EXC plc (Incorporated and registered in England and Wales under the Companies Act 1985 with registered number )

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1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document and what action you should take you are recommended immediately to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent adviser who specialises in advising on the acquisition of shares and other securities and is authorised under the Financial Services and Markets Act If you have sold or otherwise transferred all of your Existing Ordinary Shares in EXC plc please send this document to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Application has been made for the Enlarged Issued Share Capital of EXC plc to be admitted to trading on AIM of the London Stock Exchange plc ( AIM ) and it is expected that dealings in the Enlarged Issued Share Capital will commence on 1 July AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List. A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. The London Stock Exchange plc has not itself examined or approved the contents of this document. A copy of this document, which comprises a prospectus drawn up in accordance with the Public Offers of Securities Regulations 1995 as amended ( the POS Regulations ) and the AIM Rules, has been issued in connection with the application for admission to trading of the Enlarged Issued Share Capital on AIM and has been delivered to the Registrar of Companies in England and Wales for registration in accordance with Regulation 4(2) of the POS Regulations. EXC plc (Incorporated and registered in England and Wales under the Companies Act 1985 with registered number ) Proposed Acquisition of David Conrad Investments Limited Placing of 5,090,909 new Ordinary Shares at 5p per share Admission to trading on AIM Nominated Adviser and Broker John East & Partners Limited SHARE CAPITAL ON ADMISSION Authorised Issued and fully paid Number Amount Number Amount 5,000,000,000 5,000,000 Ordinary Shares of 0.1p each 348,400, ,400 The Directors and Proposed Directors, whose names appear on page 3 of this document, accept responsibility for the information contained in this document including individual and collective responsibility for compliance with the AIM Rules. To the best of the knowledge and belief of the Directors and the Proposed Directors (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 this document makes no omission likely to affect the import of such information. In connection with this document and/or the invitation contained in it, no person is authorised to give any information or make any representation other than as contained in this document. John East & Partners Limited, which is regulated by the Financial Services Authority, is acting as Nominated Adviser and Broker exclusively for the Company in connection with the arrangements described in this document and is not acting for any other person and will not be responsible to any other person for providing the protections afforded to customers of John East & Partners Limited, or for advising any other person in connection with the arrangements described in this document. The responsibilities of John East & Partners Limited, as Nominated Adviser, are owed solely to the London Stock Exchange plc. The New Ordinary Shares will, on Admission, rank pari passu with the Existing Ordinary Shares in issue and will rank in full for all dividends and other distributions thereafter declared, made or paid on the share capital of the Company.

2 Contents Page DIRECTORS, PROPOSED DIRECTORS, SECRETARY AND ADVISERS 3 DEFINITIONS 4 PLACING AND ACQUISITION STATISTICS 6 EXPECTED TIMETABLE 6 PART I INFORMATION ON THE COMPANY 7 Introduction 7 History and Background 7 Information on Excalibur 7 Information on the DCI Group 7 Principal Terms of the DCI Acquisition 8 Directors 8 Proposed Directors 8 Reasons for the Placing and use of Funds 9 Details of the Placing 9 Orderly Market Arrangements 9 Share Options and Warrants 10 Corporate Governance 10 Dividend Policy 10 Taxation 10 CREST 11 Further Information 11 PART II RISK FACTORS 12 PART III FINANCIAL INFORMATION 14 Section A: Accountants Report on EXC 14 Section B: Accountants Report on Excalibur 18 Section C: Accountants Report on DCI 23 Section D: Accountants Report on DC International 27 PART IV PRO FORMA STATEMENT OF NET ASSETS OF THE ENLARGED GROUP 36 PART V ADDITIONAL INFORMATION 37 2

3 Directors, Proposed Directors, Secretary and Advisers Directors Proposed Directors Company Secretary Registered Office Nominated Adviser and Broker Solicitors to the Company Solicitors to DCI Solicitors to the Placing Auditors and Reporting Accountants Registrars Simon Philip Larah (Chief Executive) Elliot Richard Fidler, ACA (Finance Director) both of: Reedham House, 31 King Street West, Manchester M3 2PJ John Michael Edelson (Proposed Executive Chairman) Anthony Jack Leon, DL, FCA (Proposed Non-Executive Director) both of: Third Floor, 345 Stockport Road, Manchester M13 0LF Ian Aspinall, FCA Third Floor 345 Stockport Road Manchester M13 0LF John East & Partners Limited Crystal Gate Worship Street London EC2A 2AH Kuit Steinart Levy 3 St Mary s Parsonage Manchester M3 2RD Hammonds Trinity Court 16 John Dalton Street Manchester M60 8HS Lewis Silkin 12 Gough Square London EC4A 3DW Horwath Clark Whitehill LLP Arkwright House Pasonage Gardens Manchester M3 2HP Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA 3

