Re: Inchcape AGM

Guinness Peat Group PLC 9 May 2001 TEXT OF STATEMENT FOR CIRCULATION TO SHAREHOLDERS BY GUINNESS PEAT GROUP plc IN SUPPORT OF ITS RESOLUTIONS FOR THE RETURN OF CASH TO SHAREHOLDERS TO BE PROPOSED AT THE FORTHCOMING ANNUAL GENERAL MEETING OF INCHCAPE plc. 'The Financial Services business, which is a key component of our customer-focused strategy, achieved strong growth in 1999.. ... The recovery in profitability of our Asian business contributed significantly to this growth' ---------- Inchcape 1999 Annual Report 'The sale of IRB is a further example of Inchcape strengthening its balance sheet and refocusing on its core business' ---------- Inchcape announcement, March 2001 The GPG letter of 15 February (a copy of which is included in the notice of AGM, together with Inchcape's reply of 5 March) proposed an immediate return of capital of £1 per share and an asset realization program estimated to produce in excess of £5 per share in total (arguably, considerably in excess of £5). Inchcape's response conceded a limited capital return but did not accept the merit of an orderly realization of assets rather than persisting with the traditional trading structure. Shareholders can make their own judgment on these issues but, in our view, the Inchcape conclusion outlined on Page 13, whilst certainly providing a summary of worthy business principles, is not a practical strategy which addresses the value of assets and their potential returns. Inchcape Motors Ltd in Singapore is stated to be 'one of the cornerstones of our global relationship with Toyota' but the reality is, it is half a world away, with minority shareholders, its own administrative base and a separate Stock Exchange listing (and presumably, a direct relationship with Toyota). Obviously, it should be wholly owned by Inchcape or, more logically, sold to local investors and the proceeds returned to Inchcape shareholders. The Hong Kong operation recorded an excellent performance in Year 2000 and is the 'jewel in the crown' of the Inchcape group. The problem is, however, that the profits are savaged by central costs, taxes and various diversions, such as the £6 million write off in China, before they reach Inchcape's UK shareholders. Once again, a sale of Hong Kong would command a substantial premium from Asian investors. The UK business is clearly 'the weakest link'. The loss of Toyota GB and the imminent exit from Mazda, leaves a large gap which is not easily filled. The danger is their replacement by a ragbag of fringe investments such as Autobytel and the recent rather unappealing acquisition of 49% of Eurofleet. Inchcape is a famous British trading name with a notable history and tradition. It is recognized that an effective liquidation is not an attractive option for Board and management in 2001, and should not be lightly undertaken. Unfortunately, however, we believe the same factors which caused the previous Board and management to quit the worldwide shipping and trading operations apply, with possibly greater force, to the motor industry at the present time. Volume manufacturers are steadily moving closer to the retail customer in order to complement the role of private entrepreneurs more suited to niche and specialist areas. Marketing and geographic diversification now has little or no added value. In the first instance, we commend your support for Resolutions 11 and 12 which provide for a continuation of returning cash to shareholders. Whatever course Inchcape follows in the future, there is no downside in distributing funds which are surplus to normal requirements at the present time.


Coats Group (COA)
UK 100