Untitled - David Kronemyer

THIS DocuMEN'I Is IMPORTANT AND RxeulRrs youR IMMEDIATE AT:IENTIoN. Ifyou are in any doubt
about what action to take, you should consult your srockbroker, bank manager, solicitor, accountant or
other professional advis€r immediatety. If you have sold all your holding of Ordinary Shares and /or 7 per
cent. Convertible Redeemable Second Cumulative Preference Shares 1992/99 in THORN EMI plc please
send this document with the accompanying lbrm(s) of proxy to the srockbroker or other agent through
whom the sale was effected for transmission to the purchaser.
THORN EMI plc
(Registered ln Engla d No. 229231)
Registered. Ofrce:
4 T€nterden Street
London W1A 2AY
2o April r988
To the holders of the ordinary shares and the 7 per cent. conveftible Redeemable second cumulative
Preference Shares 1992/99 and for information only the holders of the 3.5 per cent. Cumulative preference
Shares and the holders of the Unsecured Loan Srocks.
Dear Sir or Madam,
PROPOSED REDUCfiON OF SHARE PREMIUM ACCOUNT
I write with r€ference to my letter of 7 March 1988 which contained Notices convening a separate Class
Meeting of the holders of the 7 per cent. Conyeftible Redeemable Second Cumulative Prefer€nce Shares
1992/99 ("t}re Convertible Preference Shares") and an Extraordinary General Meeting of the Company and
to my letter of 25 March 1988 advising shareholdefs that the Extraordinary General Meering could not be
held on the date originally proposed. The letter of 25 March also made ir clear that it would be necessary
to reconvene the Extraordinary General Meeting and the separate Class Meeting.
This unfoftunate situation arose from the failure of the mailing house used by rhe printers to comply q/ith
the strict instructions, given in writing, as to the mailing of my 7 March letter on that date. As a result, rhe
requisite notice periods for the two meetings w€re not given. I am, however, pleased to advise shareholders
that the printers hal/€ agreed to compensate us for the consequence oftheir failure ro achiev€ the required
posting date.
The Board wishes to proceed as soon as possible with the proposed reduction of the Share Premium
Account. You will find set out on pages 4 and 5 ofthis document Notices convening a separate Class Meeting
of the holders of the Convenible Preference Shares and an Exraordinary General Meeting of the Company
to be held on 11 and l8 May 1988 respectively. The rest of this letter is in substantially the same form as
my 7 March letter and explains once again the reasons for the proposal with a view to seeking the necessary
authority from the shareholders at the Meetings.
Background
The Group has achieved its present size and structure through a combination of organic growth and
acquisitions. The principal acquisitions in rec€nt financial years have included EMI Limited in l980 (515I
million),INMOS International plc in 1985 (S125 million) and Rent-A-Center Inc. ("Rent-A-Center") in
l9a7 (e372 million), at the historical costs shown in brackets.
The total consideration payable on an acquisition will often include an element of goodv/ill which
represents the excess of the consideration over the fair value of the net tangible assets on the date of the
acquisition. Any goodwill arising is required to be dealt with in the manner set out below.
Statement of Standard Accounting Practice No. 22 requires that such goodwill should be eliminated either
by immediate write off against res€rves or amoftisation through rhe consolidated profrt and loss account
over a period of time. In common with the maiority of U.K. public companies your Directors hav€ adopted
rhe flrst approach as they consider that to amoftise significant amounts of goodwill through the profit and
loss account would be inappropriate.
Th€ Group's stated policy is controlled expansion by acquisition as well as organic grovth. Suitable
opportuniries continue to be investigated which may, in turn, give rise ro acquisirions. The oature of the
businesses in which the Group is interested is such that future acquisitions are likely to give rise to fufther
goodwill and the principal purpose of the proposed reduction of the share premium account is to create
a reserve against which such goodwill can be written off.