4 Definitions The following words and expressions shall have the following meanings in this document unless the context otherwise requires: Acquisition Act Admission AIM AIM Rules Board or Directors Capita Registrars Company or EXC Consideration Shares CREST DCI DCI Acquisition Agreement DC International DCI Vendors DCI Group EMI Options Enlarged Group Enlarged Issued Share Capital Excalibur the proposed acquisition of the entire issued share capital of DCI the Companies Act 1985 (as amended) admission of the Enlarged Issued Share Capital to trading on AIM and such admission becoming effective in accordance with rule 6 of the AIM Rules a market operated by the London Stock Exchange the rules for AIM published by the London Stock Exchange the directors of the Company, whose names appear on page 3 of this document is a trading name of Capita IRG Plc EXC plc, a company registered in England and Wales under number the 100,000,000 new Ordinary Shares to be issued to the DCI Vendors pursuant to the DCI Acquisition Agreement the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by CRESTCo Limited David Conrad Investments Limited, a company registered in England and Wales under number the conditional agreement dated 25 June 2004 between (1) J M Edelson, J H Lyons, WI Link plc and others (2) the Company (3) the EXC Warrantors and (4) John East & Partners, further details of which are set out in paragraph of Part V of this document David Conrad (International) Limited, a company registered in England and Wales under number J M Edelson, J H Lyons, WI Link plc and others DCI and its wholly owned trading subsidiary DC International and DC International s wholly owned dormant subsidiary, Highset the replacement enterprise management incentive options to be granted to certain employees of DC International on Admission, further details of which are set out in paragraph 9.2 of Part V of this document the EXC Group and the DCI Group following Admission the issued ordinary share capital of the Company at Admission being 348,400,000 Ordinary Shares Excalibur Ventures Limited, a company registered in England and Wales under number

5 Definitions (continued) Excalibur Acquisition Agreement EXC Group EXC Warrantors Existing Ordinary Shares Highset John East & Partners London Stock Exchange New Board New Ordinary Shares Ordinary Shares Placing Placing Agreement Placing Price Placing Shares POS Regulations Proposals Proposed Directors Shareholders UK or United Kingdom uncertificated or in uncertificated form Warrantors Warrants the agreement dated 14 May 2004 between (1) E R Fidler and others (2) the Company and (3) John East & Partners relating to the acquisition by EXC of the entire issued share capital of Excalibur, further details of which are set out in paragraph of Part V of this document the Company and its wholly owned subsidiary Excalibur Ventures Limited and its wholly owned subsidiary ES Excalibur Trade Limited S P Larah and B Gorfung, Gorfung Consultation and Management Ltd and Y.T.Y.Lenny Investments Ltd the 242,909,091 Ordinary Shares in issue at the date of this document Highset Limited, a company registered in England and Wales under number John East & Partners Limited, the Company s Nominated Adviser and Broker London Stock Exchange plc the Proposed Directors, S P Larah and E R Fidler the Consideration Shares, the Placing Shares and 400,000 new Ordinary Shares to be issued in part settlement of services rendered to the Company ordinary shares of 0.1p each in the capital of the Company the conditional placing by John East & Partners of the Placing Shares at the Placing Price pursuant to the Placing Agreement the conditional agreement dated 25 June 2004 between (1) the Company and (2) John East & Partners relating to the Placing, details of which are set out in paragraph of Part V of this document 5p per Ordinary Share the 5,090,909 new Ordinary Shares to be issued in connection with the Placing the Public Offers of Securities Regulations 1995 (as amended) the Acquisition and the Placing J M Edelson and A J Leon holders of Ordinary Shares the United Kingdom of Great Britain and Northern Ireland recorded on the relevant register of the shares or securities of the company concerned as being held in uncertificated form in CREST and title to which by virtue of the CREST regulations, may be transferred by means of CREST J M Edelson and J H Lyons warrants to subscribe for an aggregate of 13,570,358 Ordinary Shares created by way of a warrant instrument dated 18 May 2004, further details of which are set out in paragraph of Part V of this document 5

6 Placing and Acquisition Statistics Placing Price 5p Number of Placing Shares to be issued 5,090,909 Percentage of Enlarged Issued Share Capital being placed 1.46 per cent. Gross proceeds of the Placing 254,545 Ordinary Shares in issue at Admission 348,400,000 Market capitalisation at Admission at the Placing Price 17.4 million Expected Timetable Date of prospectus 25 June 2004 Placing letters and funds to be returned by 29 June 2004 Admission expected on 1 July 2004 Definitive share certificates for New Ordinary Shares expected to be despatched by 8 July

