DTR 7 Annex 1 The related party tests

1. (1)

   The gross assets test is calculated by dividing the gross assets the subject of the transaction by the gross assets of the issuer.

2. (2)

   The “gross assets” of the issuer means the total non-current assets, plus the total current assets, of the issuer.

3. (3)

   For:

   1. (a)

      an acquisition of an interest in an undertaking which will result in consolidation of the assets of that undertaking in the accounts of the issuer; or

   2. (b)

      a disposal of an interest in an undertaking which will result in the assets of that undertaking no longer being consolidated in the accounts of the issuer,

   the “gross assets the subject of the transaction” means the value of 100% of that undertaking’s assets irrespective of what interest is acquired or disposed of.

4. (4)

   For an acquisition or disposal of an interest in an undertaking which does not fall within paragraph (3), the “gross assets the subject of the transaction” means:

   1. (a)

      for an acquisition, the consideration together with liabilities assumed (if any); and

   2. (b)

      for a disposal, the assets attributed to that interest in the issuer’s accounts.

5. (5)

   If there is an acquisition of assets other than an interest in an undertaking, the “assets the subject of the transaction” means the consideration or, if greater, the book value of those assets as they will be included in the issuer’s balance sheet.

6. (6)

   If there is a disposal of assets other than an interest in an undertaking, the assets the subject of the transaction means the book value of the assets in the issuer’s balance sheet.

1. (1)

   The profits test is calculated by dividing the profits attributable to the assets the subject of the transaction by the profits of the issuer.

2. (2)

   For the purposes of paragraph (1), “profits” means:

   1. (a)

      profits after deducting all charges except taxation; and

   2. (b)

      for an acquisition or disposal of an interest in an undertaking referred to in paragraph 2R(3)(a) or (b), 100% of the profits of the undertaking (irrespective of what interest is acquired or disposed of).

3. (3)

   If the acquisition or disposal of the interest will not result in consolidation or deconsolidation of the target then the profits test is not applicable.

1. (1)

   The consideration test is calculated by taking the consideration for the transaction as a percentage of the aggregate market value of all the ordinary shares (excluding treasury shares) of the issuer.

2. (2)

   For the purposes of paragraph (1):

   1. (a)

      the consideration is the amount paid to the contracting party;

   2. (b)

      if all or part of the consideration is in the form of securities to be traded on a market, the consideration attributable to those securities is the aggregate market value of those securities; and

   3. (c)

      if deferred consideration is or may be payable or receivable by the issuer in the future, the consideration is the maximum total consideration payable or receivable under the agreement.

3. (3)

   If the total consideration is not subject to any maximum (and the other related party tests indicate the transaction to be a transaction where all the percentage ratios are less than 5%) the transaction is to be treated as a material related party transaction.

4. (4)

   For the purposes of sub-paragraph (2)(b), the figures used to determine consideration consisting of:

   1. (a)

      securities of a class already admitted to trading, must be the aggregate market value of all those securities on the last business day before the announcement; and

   2. (b)

      a new class of securities for which an application for admission to trading will be made, must be the expected aggregate market value of all those securities.

5. (5)

   For the purposes of paragraph (1), the figure used to determine market capitalisation is the aggregate market value of all the ordinary shares (excluding treasury shares) of the issuer at the close of business on the last business day before the announcement.

1. (1)

   The gross capital test is calculated by dividing the gross capital of the company or business being acquired by the gross capital of the issuer.

2. (2)

   The test in paragraph (1) is only to be applied for an acquisition of a company or business.

3. (3)

   For the purposes of paragraph (1), the “gross capital of the company or business being acquired” means the aggregate of:

   1. (a)

      the consideration (as calculated under paragraph 6R);

   2. (b)

      if a company, any of its shares and debt securities which are not being acquired;

   3. (c)

      all other liabilities (other than current liabilities) including for this purpose minority interests and deferred taxation; and

   4. (d)

      any excess of current liabilities over current assets.

4. (4)

   For the purposes of paragraph (1), the “gross capital of the issuer” means the aggregate of:

   1. (a)

      the market value of its shares (excluding treasury shares) and the issue amount of the debt security;

   2. (b)

      all other liabilities (other than current liabilities), including for this purpose minority interests and deferred taxation; and

   3. (c)

      any excess of current liabilities over current assets.

5. (5)

   For the purposes of paragraph (1):

   1. (a)

      figures used must be, for shares and debt security aggregated for the purposes of the gross capital percentage ratio, the aggregate market value of all those shares (or if not available before the announcement, their nominal value) and the issue amount of the debt security; and

   2. (b)

      for shares and debt security aggregated for the purposes of paragraph (3)(b), any treasury shares held by the company are not to be taken into account.

Figures used to classify assets and profits

1. (1)

   For the purposes of calculating the tests in this Annex, except as otherwise stated in paragraphs (2) to (7), the figures used to classify assets and profits must be the figures shown in the latest published audited consolidated accounts or, if an issuer has, or will have, published a preliminary statement of later annual results at the time the terms of a transaction are agreed, the figures shown in that preliminary statement.

2. (2)

   If a balance sheet has been published in a subsequently published interim statement then gross assets and gross capital should be taken from the balance sheet published in the interim statement.

3. (3)
   1. (a)

      The figures of the issuer must be adjusted to take account of transactions completed during the period to which the figures referred to in (1) or (2) relate, and subsequent completed transactions which the issuer would have been required to notify 2 under LR 10.4 or LR 10.5 if the issuer had a premium listing, provided that for such subsequent completed transactions the figures for the transactions are reasonably available to the issuer.

   2. (b)

      The figures of the target company or business must be adjusted to take account of transactions completed during the period to which the figures referred to in (1) or (2) relate, and subsequent completed transactions which would have been a class 2 transaction or greater for the purposes of the listing rules when classified against the target as a whole, provided that for such subsequent completed transactions the figures for the transactions are reasonably available to the target.

4. (4)

   Figures on which the auditors are unable to report without modification must be disregarded.

5. (5)

   When applying the percentage ratios to an acquisition by a company whose assets consist wholly or predominantly of cash or short-dated securities, the cash and short-dated securities must be excluded in calculating its assets and market capitalisation.

6. (6)

   The principles in this paragraph also apply (to the extent relevant) to calculating the assets and profits of the target company or business.

Paragraph 14R applies to an issuer where the calculation under the profits test produces a percentage ratio of 5% or more and this result is anomalous.

An issuer may, where each of the other applicable percentage ratios are less than 5%, disregard the profits test for the purposes of classifying the transaction.