CNN Caledonian Trust Plc

RNS 0107U
CALEDONIAN TRUST PLC
7th October 1998

Caledonian Trust PLC

Circular to shareholders concerning the Offer by Leafrealm Limited

Caledonian Trust PLC ("the Company") has today posted a circular to 
shareholders and holders of the 12%/10% Convertible Unsecured Loan Notes
1994/1999 of the Company  ("the CULS") concerning the offer made by Orr
MacQueen, W.S. on behalf of Leafrealm Limited ("Leafrealm"), a company
controlled and owned by I D Lowe, the chairman and chief executive of       
the Company, ("Mr Lowe") for the ordinary shares of 20p each in the Company
("Ordinary Shares") and the CULS on 24 September 1998 ("the Offer"). This
announcement contains an extract from the  circular comprising a letter from the
directors of the Company other than Mr Lowe ("the Non Leafrealm Directors") and
the text of a letter from Marshall Securities Limited ("Marshall"), which has
been appointed to give independent financial advice to the Company regarding the
Offer.

I       Letter from the Non Leafrealm Directors
The following is the text of a letter dated 6 October 1998 from the Non 
Leafrealm Directors. In the letter the term "Offer Document" refers to the
offer document dated 24 September 1998 containing the offer.

"To the holders of Ordinary Shares and the holders of CULS

Dear Sir or Madam

Offer by Leafrealm for Ordinary Shares and CULS

1.      The Offer

On 24 September 1998 an offer was announced by Leafrealm and made by Orr 
Macqueen W.S. on behalf of Leafrealm for the whole of the issued share capital
of the Company and the entire issue of the CULS, except for Ordinary Shares and
CULS owned or controlled by Mr Lowe.


The Offer is made on the following basis:

        for each Ordinary Share 27.5p in cash; and
        for each #1 nominal of CULS 40.146p in cash

and otherwise on the terms and subject to the conditions set out in the Offer   
Document.

2.      Conflicts of interest

Mr Lowe, the Company's Chairman and Chief Executive, controls Leafrealm. 
Accordingly, he has taken no part in the discussions of the Non Leafrealm
Directors and Marshall regarding the Offer and expresses no views as a director
of the Company on the Offer.

The Offer, if successful, will result in Mr Lowe controlling more than 50 per 
cent. of the Ordinary Shares. The Offer is therefore considered under the City
Code to be a transaction similar to a management buy-out. It is expected that
the Non Leafrealm Directors will continue their respective roles within the
Company whether or not the Offer is successful. In these circumstances, by
virtue of notes 3 and 4 to Rule 25.1 of the Code, the Non Leafrealm Directors
are considered to have a conflict of interest and are precluded from expressing
their views on the Offer.


The Non Leafrealm Directors have appointed Marshall to provide independent 
advice to the Company regarding the Offer. The advice of Marshall to the
Company is set out in Part 2 of this document.


3.      Current trading

The unaudited interim accounts of the Company for the six months ended 31 
December 1997, which were published on 22 April 1998, are set out in Part 3 of
this document.

The Non Leafrealm Directors are not aware of any material change in the 
financial or trading position of the Company since 31 December 1997 nor of any
material change in the net assets of the Company since 30 June 1997, the date of
the last published audited balance sheet of the Company.

The Non Leafrealm Directors note that in the Offer Document at page 41 Leafrealm
has confirmed that, save as disclosed in the Offer Document and as far as it is
aware, there has been no material change in the financial or trading position
of the Company since 30 June 1997.


4.      Company's proposals to redeem CULS

On 28 September 1998 the Non Leafrealm Directors wrote to the Ordinary 
Shareholders and the CULS holders informing them, inter alia, that the Company
proposes to offer to redeem the CULS at a price below par but significantly in
excess of Leafrealm's Offer for the CULS.

The Company intends to put forward proposals within the next seven days to 
acquire the CULS (other than CULS held by the Directors and certain holders
who have indicated th at they would not accept any such offer) at 98p per #1
nominal value of CULS, such price to include all accrued interest on the CULS.

Marshall considers that such proposals, if made today, would be fair and 
reasonable to the Ordinary Shareholders as a whole.

5.      Financial effects of the Offer

(i)     In relation to the Ordinary Shares

The Non Leafrealm Directors expect that the Company's audited accounts for the 
year ended 30 June 1998 will be published towards the end of December 1998. 
Until such accounts are published the latest audited information relating to the
net asset value per Ordinary Share is that contained in the audited accounts of
the Company for the year ended 30 June 1997 which are summarised in Appendix
III of the Offer Document. Such accounts showed net asset value of 82.6 p per
Ordinary Share as at 30 June 1997 compared to 95.6p at 30 June 1996 and 96.3p at
30 June 1995. The price offered by Leafrealm for an Ordinary Share represents a
discount of 67 per cent. to the last published audited net asset value per
Ordinary Share.