7 PART I Information on the Company INTRODUCTION EXC is a company which was established to acquire Excalibur, the acquisition being completed on 14 May EXC has conditionally agreed to acquire DCI subject to Admission. Excalibur is a product sourcing company operating primarily from Israel. The DCI Group designs, sources and distributes a large range of leather garments, mainly for leisure use. HISTORY AND BACKGROUND EXC was incorporated on 25 March 2004, as a holding company, initially to acquire Excalibur in a share-for-share transaction. Subsequently, EXC raised an aggregate of 285,454 through the issue of an aggregate of 134,909,091 Ordinary Shares. On 25 June 2004 EXC entered into an agreement to acquire DCI for a consideration of 5 million and effected a placing to raise 254,545, before expenses, both of which are conditional, inter alia, on Admission. INFORMATION ON EXCALIBUR Excalibur, which commenced trading in September 2003, is based in Manchester, with operations in Israel and Jordan. Excalibur is an import/export trading company involved in the sourcing and supply of a diverse range of equipment in the Middle East. It is currently exploring the possibility of opening an office in Kuwait. Excalibur sources a wide variety of materials and equipment from the USA, Europe and the Middle East. It responds rapidly to requests for all types of equipment from low to high value items. One of the potential growth areas is the short term leasing of heavy plant machinery. In the period to 31 May 2004, Excalibur achieved invoiced sales of approximately $1.3 million and at that date had confirmed orders not yet completed amounting to approximately $5.1 million, which are expected to be completed by the end of September The business is growing rapidly as a result of its dedicated management team and its dynamic approach to sourcing equipment, with price, delivery and reliability being crucial factors in the company s success. The Directors and Proposed Directors intend to expand Excalibur s business by offering its specialised services to a wider range of international companies, building upon its current network of suppliers to expand its range of services and products. INFORMATION ON THE DCI GROUP DC International was incorporated on 28 July 1998 and since it commenced trading, its business has primarily been the importation of leather garments for sale by the DCI Group to re-sellers. Since DC International commenced trading, it has achieved a profit before tax in each financial period. DCI was incorporated on 14 November DCI acquired the entire issued share capital of DC International on 5 February Other than as the holding company of DC International, DCI has never traded. The DCI Group designs a range of garments primarily for the Spring/Summer and Autumn/Winter seasons but the designs may be updated periodically at other times. Customers may choose from the garments designed by the DCI Group or have garments specifically designed for them. The DCI Group s customers include several large discount retailers. 7

8 The following phases typically take place in DCI Group s design/sale process: 1. DCI designs a range of garments; 2. the designs are sent to the manufacturers (who are predominantly based in China and India) who prepare samples which are returned to the DCI Group and displayed at DCI Group s premises; 3. potential customers meet with the DCI Group and view the samples. Customers then either place orders or discuss alternative designs; 4. following receipt of firm, bulk orders from the customer, the DCI Group places back-to-back orders with the manufacturers; 5. after initial delivery to the DCI Group s premises for inspection and processing, the DCI Group supplies the garments to its customers. Although currently the majority of the DCI Group s turnover comes from its leather business, the DCI Group s directors believe that business opportunities exist by using their sourcing, importing and exporting experience to expand into other areas such as fabric and PVC garments, children s wear and the supply of electrical goods. Directors and Management DCI s executive chairman, Michael Edelson, further details of whom are set out below under Proposed Directors, will join the Board on Admission. PRINCIPAL TERMS OF THE DCI ACQUISITION Under the terms of the DCI Acquisition Agreement, the Company has conditionally agreed to acquire the entire issued share capital of DCI from the DCI Vendors, for a consideration of 5 million to be satisfied by the issue of the Consideration Shares at the Placing Price. The Acquisition Agreement is conditional, inter alia, on Admission. Further details of the DCI Acquisition Agreement are set out in paragraph of Part V of this document. DIRECTORS Simon Larah (aged 30), Managing Director Simon Larah graduated from Salford University with a degree in Finance and Accounting in He then became a registered representative at W. H. Ireland Limited where he worked for four years in investment management. In June 2000 he moved to Israel and was a founder and director of tecc-is PLC, an investment company investing in early stage Israeli companies, where he acted as investment manager until October He was a founder of Excalibur in August Elliot Fidler (aged 34), Finance Director Elliot Fidler qualified as a chartered accountant in 1997 and became a partner in Freedman Frankl & Taylor in 2003, specialising in audit and accountancy work and in the preparation of forensic accountant reports. Elliot is also a director of MCB Advertising Limited, Glass Day Limited and a number of charitable organisations. PROPOSED DIRECTORS Conditional on Admission, Michael Edelson and Anthony Leon will be appointed as executive chairman and non-executive director of the Company, respectively. Michael Edelson (aged 59), Proposed Executive Chairman Michael Edelson s current directorships include being a non-executive director of City Invoice Finance Limited, Hawthorn Holdings plc and Singer & Friedlander AIM3 VCT plc. He is also executive chairman of London & City Credit Corporation Limited. Historically, he has been a director of a number of companies admitted to trading on AIM, including Aerobox plc, Prestbury Group plc, Chelford Group plc, Host Europe plc, Knutsford Group plc, Nadlan plc and has been on the board of Manchester United Football Club Limited since

