and Wimpey (Homes) Group Limited, with involvement in large project 
implementation. David Birch is the brother of Keith Birch. 
Philip Birch 
Philip Birch joined Touchstone Limited (previously "Touchstone Computers 
Limited") as Non-Executive Chairman in 1986. At that time, he was also Chairman 
and Chief Executive of Ward White Group plc, which owned Halfords, Payless DIY 
and AG Stanley, and which was subsequently acquired by The Boots Company plc in 
1989. Philip was appointed Non-Executive Chairman of the Company in 1998 and 
played a significant role in the Company's successful AIM Admission that same 
year. Philip chaired the Board for five years until his retirement at age 70 in 
2003. Philip Birch is the father of Keith and David Birch. 
Catherine Birch 
Catherine Birch is the mother of Keith and David Birch. 
Christopher Birch 
Christopher Birch is the son of Philip Birch. 
James Birch 
James Birch is the son of Philip Birch. 
Joanna Birch 
Joanna Birch is the daughter of Philip Birch. 
Position of the Company following implementation of the Proposals 
Following the Cancellation, the Company would remain a public limited company 
subject to English company law, which requires, amongst other things, that the 
Company must: 
  *  prepare and publish annual audited accounts; and 
  *  hold annual general meetings. 
 
In addition, as a public limited company, the provisions of the Takeover Code 
would continue to apply to the Company. 
As mentioned, the Board continues to believe that dividends should be paid in 
accordance with the Group's cash flow requirements whilst maintaining an 
appropriate level of dividend cover and sufficient cash reserves for future 
investment opportunities. 
Subject to existing contractual obligations, the Board intend to pay management 
and employees' salaries and benefits that are commensurate with industry 
practice and, assuming the Cancellation occurs, the Company's status as an 
off-market company. 
General Meeting 
Implementation of the Cancellation and the Tender Offer, and approval of the 
Rule 9 Waiver, require the approval of Shareholders at a general meeting. 
At the General Meeting, the following resolutions will be proposed: 
  1.  Resolution 1 - a special resolution to authorise the cancellation of the AIM 
  Admission; 
  2.  Resolution 2 - a special resolution to authorise the Company to make market 
  purchases of up to a maximum number of 3,861,500 Ordinary Shares from Brewin 
  Dolphin at a fixed price of 23 pence per Ordinary Share pursuant to the Tender 
  Offer. The authorisation will be conditional on the Cancellation and the Rule 9 
  Waiver each having been approved; 
  3.  Resolution 3 - an ordinary resolution to approve the waiver of Rule 9 of the 
  Takeover Code for the purpose of the Tender Offer. This Resolution will be taken 
  on a poll and only the Independent Shareholders will be entitled to vote. 
 
Each of Resolutions 1 and 2 are proposed as special resolutions which means they 
must be approved by not less than 75 per cent. of votes cast by Shareholders at 
the General Meeting. Resolution 3 is proposed as an ordinary resolution and must 
be passed by more than 50 per cent. of the votes cast by Independent 
Shareholders at the General Meeting. 
For the reasons explained above, the Board believe that it would be in the best 
interests of the Company and Shareholders as a whole if the AIM Admission were 
to be cancelled. Accordingly, if Shareholders pass Resolution 1 to approve the 
Cancellation, it is the intention of the Company to proceed with the 
Cancellation whether or not Resolutions 2 and 3 are passed by Shareholders. 
The Independent Directors recognise, however, that some Shareholders may not be 
able or willing to continue to hold Ordinary Shares following any Cancellation 
and have therefore proposed the Tender Offer to give Qualifying Shareholders an 
opportunity to dispose of or reduce their interest in the Company (subject to 
the maximum aggregate number of Ordinary Shares which may be purchased pursuant 
to the Tender Offer of 3,861,500 Ordinary Shares). 
In order for the Tender Offer to take place, however, Resolutions 2 and 3 must 
be passed. If these Resolutions are not passed by the requisite majority it will 
not be possible for the Tender Offer to take place. 
If the Cancellation is approved but the Tender Offer does not take place, 
Shareholders who wish to sell Ordinary Shares will need to do so either through 
the matched bargain settlement facility which the Company intends to set up 
following Cancellation or, independently. 
 