The Company has not paid a dividend on its Ordinary Shares for at least ten 
years. Accordingly, any yield on re-investment of the cash proceeds of
acceptance of the Offer for the Ordinary Shares would represent additional
income to the holder.

The latest price at which Ordinary Shares were traded on AIM on 23 September 
1998, the day prior to announcement of the Offer, was 40p.  The average      
price of trades in the Ordinary Shares reported on AIM in the month ended 23
September 1998 was 41p. The price offered by Leafrealm for an Ordinary Share
represents a discount of 31 per cent. to such price of 40p and a discount of 33
per cent. to such average price of 41p.


(ii)    In relation to the CULS

As stated above, the Company proposes to offer to acquire the CULS (other than 
CULS held by certain holders who have indicated that they would not accept any
such offer) at 98p per #1 nominal value of CULS inclusive of accrued interest.
This price would represent a premium of 57.854p per #1 nominal value of CULS
compared to the Offer for the CULS.


6.      Factors to be considered in relation to the Offer for Ordinary Shares

For the reasons stated in paragraph 2 above, the Non Leafrealm Directors are 
precluded from expressing their views on the Offer for the Ordinary Shares.
They do, however, consider the following factors to be relevant to Ordinary
Shareholders in assessing the merit s of the Offer for the Ordinary Shares:

(i)     Illiquidity of Ordinary Shares

The Ordinary Shares have been traded on AIM since 29 September 1995 and the 
Board intends that the Ordinary Shares will continue to be traded on AIM
regardless of the outcome of the Offer. In common with the shares of many AIM
companies and many smaller listed companies, trading in the Ordinary Shares has
been highly illiquid. The Non Leafrealm Directors do not expect this situation
to change significantly as a result of the Offer. After the Offer closes, 
Shareholders who retain significant holdings of Ordinary Shares may have
difficulty realising their holdings at or near the then prevailing market
price.


(ii)    Controlling shareholding

Mr Lowe currently owns or controls Ordinary Shares representing 42.3 per cent. 
of the Company's issued Ordinary Share capital. By virtue of a recent change in
the Code he is not permitted to increase this holding without making a general
offer for all the Ordinary Shares which he does not own or control (prior to
such change he would have been permitted to increase his holding by up to one
per cent. per annum without being required to make such an offer).  If the 
Offer is successful Mr Lowe will own or control more than 50 per cent. of the
Company's issued Ordinary Shares and he will be free to increase this holding
without making a general offer for the remainder of the

Ordinary Shares.

(iii)   Yield

The Company has not paid dividends on its Ordinary Shares for at least ten years
.

(iv)    Discount to net asset value and share price

The Offer for the Ordinary Shares represents a substantial discount to the last
published audited net asset value per Ordinary Share and a discount to the
recent share price (see "Financial effects of the Offer" above).

(v)     Effect of the Offer on supply and demand for the Ordinary Shares


Acceptances of the Offer may remove from the Company's register certain 
shareholders who have been unable to dispose of Ordinary Shares in the market.


(vi)    Intentions of the Non Leafrealm Directors

The intentions of the Non Leafrealm Directors with regard to the Offer are set 
out in paragraph 8 below.


7.      Factors to be considered in relation to the Offer for the CULS

For the reasons stated in paragraph 2 above, the Non Leafrealm Directors are    
precluded from expressing their views on the Offer for the CULS. They do,
however, consider the following factors to be relevant to CULS holders in
assessing the merits of the Offer for the CULS:


(i)     Company's proposal to acquire CULS

As described in paragraph 4 above, the Company proposes to offer to acquire CULS
(other than CULS held by certain holders who have indicated that they would not
accept any such offer) at a price which is significantly in excess of the price
offered by Leafrealm for the CULS.


(ii)    Redemption date of the CULS

The CULS fall due for redemption on 30 June 1999 at par together with accrued 
interest at the rate of 10 per cent. per annum. The Company expects to put
forward proposals to extend the redemption date of any CULS which remain
outstanding at the time of publication of the report and accounts for the year
ended 30 June 1998.


(iii)   Intentions of the Non Leafrealm Directors

The intentions of the Non Leafrealm Directors with regard to the Offer are set 
out in paragraph 8 below.


8.      Intentions of the Non Leafrealm Directors in relation to the Offer

The Non Leafrealm Directors do not intend to accept the Offer in respect of any
of the Ordinary Shares or CULS beneficially owned by them, amounting in
aggregate to 605,383 Ordinary Shares and #33,069 nominal of CULS. Keepname
Limited, a company of which Mr Rankin is a director and shareholder, has stated
that it does not intend to accept the Offer in respect of the #250,000 nominal
of CULS held by it.