9 Anthony Leon, DL FCA (aged 66), Proposed Non-Executive Director Anthony Leon qualified as a Chartered Accountant in During a wide ranging professional career, Anthony was Managing Partner of Binder Hamlyn s Manchester office for 15 years and subsequently Senior Partner. He retired from the firm in August 1996 and was Chairman of the Mancunian Community Health NHS Trust until 31 March 2001 and is currently non-executive chairman of Enition plc (previously Walnut Partners plc), Nadlan plc and of Bright Futures Group plc and a non-executive director of Mercury Recycling Group plc and Aerobox plc. He is also a non-executive director of Central Manchester and Manchester Children s University Hospitals NHS Trust and is currently also treasurer of UMIST. His previous directorships include Prestbury Group plc, Media Content plc (previously Wilmslow Group plc) and WI Link plc (previously Knutsford Group plc). The New Board intends to appoint a further non-executive director in the near future. As the Group grows the New Board will review, in conjunction with John East & Partners, the composition of the board of directors to consider, in particular, the appointment of additional nonexecutive directors. Details of the terms of the Directors and Proposed Directors service contracts are summarised in paragraph 6 of Part V of this document. REASONS FOR THE PLACING AND USE OF FUNDS The Directors believe that the future growth of the Enlarged Group will be accelerated through the introduction of additional equity capital and the higher profile associated with being a quoted public company. DETAILS OF THE PLACING The Placing, which is not underwritten, is conditional, inter alia, upon Admission. On behalf of the Company, John East & Partners is conditionally placing a total of 5,090,909 Ordinary Shares at the Placing Price to raise 254,500 before expenses. It is anticipated that the proceeds of the Placing will be utilised to pay the majority of the expenses of the Placing of 283,000 (including VAT). The Placing Shares will represent approximately 1.46 per cent. of the Enlarged Issued Share Capital. The Placing Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares. Details of the Placing Agreement are set out in paragraph of Part V of this document. ORDERLY MARKET ARRANGEMENTS All the members of the New Board have undertaken that they will not (and will procure, insofar as they are able, that any person with whom they are connected will not) dispose of any beneficial interest in Ordinary Shares held by them or their associates for a period of one year from Admission, save in limited circumstances such as a takeover. All the members of the New Board have further undertaken that for a further twelve months they will only dispose of any such Ordinary Shares with the consent of John East & Partners (not to be unreasonably withheld or delayed) and then only through a broker nominated by John East & Partners, save in certain limited circumstances. All other holders of Existing Ordinary Shares have undertaken not to dispose of more than 20 per cent. of any Ordinary Shares in which they have a beneficial interest for a period of one year from Admission and not to dispose of any further Ordinary Shares in which they have a beneficial interest for a further period of one year except with the prior written consent of John East & Partners (not to be unreasonably withheld or delayed) and then on an orderly market basis. These undertakings are all subject to rule 7 of the AIM Rules whereby certain shareholders (consisting of Stay Local Limited and certain employees of the Enlarged Group who, in aggregate, will hold 94,367,783 Ordinary Shares, representing per cent. of the Enlarged Issued Share Capital) will not be able to dispose of any interest in Ordinary Shares held by them or their associates for a period of one year from Admission. 9

10 SHARE OPTIONS AND WARRANTS On 18 May 2004 the Company granted options over 30,600,000 Ordinary Shares at an exercise price of 0.1p per share, including options over 15,300,000 Ordinary Shares to Simon Larah (which will represent 4.4 per cent. of the Enlarged Issued Share Capital). DCI has granted EMI options over an aggregate of 11,378 ordinary shares in DCI to certain employees at an exercise price of 2.81 per share and has granted J H Lyons an option over 11,387 ordinary shares in DCI, at an exercise price of per share. Under the terms of the DCI Acquisition Agreement, the Company has agreed to grant replacement EMI Options over an aggregate of 3,190,690 Ordinary Shares to certain employees of the DCI Group and to enter into a replacement option agreement with JH Lyons over 3,200,000 Ordinary Shares. The grant of these replacement options will be in consideration for the release of the existing options granted by DCI to those employees and JH Lyons over shares in DCI and is intended to assist in the retention and incentivisation of the relevant employees. Details of these replacement options are set out in paragraph 9 of Part V of this document. Furthermore, the Company issued Warrants to subscribe for an aggregate of 13,570,358 Ordinary Shares at par when it issued 118,181,818 Ordinary Shares at par on 18 May Further details of the terms of the Warrants are set out in paragraph of Part V of this document. CORPORATE GOVERNANCE The Board recognises the importance of sound corporate governance and the New Board intends to ensure that, following Admission, the Company adopts policies and procedures which reflect the principles of Good Governance and Code of Best Practice as published by the Committee on Corporate Governance (commonly known as the Combined Code ) as are appropriate to the Company s size on Admission. The Company has established, conditional on Admission, an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities. Until the appointment of an additional non-executive director, each committee will consist of Anthony Leon. The Audit Committee will determine the terms of engagement of the Enlarged Group s auditors and will determine, in consultation with the auditors, the scope of the audit. The Audit Committee will receive and review reports from management and the Enlarged Group s auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Enlarged Group. The Audit Committee will have unrestricted access to the Enlarged Group s auditors. The Remuneration Committee will review the scale and structure of the executive directors and senior employees remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of any nonexecutive directors will be set by the entire board. The New Board intends to comply with Rule 19 of the AIM Rules relating to directors dealings as applicable to AIM companies and will also take all reasonable steps to ensure compliance by the Enlarged Group s applicable employees. DIVIDEND POLICY It is the intention of the New Board to commence the payment of dividends as soon as practicable, bearing in mind the financial resources required for the development of the Enlarged Group, and to pursue a progressive, but prudent, dividend policy thereafter. TAXATION Information regarding taxation in relation to the Proposals and Admission is set out in paragraph 12 of Part V of this document. If you are in any doubt as to your tax position you should consult your own independent financial adviser immediately. 10

11 CREST The Ordinary Shares are eligible for CREST settlement. Accordingly, following Admission settlement of transactions in Existing Ordinary Shares and New Ordinary Shares may take place within the CREST system if the relevant Shareholder so wishes. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates will be able to do so. FURTHER INFORMATION Your attention is drawn to Parts II to V of this document which provide additional information. 11

