Investor News

13 April 2006

Avecia 16% PIK Preference Shares

On 3rd January 2006, Avecia Group PLC (“the Company”) issued an investor release informing its preference shareholders that it would not be possible for the Company to pay the fixed preference share dividend of US$2.00 per share relating to the six month period ended 31st December 2005 because it did not have sufficient distributable reserves for this purpose, as required under section 263 of the UK Companies Act 1985. It was also confirmed that, as a result, the dividend rate on the preference shares would be increased to 18% per annum from 1st January 2006 until the dividend was paid in full.

Since that date, the Company has repaid in full all its outstanding indebtedness arising under its 11% Senior Notes (“the Bonds”) and has been considering how to facilitate the future payment of dividends on the preference shares in the light of its distributable reserves position. The Company has concluded that it should undertake a capital restructuring to reduce its ordinary share capital and thereby provide distributable reserves on its balance sheet in order both to facilitate the payment of the outstanding dividend and make some provision for future dividend and possible capital repayments to preference shareholders.

The Company therefore proposes shortly to call an extraordinary general meeting of its ordinary shareholders to consider and, if thought fit, approve a resolution reducing the ordinary share capital of the Company. If approved by the meeting, the reduction in ordinary share capital will also require sanction by the UK Companies Court before it can become effective. The Company has arranged a provisional court hearing for this purpose in mid-May 2006 and, as the Company no longer has external creditors following repayment of the Bonds, anticipates that court sanction is likely to be secured. Subject to this process being successfully completed therefore, the Company would expect to be in a position to pay its outstanding preference share dividend as soon as practicable thereafter.

The Company wishes to emphasise that the proposed reduction in its share capital applies only to its ordinary shares and does not affect its preference shares in any way. In accordance with the Company's Articles of Association (or by-laws) therefore, the general meeting of the Company, which is likely to be held before the end of April 2006, will be a meeting at which only holders of the Company's ordinary shares are entitled to attend and vote. The Company's ordinary shareholders are its immediate parent companies, Avecia Finance PLC and Avecia Holdings PLC, and are presently expected by the Company to be supportive of the proposed reduction in ordinary share capital in order to address the impediment to paying dividends or capital in relation to the preference shares arising from the lack of current distributable reserves.

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