 
Irrevocable Undertakings and Letters of Intent 
The Company has received irrevocable undertakings not to tender any Ordinary 
Shares under the Tender Offer and to vote in favour of Resolutions 1 and 2 and 
abstain from voting on Resolution 3 from the members of the Birch Concert Party 
(other than Christopher Birch, James Birch and Joanna Birch who do not hold any 
Ordinary Shares) in respect of their holdings of, in aggregate, 5,603,178 
Ordinary Shares, representing approximately 43.53 per cent. of the issued 
Ordinary Shares. 
The Company has received irrevocable undertakings not to tender any Ordinary 
Shares under the Tender Offer and to vote in favour of the Resolutions, from 
those Independent Directors who hold Ordinary Shares, in respect of their 
holdings of, in aggregate, 32,000 Ordinary Shares, representing approximately 
0.25 per cent. of the issued Ordinary Shares. All Independent Directors have 
irrevocably undertaken, subject to their fiduciary duties as directors of the 
Company, to recommend to Shareholders to vote in favour of the Resolutions. 
The Company has received irrevocable undertakings not to tender any Ordinary 
Shares under the Tender Offer and to vote in favour of the Resolutions from the 
EBT Trustee in respect of its holdings of 95,000 Ordinary Shares, representing 
approximately 0.74 per cent. of the issued Ordinary Shares. 
The Company has also received letters of intent from certain other Shareholders 
holding, in aggregate, 982,529 Ordinary Shares, representing approximately 7.6 
per cent. of the issued Ordinary Shares, indicating that it is their current 
intention not to tender any Ordinary Shares under the Tender Offer and to vote 
in favour of the Resolutions at the General Meeting. 
Further details of the irrevocable undertakings and letters of intent are set 
out in Part 5 of the Circular. 
Recommendation 
Neither of Keith Birch and David Birch has taken part in any decision by the 
Board relating to any proposal to seek the Rule 9 Waiver from the Panel since it 
is, inter alia, their potential interests in Ordinary Shares that are the 
subject of the Rule 9 Waiver.  No member of the Birch Concert Party will vote on 
Resolution 3. 
The Board consider the Cancellation to be in the best interests of the Company 
and Shareholders as a whole. Accordingly, the Board recommend that you vote in 
favour of Resolution 1 relating to the Cancellation as those members of the 
Board who hold Ordinary Shares have irrevocably agreed to do in respect of their 
holdings of, in aggregate, 4,507,054 Ordinary Shares, representing in aggregate 
approximately 35.02 per cent. of the Company's current issued Ordinary Share 
Capital. 
The Independent Directors, who have been so advised by Brewin Dolphin, consider 
the Tender Offer and the Rule 9 Waiver to be fair and reasonable and in the best 
interests of the Company and Independent Shareholders as a whole. In providing 
advice to the Independent Directors, Brewin Dolphin has taken into account the 
commercial assessment of the Independent Directors. 
Accordingly, the Independent Directors recommend that you vote in favour of 
Resolutions 2 and 3 relating to the Tender Offer and the Rule 9 Waiver, as those 
Independent Directors who hold Ordinary Shares have irrevocably agreed to do in 
respect of their holdings of, in aggregate, 32,000 Ordinary Shares, representing 
in aggregate approximately 0.25 per cent. of the Company's current issued 
Ordinary Share Capital. 
The Independent Directors make no recommendation to Shareholders in relation to 
participation in the Tender Offer itself. Whether or not Qualifying Shareholders 
decide to tender all or any of their Ordinary Shares will depend, amongst other 
things, on their view of the Company's prospects and their own individual 
circumstances, including their tax position. In making their decisions, 
Qualifying Shareholders are recommended to consult their duly authorised 
independent advisers. 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
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