12 PART II Risk Factors In addition to the other relevant information set out in this document, the following specific factors should be considered carefully when evaluating whether to make an investment in the Company. The investment offered in this document may not be suitable for all of its recipients. Before making an investment decision, prospective investors should consult a person authorised under the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and other securities. A prospective investor should consider carefully whether an investment in the Company is suitable for him/her in the light of his/her personal circumstances and the financial resources available to him/her. There are various risk and other factors associated with an investment of the type described in this document. In particular: Area of Operations Excalibur operates primarily in a part of the world that is subject to economic and political instability. Accordingly, there can be no guarantee that current commercial relationships will continue beyond the short term. Reliance upon Principal Customers The majority of Excalibur s sales and confirmed orders received to date have been with one customer and all have been on an order by order basis. The loss of orders from this customer would have a materially adverse effect on the Enlarged Group s business and future, although enquiries are now being received from a total of three customers. The majority of the DCI Group s sales are made to only two customers and all of the DCI Group s sales are made on an order by order basis. The loss of sales to either of these customers would have a materially adverse effect on the Enlarged Group s business and future. Clothing fashions and trends The business of the DCI Group is primarily that of the supply of leather garments. Should leather garments become unfashionable or otherwise undesirable then this may have a materially adverse effect on the Enlarged Group s business and future. The Company s objectives may not be fulfilled The value of an investment in the Company is dependent upon the Enlarged Group achieving the aims set out in this document. There can be no guarantee that the Enlarged Group will achieve the level of success that the New Board expects. Internal Systems and Controls The Company does not currently have all the internal systems and controls which investors would expect from a larger, more established business. The New Board intends to take steps to ensure that systems and controls (appropriate for a group of the size and of the nature of the Enlarged Group) are adopted and reviewed regularly, as is the composition of the board of directors. Attraction and Retention of Key Employees The Enlarged Group s success will depend on its current and future executive management team. The loss of any of the services of S P Larah, D Larah, J H Lyons and J M Edelson could have a materially adverse effect upon the Enlarged Group s business and future. 12

13 Other directorships Investors should note that none of A J Leon, E R Fidler and J M Edelson are in any way limited (other than by their normal duties as company directors by way of their involvement with the Enlarged Group) from acting in the management or conduct of the affairs of any other company. Should any conflicts of interest be identified, they will be declared to the New Board and dealt with appropriately. Economic, political, judicial, administrative, taxation or other regulatory matters The Enlarged Group may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, as well as other unforeseen matters. Requirement for further funds The existing resources of the Company and the funds raised pursuant to the Acquisition and the Placing may not be sufficient for the future working capital requirements of the Enlarged Group or allow the Enlarged Group to exploit new opportunities. It may therefore be necessary for the Company to raise further funds in the future, which may be by way of issue of further Ordinary Shares on a non preemptive basis. Market information The market price of the Ordinary Shares may not reflect the underlying value of the Enlarged Group s net assets. Potential investors should be aware that the value of shares can rise or fall and that there may not be proper information available for determining the market value of an investment in the Company at all times. An investment in a share which is traded on AIM, such as the Ordinary Shares, may be difficult to realise and carries a high degree of risk. The ability of an investor to sell Ordinary Shares will depend on there being a willing buyer for them at an acceptable price. Consequently, it might be difficult for an investor to realise his/her investment in the Company and he/she may lose all his/her investment. 13

14 Section A: Accountants Report on EXC PART III Financial Information The Directors EXC plc Third Floor 345 Stockport Road Manchester M13 0LF and Horwath Clark Whitehill LLP Chartered Accountants Arkwright House Parsonage Gardens Manchester M3 2HP The Directors John East & Partners Limited Crystal Gate Worship Street London EC2A 2AH 25 June 2004 Dear Sirs EXC plc ( EXC ) We report on the financial information set out in paragraphs 2 to 6 below which has been prepared for inclusion in the Prospectus of EXC issued on 25 June 2004 (the Prospectus ) relating to the acquisition of the whole of the issued share capital of David Conrad Investments Limited, the placing of shares of EXC and admission of the issued share capital of EXC to trading on the AIM Market of the London Stock Exchange plc. 1. INTRODUCTION EXC was incorporated in England and Wales on 25 March 2004 with company number On incorporation EXC had authorised share capital of 5,000,000,000 ordinary shares of 0.1 pence each of which one subscriber share had been issued. On 14 May 2004 EXC issued 107,999,999 ordinary shares of 0.1 pence each at par value in exchange for the entire issued share capital of Excalibur Ventures Limited. On 18 May 2004 EXC issued 118,181,818 ordinary shares of 0.1 pence each at par for cash. The shareholders that subscribed for the ordinary shares were also issued with an aggregate of 13,570,359 warrants pursuant to the terms of a warrant instrument executed by EXC on 18 May Under the terms of this warrant instrument, each warrantholder is entitled to subscribe for 1 ordinary share for each warrant held at par provided that the profits of Excalibur Ventures Limited before interest and tax for the periods 1 April 2004 to 31 December 2005 and 1 January 2006 to 31 December 2006 are at least US$1,000,000 and US$1,500,000 respectively on a cumulative basis. The warrantholders have a period of six months following determination of the relevant profits in which to exercise their warrants. On 10 June 2004 EXC issued 16,727,273 ordinary shares of 0.1 pence each at a price of 1 pence per share for cash. On 16 June 2004, EXC re-registered as a public limited company. Basis of Preparation of Financial Information The financial information set out below is based upon non statutory financial statements prepared by the directors of EXC (the Directors ) for the purpose of this Prospectus and covers the period from incorporation on 25 March 2004 to 16 June

