The shareholders of United Docks are being charmed by a company called Horus Ltee a new shareholder with 18.27% of the company, with claims that they will bring greater value to the shareholders than the current management, should they be voted onto the board of United Docks Ltd at the forthcoming special general assembly on the 17th of October 2006. As independent investment advisers, we wish to bring into context the offers and promises being made by Horus Ltee to the current and prospective shareholders of United Docks Ltd.

United Docks has three major assets:

22 acres of land around the port area

12.5% effective holding of Harel Mallac Ltd

12% of Societe du Port

The fair value of these assets in the last published accounts was Rs1.3 billion. Horus is claiming that they can add enormous shareholder value if they are given the management of the company.

What are the options available to release value in the company?

Sell the land (last official valuation Rs1 billion)

Sell the investments (Rs300 million)

Develop the land

Make more lucrative investments than those currently held.

Assuming that Horus’ intentions are to sell the land owned by the company we could justifiably expect the shares to be worth around Rs100 each from the proceeds received. They claimed in a recent press article that they estimated the land to be worth around Rs 2.2 billion, equal to Rs209.50 per share. In doing so, they are in effect casting doubts on the directors, the auditors and the professional land valuers’ integrity. But more importantly, they are telling us that our shares are worth a lot more, because the land forming part of United Docks’ assets is grossly under valued and if they were voted onto the board they would release this value.

Let’s look at this problem another way and assume they are telling us the truth. If we were land developers looking to the Docks land to do a project, we would need to buy this land at a price that would make our project commercially viable. Clearly, Horus’ valuation of Rs100 million per acre on average, does not add up commercially and we fail to see who would possibly want to pay for land at these prices. The next asset United Docks owns is an indirect stake in Harel Mallac. This investment is subject to a preemptive clause allowing either shareholder the right to repurchase control of the société should management change drastically. As this investment was only recently made, we see no great value to be released here.

The only other substantial investment remaining in the portfolio is Société Du Port and here again the value stated seems very generous given that it has been loss making for quite a few years. Why then would they want to take control of United Dock’s board and how will they bring value to shareholders? The only way therefore, to increase shareholder value is in the land assets. If the land is so valuable and seemingly easy to sell at Horus’ valuation, why then did they not make a formal takeover bid to all shareholders at Rs 128, the last quoted price, at the time they purchased 18.27%?

In summary we have before us two choices. On one hand a promise of better management, greater transparency, better returns, more valuable assets and a dynamic independent board.On the other hand, we have an experienced board, a major land development project, realistic values for its land, stable income distributions and an interesting partnership with Harel Mallac. The morale of the story…. A bird in the hand is always better than two in the bush and the grass is rarely greener on the other side!

V. T. (</B><I>shareholder)</I>