Rugby Estates plc ("Rugby Estates" or the "Company")

Proposed Return of Cash to Shareholders

15 July 2010

1.      Introduction

During the financial year ended 31 January 2010, and following a strategic review of its business, the Company returned a total of approximately £14.7 million to Shareholders by way of B and C share schemes. The Group's strategy continues to be to concentrate on its asset management business and to realise its portfolio of directly-owned properties. Subject to retaining sufficient resources for the needs of the asset management business, the Company intends to return surplus funds to Shareholders as and when significant realisations are made. On 28 June 2010 and 1 July 2010, the Company announced further progress in the Group's property disposal programme with £15.8 million of properties sold since 31 January 2010. Accordingly, the Company intends to make a further return of cash of 175 pence per share to Shareholders pursuant to the Proposals. Full details of the Proposals are set out in a Circular which is being posted to Shareholders today and are summarised below. Terms used in this announcement have the meaning set out in Appendix 1 below.

The Proposals involve the issue to Shareholders of B Shares and/or C Shares which is intended to give Shareholders, where eligible under their prevailing tax regime (such as in the UK), the flexibility to receive a return of cash from the Company as capital or income for tax purposes, or a combination of the two. The Directors believe the Proposals represent the most efficient and effective way to return cash to Shareholders.

The Proposals require the approval of Shareholders, which will be sought at a General Meeting to be held at 4 Farm Street, Mayfair, London W1J 5RD at 10.00 a.m. on 30 July 2010. The notice of the General Meeting is set out in the Circular being sent to Shareholders. The Reduction of Capital included in the Proposals is also subject to the confirmation of the Court.

It is intended that the market price of the Company's ordinary shares should remain approximately similar before and after the return of cash, subject to market movements, and consequently the Proposals (through the Share Capital Consolidation) will reduce the number of such ordinary shares in issue to reflect the return of cash to Shareholders. For every 15 Existing Ordinary Shares held at the Record Time, Shareholders will receive 7 New Ordinary Shares. The New Ordinary Shares will be traded on AIM in the same way as Existing Ordinary Shares and will be equivalent in all material respects to the Existing Ordinary Shares, including as to their dividend and voting rights.

In addition, the Board will be seeking Shareholder approval at the General Meeting of resolutions to renew the Company's authority to make market purchases of shares and to renew the Directors' authority to allot shares pursuant to section 551 of the Act and to disapply section 561 of the Act, in each case to take account of the Reduction of Capital and the Share Capital Consolidation.

2.         Summary of the Proposals

The implementation of the Proposals involves a number of steps, which are all subject to approval of Shareholders at the General Meeting.

·     Each Existing Ordinary Share in issue on the Share Split Record Date will be sub-divided into one ordinary share of 7 pence together with either (at the election of Shareholders) one B Share or (at the election of Shareholders) one C Share. The B Shares will entitle their holders to receive the Capital Repayment of 175 pence per B Share and the C Shares will entitle their holders to receive the Special Dividend of 175 pence per C Share.

·     Shareholders will receive C Shares unless they elect for B Shares.

·     Following the Share Split, and subject to the confirmation of the Court, the Company will seek to reorganise its share capital to return 175 pence per B Share to the holders of such shares.

·     The Company will then cancel the B Shares and the C Shares.

·     The Proposals to implement the above involve the reduction of the Company's share capital in order to (i) create the additional distributable reserves (if any) required to fund the Special Dividend and (ii) create a reserve in order to fund the Capital Repayment. In addition, depending on the amount of distributable reserves required to pay the Special Dividend to Shareholders who elect (or are deemed to have elected) for the Dividend Alternative, a further reduction of the Company's share premium account is being proposed to create additional distributable reserves such that after completion of the Proposals, the Company will have distributable reserves of not less than £2 million. This further reduction of capital (if required) will reduce the probability of the Company showing a retained loss at the end of the current financial year.

·     The Court will require to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the Reduction of Capital. The Company will put into place such form of creditor protection (if any) as the Court may require.

·     Following the Reduction of Capital becoming effective, the ordinary share capital will be sub-divided and consolidated on the basis of 7 New Ordinary Shares for every 15 Existing Ordinary Shares held at the Record Time. The Share Capital Consolidation is intended to maintain comparability of the Company's future and historic share price.

·     New Ordinary Shares will be traded on AIM in the same way as Existing Ordinary Shares and will be equivalent in all other respects to the Existing Ordinary Shares.