15 Other than the issue of share capital and the acquisition of Excalibur Ventures Limited, EXC has not traded in the period from its incorporation to 16 June 2004 and consequently a profit and loss account is not presented. Responsibility The financial statements which form the basis of the financial information in this report are the responsibility of the Directors and have been approved by them. The Directors are responsible for the contents of the Prospectus in which this report is included. It is our responsibility to compile the financial information set out in this report, to form an opinion on the financial information and to report our opinion to you. Basis of Opinion We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued by the Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgements made by those responsible for the preparation of the financial statements underlying the financial information and whether the accounting policies are appropriate to EXC s circumstances, consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Opinion In our opinion the financial information set out below gives for the purpose of the Prospectus a true and fair view of the state of affairs of EXC as at 16 June 2004, and of its cash flows for the accounting period then ended. Consent We consent to the inclusion in the Prospectus of this report and accept responsibility for the report for the purposes of paragraph 45(8)(b) of Schedule 1 to the Public Offers of Securities Regulations PROFIT AND LOSS ACCOUNTS Other than the acquisition of Excalibur Ventures Limited and issue of share capital EXC has remained dormant since its incorporation. 3. BALANCE SHEET as at 16 June 2004 Notes 000 Fixed assets Investments Current Assets Debtors Cash at bank 168 Net Assets 393 Capital and Reserves Called up share capital Share premium Shareholders Funds

16 4. CASH FLOW STATEMENT for the period from 25 March 2004 to 16 June Acquisitions and disposals Loans advanced to group undertakings (117) Financing Issue of ordinary shares 285 Increase in cash ACCOUNTING POLICIES The principal accounting policies of EXC are set out below:- (a) Basis of accounting The accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards. (b) Investments Investments in subsidiary undertakings are stated at cost unless, in the opinion of the directors, there are indications of impairment, in which case an appropriate adjustment is made. 6. NOTES TO THE FINANCIAL INFORMATION 6.1 Investments 000 Cost At 25 March 2004 Additions in period 108 At 16 June On 14 May 2004 the Company acquired the entire issued share capital of Excalibur Ventures Limited for a consideration of 108,000. The consideration was paid by the issue of 107,999,999 ordinary shares of 0.1 pence each issued at par value. In addition, maximum deferred consideration of 12,401 to be satisfied by the issue and allotment of up to 12,401,220 new ordinary shares credited as fully paid at par is payable if the profits before interest and tax of Excalibur Ventures Limited for the periods from 1 April 2004 to 31 December 2005 and 1 January 2006 to 31 December 2006 are at least US$1,000,000 and US$1,500,000 respectively on a cumulative basis. This report presents information about EXC as an individual undertaking and not on a consolidated basis for its Group. The information has been shown separately to show a clearer presentation of the trading results of Excalibur Ventures Limited. 6.2 Debtors 000 Amounts due from group undertakings

17 6.3 Share Capital 000 Authorised 5,000,000,000 ordinary shares of 0.1p each 5,000 Allotted, called up, and fully paid 242,909,091 ordinary shares of 0.1p each 243 The shareholders that subscribed on 18 May 2004 for 118,181,818 ordinary shares of 0.1 pence each at par value were also issued with an aggregate of 13,570,359 warrants pursuant to the terms of a warrant instrument executed by EXC on 18 May Under the terms of this warrant instrument, each warrantholder is entitled to subscribe for 1 ordinary share for each warrant held at par provided that the profits of Excalibur Ventures Limited before interest and tax for the periods 1 April 2004 to 31 December 2005 and 1 January 2006 to 31 December 2006 are at least US$1,000,000 and US$1,500,000 respectively on a cumulative basis. On 18 May 2004 EXC granted options over 30,600,000 ordinary shares at an exercise price of 0.1 pence per share. 6.4 Share Premium 000 Premium on shares issued in the period Reconciliation of movement in shareholders funds Total 000 Equity shares on incorporation * Issue of shares at par 243 Issue of shares at premium 150 Closing shareholders funds 393 *One ordinary share with a par value of 0.1 pence 6.6 Related Party Transactions Following the acquisition of Excalibur Ventures Limited on 14 May 2004, EXC has made a loan to Excalibur Ventures Limited of 117,000 which was outstanding as at 16 June Subsequently, a further 168,000 was loaned to Excalibur Ventures Limited. Yours faithfully Horwath Clark Whitehill LLP 17