9.      Employees

Leafrealm has stated that it intends that all existing rights, including pension
rights, of employees of the Company and any subsidiaries will be fully
safeguarded.


10.     Advice to the Company

I would refer you to the letter from Marshall set out in Part 2 of this document
which sets out its advice to the Company.


11.     Further information

Your attention is also drawn to Parts 3 and 4 of this document.

Yours faithfully,


J N Little
Director"

II      Letter from Marshall to the Non Leafrealm Directors

The following is the text of a letter from Marshall to the Non Leafrealm
Directors of the Company:

"MJ Baynham esq.
JN Little esq.
BJ Rankin esq.
("the Non Leafrealm Directors")
Caledonian Trust PLC
61 North Castle Street
Edinburgh
EH2 3LJ
                                                          6 October 1998
Dear Sirs,

Offer by Leafrealm Limited for Ordinary Shares and 12%/10% Convertible Unsecured
Loan Notes 1994/1999 ("CULS")

You have appointed us as financial adviser to provide advice to the Company in
connection with the offer made by Leafrealm Limited for Ordinary Shares and
CULS, except for Ordinary Shares and CULS owned or controlled by Mr Lowe. The
Offer is considered under the City Code on Take-overs and Mergers to be a
transaction similar to a management buy-out and, as a consequence of your
continuing roles as directors of the Company, you are considered to have a
conflict of interest and are precluded from expressing your views on the terms
of the Offer and from making recommendations as to the appropriate courses of
action for Shareholders and CULS holders.

We advise the Company that Shareholders and CULS holders, in reaching their
decision whether or not to accept the Offer, should take account of the
following points:

1 the factors set out in the letter from the Non Leafrealm Directors, and in
particular the information contained in paragraph 6 headed "Factors to be
considered in relation to the Offer for Ordinary Shares" and in paragraph 7
headed "Factors to be considered in relation to the Offer for CULS"; and

2 the financial effects of the Offer as described in paragraph 5 of the letter
from the Non Leafrealm Directors; and

3 the intention of the Board of the Company that the Ordinary Shares will
continue to be traded on the Alternative Investment Market ("AIM") regardless of
the outcome of the Offer.

It is our view that Shareholders who have, or anticipate that they will have, a
requirement to realise a holding of Ordinary Shares should carefully consider
whether, once the Offer closes, they believe that there will be a ready market
for such a holding on AIM at or above the level of the Offer. Any such
Shareholders who are in doubt may wish to accept the Offer as a means of
securing liquidity. However, it is also our view that Shareholders who do not
have or anticipate such a requirement for liquidity should not accept the Offer
in view of the substantial discount which the Offer price represents to the last
published net asset value per Ordinary Share and the discount which it
represents to the market price of Ordinary Shares on AIM prior to the
announcement of the Offer.

It is our view that CULS holders should not accept the Offer since the Company
intends to offer to acquire the CULS (other than CULS held by the Directors and
certain holders who have indicated that they would not accept any such offer) at
98p per #1 nominal value of CULS, a substantial premium to the Offer price. We
consider that the proposal to acquire the CULS set out in paragraph 4 of the
letter from the Non Leafrealm Directors, if made today, would be fair and
reasonable to the Shareholders as a whole.

In providing advice to the Company we have taken into account, inter alia, the
factors set out in this document and the commercial assessments of the Non
Leafrealm Directors.

In giving its advice, Marshall is advising the Company in relation to the Offer
and is not acting for any of the Directors in their personal capacities nor for
any Shareholders or CULS holders in relation to the Offer. Marshall will not be
responsible to any such person for providing the protections afforded to
customers of Marshall or advising any such person in relation to the Offer.

Accordingly when considering what action they should take, Shareholders and CULS
holders are strongly recommended to seek their own personal financial advice
from their stockbroker, bank manager, solicitor, accountant or other independent
financial adviser authorised under the Financial Services Act 1986.

Yours faithfully,

RS Luetchford
Director
for and on behalf of Marshall Securities Limited"

Responsibility

The Directors of Caledonian Trust PLC (other than Mr Lowe as he controls
Leafrealm) accept responsibility for the information contained in this
announcement save that the only responsibility accepted in respect of the
information relating to Leafrealm which has been compiled from published sources
is to ensure that it has been correctly and fairly reproduced and presented.
Subject as aforesaid, to the best of the knowledge and belief of The Directors
of Caledonian Trust PLC (other than Mr Lowe) (who have taken all reasonable care
to ensure that such is the case), the information contained in this document is
in accordance with the facts and does not omit anything likely to affect the
import of such information.

Documents available for inspection

A copy of the Circular to Shareholders may be inspected at the offices of
Marshall, Crusader House, 145-157 St John Street, London EC1V 4QJ and at the
head office of the Company, during normal business hours on any weekday (except
Saturdays and public holidays) whilst the Offer remains open for acceptance.


END


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