·     In the event that the Court does not confirm the Reduction of Capital, or the Reduction of Capital is otherwise not implemented by the Long-Stop Date, the share capital of the Company will be reorganised so as to leave the Company's share capital in its current position and Shareholders holding their current numbers of Existing Ordinary Shares.

Further details of the steps required to implement the Proposals are set out in the Circular to Shareholders.

3.         The Return of Cash

The Proposals will return 175 pence per Existing Ordinary Share to Shareholders. Under the Proposals, Shareholders will receive, in respect of their holding of Existing Ordinary Shares at the Record Time:

·     1 B Share or 1 C Share (as they may elect) for every 1 Existing Ordinary Share; and

·     7 New Ordinary Shares for every 15 Existing Ordinary Shares.

Shareholders will be able to elect between the following Alternatives as to how they receive their cash:

·     the Capital Alternative in respect of the B Shares (cash expected to be sent by 2 September 2010); and/or

·     the Dividend Alternative in respect of the C Shares (cash expected to be sent by 2 September 2010).

Shareholders may split the aggregate amount to be returned to them between the Alternatives. The Alternatives and the Share Capital Consolidation are described more fully below.

4.         The Alternatives

The Alternatives available to Shareholders are summarised below and explained in further detail in Part 5 of the Circular. Shareholders may split the aggregate amount to be returned to them between the Alternatives.

Shareholders who do not make a valid election will be deemed to have elected for the Dividend Alternative in respect of ALL of their Share Entitlement.

The general guidance on the UK tax treatment included below is only a summary, is based on current UK law and practice as at the date of the Circular and applies only to Shareholders who are resident and, if they are individuals, ordinarily resident in the UK for tax purposes and who hold their Existing Ordinary Shares, B Shares and/or C Shares beneficially as investments and not on trading account. UK tax resident Shareholders should read Part 7 of the Circular as the Alternatives will have different UK tax consequences. 

Shareholders who require further information or who are in any doubt as to their tax position, or are subject to tax in a jurisdiction other than the United Kingdom, should consult an appropriate professional adviser without delay.

•           Alternative 1 - Capital Alternative (B Shares)

Shareholders who elect for the Capital Alternative in respect of some or all of their Share Entitlement will receive one B Share for each corresponding Existing Ordinary Share they hold at the Record Time.

It is expected that the B Shares will be cancelled pursuant to the Reduction of Capital by 19 August 2010 and that the Capital Repayment of 175 pence will be made in respect of each cancelled B Share. Proceeds will be sent to Shareholders by 2 September 2010.

The amounts received under the Capital Alternative should generally be taxed as capital for UK tax purposes. UK tax resident Shareholders should read Part 7 of the Circular for further information.

The attention of Non-United Kingdom Shareholders is drawn to paragraph 6 of Part 5 of the Circular.

•           Alternative 2 - Dividend Alternative (C Shares)

Shareholders who elect or are deemed to have elected for the Dividend Alternative in respect of some or all of their Share Entitlement will receive one C Share for each corresponding Existing Ordinary Share they hold at the Record Time. A Special Dividend of 175 pence will become payable on each such C Share by 19 August 2010 and we expect to send the Special Dividend to such Shareholders by 2 September 2010. C Shares will be cancelled following declaration of the Special Dividend pursuant to the Reduction of Capital.

The amounts received under the Dividend Alternative should generally be taxed as income for UK tax purposes. UK tax resident Shareholders should read Part 7 of the Circular for further information.

The attention of Non-United Kingdom Shareholders is drawn to paragraph 6 of Part 5 of the Circular.

Details of how to complete and return an Election Form are set out in Part 4 of the Circular. Shareholders electing through CREST should refer to paragraph 2 of Part 4 of the Circular for further information.

Shareholders wishing to receive the Special Dividend in respect of all of their Share Entitlement need NOT complete or return the Election Form or make an election through CREST as C Shares will be issued and the Special Dividend paid automatically in respect of all of the Share Entitlement in relation to which a Shareholder has not elected for either of the Alternatives.

5.         The Share Capital Consolidation

The return of cash proposed to be made pursuant to the Proposals represents approximately 52.6 per cent. of the Company's market capitalisation as at 14 July 2010, based on the Closing Price of 332.5 pence per Existing Ordinary Share on that date. The Share Capital Consolidation will reduce the number of the Company's ordinary shares in issue by approximately the same percentage as the return of cash bears to the market capitalisation of the Company.

For every 15 Existing Ordinary Shares held at the Record Time, Shareholders will receive 7 New Ordinary Shares. The intention is that, subject to market movements, the market price per New Ordinary Share immediately after Admission should be approximately similar to the market price per Existing Ordinary Share immediately prior to the Proposals whilst the market capitalisation will reflect the return of cash pursuant to the Proposals.