18 Section B: Accountants Report on Excalibur The Directors EXC plc Third Floor 345 Stockport Road Manchester M13 0LF and Horwath Clark Whitehill LLP Chartered Accountants Arkwright House Parsonage Gardens Manchester M3 2HP The Directors John East & Partners Limited Crystal Gate Worship Street London EC2A 2AH 25 June 2004 Dear Sirs Excalibur Ventures Limited ( Excalibur ) We report on the financial information set out in paragraphs 2 to 6 below which has been prepared for inclusion in the Prospectus of EXC plc issued on 25 June 2004 (the Prospectus ) relating to the acquisition by EXC plc of the whole of the issued share capital of David Conrad Investments Limited, the placing of shares by EXC plc and admission of the issued share capital of EXC plc to trading on the AIM Market of the London Stock Exchange plc. 1. INTRODUCTION Excalibur was incorporated in England and Wales on 29 August 2002 with company number On incorporation Excalibur had an authorised share capital of 100 divided into 100 ordinary shares of 1 each. On 29 August 2002 Excalibur issued 1 ordinary share of 1 at par. On 2 September 2003, Excalibur subdivided each authorised and issued ordinary share of 1 each into 1,000 ordinary shares of 0.1 pence and increased the authorised share capital to 150 comprising of 150,000 ordinary shares of 0.1 pence each. On 2 September 2003 Excalibur issued 149,000 ordinary shares of 0.1 pence each at par. Basis of Preparation of Financial Information The financial information set out below is based upon statutory financial statements for the period from incorporation on 29 August 2002 to 31 August 2003 and non statutory financial statements prepared by the directors of Excalibur for the purpose of this Prospectus for the period from 1 September 2003 to 29 February The non statutory financial statements have been prepared in accordance with the accounting policies set out in paragraph 5 below. Excalibur commenced trading during September Excalibur s trading was conducted by a related company under common control, EVI Excalibur Israel Ltd, which acted as trustee for the Israeli branch of Excalibur. At the balance sheet date EVI Excalibur Israel Ltd held certain assets and liabilities on behalf of Excalibur and these have been aggregated with those of Excalibur to ensure the financial information reflects all transactions, assets and liabilities of Excalibur. Responsibility The financial statements which form the basis of the financial information in this report are the responsibility of the directors of Excalibur and have been approved by them. The directors of EXC plc are responsible for the contents of the Prospectus in which this report is included. It is our responsibility to compile the financial information set out in this report, to form an opinion on the financial information and to report our opinion to you. 18

19 Basis of Opinion We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued by the Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgements made by those responsible for the preparation of the financial statements underlying the financial information and whether the accounting policies are appropriate to Excalibur s circumstances, consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by fraud or other irregularity or error. Opinion In our opinion the financial information set out below gives for the purpose of the Prospectus a true and fair view of the state of affairs of the Excalibur as at 31 August 2003 and 29 February 2004 and of its cash flows and losses for the periods then ended. Consent We consent to the inclusion in the Prospectus of this report and accept responsibility for the report for the purposes of paragraph 45(8)(b) of Schedule 1 to the Public Offers of Securities Regulations PROFIT AND LOSS ACCOUNTS Period ended Period ended 31 August February Turnover 258 Cost of sales (180) Gross profit 78 Distribution expenses (1) Administrative expenses (81) Operating loss (4) Interest payable and similar charges (1) Retained loss before and after tax for the period (5) All activities are continuing. The profit and loss account contains all recognised gains and losses arising in the period. 3. BALANCE SHEETS 31 August February 2004 Notes Fixed Assets Tangible fixed assets Current Assets Debtors Cash at bank Creditors: amounts falling due within one year 6.3 (157) Net Current Assets 351 Total Assets less Current Liabilities 360 Creditors: amounts falling due after more than one year 6.4 (365) Net Liabilities (5) Capital and Reserves Called up share capital 6.5 * ** Profit and loss account (5) Shareholders Deficit (5) *Called up share capital comprised 1 ordinary share of 1. **Called up share capital comprised 150,000 ordinary shares of 0.1 pence each 19

20 4. CASH FLOW STATEMENTS Period ended Period ended 31 August February 2004 Notes Net cash out flow from operating activities 6.6 (365) Returns on investment and servicing of finance Interest paid (1) Capital expenditure and financial investment Purchase of tangible fixed assets (34) Financing Debt due within one year: increase in short term borrowings 90 increase in long term borrowings 365 Increase in cash ACCOUNTING POLICIES The principal accounting policies of Excalibur are set out below:- (a) Basis of accounting The accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards. During the period all purchases and expenses were initiated by a related company under common control, EVI Excalibur Israel Ltd, which acted as trustee for the Israeli branch of Excalibur and does not trade independently of Excalibur. At the balance sheet date EVI Excalibur Israel Ltd held certain assets and liabilities on behalf of Excalibur and these have been aggregated with those of Excalibur to ensure the financial information reflects all transactions, assets and liabilities of Excalibur. (b) (c) (d) (e) Turnover Turnover represents the amounts invoiced, excluding value added tax, in respect of the sale of goods. Depreciation Depreciation is calculated to write off the cost less estimated residual value of fixed assets on a straight line basis over their useful lives. The following annual rates have been applied: Plant & Machinery over the period of the initial rental to customers Office equipment 15-33% per annum Foreign currencies Transactions denominated in foreign currency are translated into sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rates ruling at the balance sheet date. All exchange differences are taken to the profit and loss account. Deferred tax Deferred taxation is provided on timing differences, arising from the different treatment of items for accounts and taxation purposes, which are expected to reverse in the future, calculated at rates which it is estimated that tax will arise. 20

21 6. NOTES TO THE FINANCIAL INFORMATION 6.1 Fixed Assets Plant & Office Machinery Equipment Total Cost At 1 September 2003 Additions At 29 February Depreciation At 1 September 2003 Provision for period At 29 February Net Book Value At 29 February At 31 August 2003 Plant and machinery represents assets leased to customers under operating lease arrangements. 6.2 Debtors 31 August February Trade debtors 194 Prepayments and accrued income 225 Social security and other taxes 32 Taxation Creditors: amount falling due within one year 31 August February Bank loans and overdrafts 90 Trade creditors 49 Accrued expenses Creditors: amount falling due after more than one year 31 August February Loan 365 The loan disclosed above relates to monies advanced from a loan agreement dated 24 June 2004 (the Loan Agreement ) between ABIDA Holding and Investments Limited, Sulam Management L.R. Limited and Carstock Limited (together the Lenders ) and Excalibur Ventures Limited or one of its subsidiaries (the Borrower ). Under the terms of the Loan Agreement the Lenders make available to the Borrower a loan facility of US$3,000,000 which shall be reduced to US$2,000,000 on admission of the Borrower s (or the parent undertaking s) shares to the AIM Market for the period to 31 January

22 6.5 Share Capital 31 August February 2004 Authorised 100 ordinary shares of 1 each ,000 ordinary shares of 0.1 pence each Allotted, called up, and fully paid 1 ordinary share of ,000 ordinary shares of 0.1 pence each Reconciliation of operating loss to operating cash flow Period ended Period ended 31 August February Operating loss (4) Depreciation 25 Increase in debtors (453) Increase in creditors 67 Cash outflow from operating activities (365) 6.7 Post Balance Sheet Event On 14 May 2004 the entire issued share capital of Excalibur was acquired by EXC plc. Following the acquisition, loans totalling 285,000 were made by EXC plc to Excalibur. On 31 May 2004 Excalibur incorporated a new subsidiary company to provide logistical support to its trading activity in Israel. On 24 June 2004 Excalibur entered into the loan agreement disclosed in note Related Party Transactions All of Excalibur s purchases and expenses have been incurred on its behalf by a related company incorporated in Israel, EVI Excalibur Israel Ltd. Similarly any assets or liabilities held at the balance sheet date by EVI Excalibur Israel Ltd are deemed to be the property of Excalibur and have been disclosed as such. Yours faithfully Horwath Clark Whitehill LLP 22

23 Section C: Accountants Report on DCI The Directors EXC plc Third Floor 345 Stockport Road Manchester M13 0LF and Horwath Clark Whitehill LLP Chartered Accountants Arkwright House Parsonage Gardens Manchester M3 2HP The Directors John East & Partners Limited Crystal Gate Worship Street London EC2A 2AH 25 June 2004 Dear Sirs David Conrad Investments Limited ( DCI ) We report on the financial information set out in paragraphs 2 to 6 below which has been prepared for inclusion in the Prospectus of EXC plc issued on 25 June 2004 (the Prospectus ) relating to the acquisition by EXC plc of the whole of the issued share capital of DCI, the placing of shares by EXC plc and admission of the issued share capital of EXC plc to trading on the AIM Market of the London Stock Exchange plc. 1. INTRODUCTION DCI was incorporated in England and Wales on 14 November 2000 under the name Divedeep Limited with company number On incorporation the authorised share capital was 1,000 divided into 1,000 ordinary shares of 1 each of which one subscriber share was issued. On 17 January 2001 the name was changed to David Conrad Investments Limited. On 5 February 2001 the authorised share capital was increased to 356,600 divided into 356,600 ordinary shares of 1 each. On 5 February 2001 DCI issued 249,999 shares of 1 each for cash at par value. On the same day a further 106,600 ordinary shares of 1 each were issued at a total value of 475,000 as part of the consideration for the acquisition of the entire issued share capital of David Conrad (International) Limited. The consideration for the acquisition comprised 250,000 in cash together with the issue of 475,000 of shares giving a total consideration of 725,000. Basis of Preparation of Financial Information The financial information relating to DCI set out in paragraphs 2 to 6 below is based on the audited financial statements of DCI from the company s date of incorporation of 14 November 2000 to 31 December 2001 and for the years ended 31 December 2002 and 31 December The financial information does not consolidate the results of DCI with the trading results of David Conrad (International) Limited. The results of David Conrad (International) Limited are reported on separately within Section D, Part III of this Prospectus. The financial information has been prepared on the basis of the accounting policies set out in paragraph 5. Responsibility The financial statements which form the basis of the financial information in this report are the responsibility of the directors of DCI, and have been approved by them. The financial statements of DCI for the two periods ended 31 December 2001 and 31 December 2002 have been audited by Horwath Clark Whitehill, Registered Auditors and Chartered Accountants of Arkwright House, Parsonage Gardens, Manchester M3 2HP. Subsequent to the transfer of substantially all their 23