The New Ordinary Shares will be traded on the London Stock Exchange in the same way as the Existing Ordinary Shares and will be equivalent in all material respects to the Existing Ordinary Shares, including as to their dividend rights. Application will be made for the New Ordinary Shares to be admitted to trading on AIM and Admission is expected to take effect at 8.00 a.m. on 19 August 2010. It is expected that share certificates representing the New Ordinary Shares will be sent to Shareholders who hold their Existing Ordinary Shares in certificated form by 2 September 2010. The CREST accounts of Shareholders who hold their Existing Ordinary Shares in CREST are expected to be credited with New Ordinary Shares at approximately 8.00 a.m. on 19 August 2010.

Further information on the Share Capital Consolidation, and any fractional entitlements to New Ordinary Shares that may result, is set out in paragraph 3 of Part 5 of the Circular.

6.         All Employee Share Ownership Plan

The trustees of the All Employee Share Ownership Plan will send letters to participants in that plan asking them how they wish the trustees to act in relation to Existing Ordinary Shares held on their behalf under the plan in respect of the Proposals.

7.         Proposed amendments to the Articles of Association

A number of amendments to the Articles of Association are required to implement the Proposals and require approval at the General Meeting. The proposed amendments relate to the rights and restrictions attaching to the B Shares and C Shares and certain consequential amendments to the Articles of Association. The changes are summarised in paragraph 8 of Part 5 and Part 6 of the Circular.

8.         Action to be taken

A Form of Proxy for use in connection with the General Meeting is enclosed with the Circular. Whether or not Shareholders intend to be present at the General Meeting, they are requested to complete and sign the accompanying Form of Proxy and return it, in accordance with the instructions printed on it, by post or (during normal business hours) by hand to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6ZL to arrive as soon as possible and, in any event, by no later than 10.00 a.m. on 28 July 2010. Shareholders who hold their Existing Ordinary Shares in CREST may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti so that it is received by no later than 10.00 a.m. on 28 July 2010.

The return of a completed Form of Proxy or CREST Proxy Instruction will not prevent a Shareholder from attending the General Meeting and voting in person (in substitution for their proxy vote) should they wish to do so and are so entitled.

An Election Form for use by Shareholders (with the exception of Shareholders who hold their Existing Ordinary Shares in CREST) in connection with the Alternatives is enclosed with the Circular. To be valid, Election Forms must be validly completed and returned in the prepaid envelope provided so as to be received by Equiniti by no later than 11.00 a.m. on 17 August 2010. If Shareholders do not use the envelope provided, the Election Form should either be:

1.         sent by post to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA and postage will (where applicable) be payable; or

2.         delivered by hand only (during normal business hours) to Equiniti, Holm Oak, Holm Oak Business Park, Woods Way, Goring-by-Sea, Worthing, West Sussex BN12 4FE.

Full details on how to complete and return the Election Form are set out in Part 4 of the Circular.

Shareholders who hold their Existing Ordinary Shares in CREST will not be sent the Election Form and may only elect in respect of the Alternatives through CREST. Please see paragraph 2 of Part 4 of the Circular for further information.

9.         Recommendation

The Board believes the Proposals to be in the best interests of Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings, amounting in aggregate to 1,560,895 Existing Ordinary Shares representing approximately 14.0 per cent of the current issued share capital of Rugby Estates Plc. In addition, the executive Directors have been advised that Rugby Estates Plc Retirement Benefits Scheme will vote a minimum of 402,623 Existing Ordinary Shares, representing approximately 3.5 per cent of the current issued share capital of Rugby Estates Plc, in favour of the Resolutions.

A summary explanation of the Resolutions relating to the Proposals is set out in paragraph 9 of Part 5 of the Circular.

10.       Expected timetable of key events

Notes:

1.         References to times in the Circular are to London times. If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders by an announcement on a Regulatory Information Service.

2.         All events in the above timetable following the holding of the General Meeting are conditional on (i) the passing of Resolution 1 and (ii) Admission.

11.       Circular to Shareholders

The Circular is being posted to Shareholders today and will be available later today on the Company's website, www.rugbyestates.plc.uk.

Enquiries:

Appendix 1

Definitions

The following definitions apply throughout this announcement unless the context

otherwise requires:

The following definitions apply throughout the Circular and the accompanying documents including the Form of Proxy and the Election Form, unless the context otherwise requires: