ADVFN Regulatory News (AFN)

ADVFN PLC

4 August 2014

ADVFN Plc ("ADVFN" or the "Company")

Share Capital Reorganisation

Authority for the purchase of Ordinary Shares by the Company

and

Notice of General Meeting

ADVFN announces that it is today posting an explanatory circular (the "Circular") to the shareholders of the Company incorporating formal notice of a general meeting (the "General Meeting") to seek the approval of Shareholders for a proposed reorganisation of the Company's share capital (the "Share Capital Reorganisation") comprising a Court approved reduction of share capital ("Share Capital Reduction") and share capital consolidation ("Share Consolidation"), together with a proposal for the Company to make market purchases of its Ordinary Shares.

The Circular together with the Notice of General Meeting will shortly be made available on the Company's website at www.advfn.com

Highlights

· The Company proposes to carry out a reorganisation of the Company's share capital and to create distributable reserves in order to support the Company's ability to effect market purchases of the Company's Ordinary Shares for the purpose of meeting anticipated demand for those shares under an American Depositary Receipt Programme established by the Company in 2007.

· The Board believes that there is now significant demand from potential investors in the US to acquire ADRs under the ADR Programme. Under the ADR Programme, Bank of New York Mellon has been appointed to act as the Depositary and is responsible for issuing ADRs in the form of certificates representing the Company's underlying Ordinary Shares

· To avoid diluting Shareholders' holdings of Ordinary Shares, the Board propose to effect a Share Buyback of the Company's Ordinary Shares which will then be transferred to the Depositary, as and when required under the ADR Programme, to enable it to issue the corresponding number of ADRs to US investors

· As the Company currently has significant retained accumulated losses, it will be necessary for the Company to effect a Share Capital Reduction in order to restructure the Company's balance sheet so as, subject to the protection of creditors, to create distributable reserves from which the Company can fund any purchases of Ordinary Shares pursuant to the Share Buyback. The Share Capital Reduction will be Court approved and, therefore, require the consent of the Court.

· The Share Capital Reduction will comprise:

(a) a reduction in the Company's paid up share capital;

(b) the cancellation of the amount standing to the credit of the Company's share premium account;

(c) the cancellation of the Share Capital Reduction Shares created by the capitalisation of the amount standing to the credit of the Company's share based payment reserve;

(d) the cancellation of the Share Capital Reduction Shares created by the capitalisation of the amount standing to the credit of the Company's merger reserve

· It is also proposed that the Company effects a Share Consolidation as part of the Share Capital Reorganisation, in order to increase the marketability of the ADRs and the Ordinary Shares by creating a higher trading price of both of those securities. It is proposed that the Share Consolidation will be implemented on the basis of 1 New Ordinary Share for every 25 Existing Ordinary Shares held by Shareholders on the Share Consolidation Record Date

· The Board believes that the Share Capital Reorganisation and Share Buyback are in the best interests of Shareholders and would promote the success of the Company for the benefit of its members as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting

* This date is subject to any changes which may be imposed by the Court.

** This date will depend on, amongst other things, the date on which the Court confirms the Share Capital Reduction.

Enquiries

Contacts:

Clem Chambers clemc@advfn.com

Salmaan Khawaja 0207 383 5100

Grant Thornton UK LLP (Nominated Adviser)

1. Introduction

The Board is proposing to carry out a reorganisation of the Company's share capital and to increase its distributable reserves, in order to support the Company's ability to effect market purchases of the Company's Ordinary Shares for the purpose of meeting anticipated demand for those shares under an American Depositary Receipt Programme established by the Company in 2007.

The Board believes that there is now significant demand from potential investors in the US to acquire ADRs under the ADR Programme. Under the ADR Programme, Bank of New York Mellon has been appointed to act as the Depositary and is responsible for issuing ADRs in the form of certificates representing the Company's underlying Ordinary Shares. Accordingly, for the purpose of fulfilling the anticipated demand for the ADRs, the Company will need to supply a corresponding amount of Ordinary Shares (based on the pre-determined ratio of ADRs to Ordinary Shares) to the Depositary under the ADR Programme, either through the transfer or issue to it of the relevant number of Ordinary Shares. So as to avoid diluting Shareholders' holdings of Ordinary Shares, the Board propose to effect a Share Buyback of the Company's Ordinary Shares which will then be transferred to the Depositary, as and when required under the ADR Programme, to enable it to issue the corresponding number of ADRs to US investors.

As the Company currently has significant retained accumulated losses, it will be necessary for the Company to effect a Share Capital Reduction in order to restructure the Company's balance sheet so as, subject to the protection of creditors, to increase the amount of distributable reserves from which the Company can fund any purchases of Ordinary Shares pursuant to the Share Buyback. It is also proposed that the Company effects a Share Consolidation as part of the Share Capital Reorganisation, in order to increase the marketability of the ADRs and the Ordinary Shares by creating a higher trading price of both of those securities. It is proposed that the Share Consolidation will be implemented on the basis of 1 New Ordinary Share for every 25 Existing Ordinary Shares held by Shareholders on the Share Consolidation Record Date.

Accordingly, Shareholder approval is being sought to:

(a) approve a Share Consolidation of the Company's ordinary share capital to be made on the basis of Shareholders exchanging every 25 Existing Ordinary Shares they hold on the Share Consolidation Record Date for 1 New Ordinary Share;

(b) approve a Share Capital Reduction to be carried out by way of:

(i) a reduction of the Company's paid up share capital;

(ii) the cancellation of the amount standing to the credit of the Company's share premium account;

(iii) the cancellation of the Share Capital Reduction Shares created by the capitalisation of the amount standing to the credit of the Company's share based payment reserve;

(iv) the cancellation Share Capital Reduction Shares created by the capitalisation of the amount standing to the credit of the Company's merger reserve; and

(c) authorise the Company to make market purchases of Ordinary Shares of the Company.

The Share Consolidation, Share Capital Reduction and Share Buyback are each conditional upon, amongst other things, the Company obtaining appropriate Shareholder approval at the General Meeting.

The purpose of the Circular is to provide you with information about the background to, and the reasons for, the Share Capital Reorganisation and the request for the Share Buy Back Authority, to explain why the Board considers the Share Capital Reorganisation and the request for the Share Buy Back Authority to be in the best interests of the Company and its Shareholders as a whole and why the Board unanimously recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of the Circular. Shareholders should note that, unless the Resolutions are approved at the General Meeting (and the Court confirms the Share Capital Reduction), the Share Buyback and the Share Capital Reduction will not take place.

2. Background to, and reasons for, the Share Capital Reorganisation

The Company was incorporated on 24 April 1989 and its Ordinary Shares were admitted to trading on AIM on 20 March 2000. The Company is engaged in the development and provision of financial information, primarily through the internet, research services and the development and exploitation of ancillary internet sites.

As was announced on 10 March 2014 in the interim results for the six months ended 31 December 2013, the Company made a strong start to the year with the Company's sales up 10 per cent. on the first half of the previous year and a similar percentage on the preceding 6 month period. This improving performance fed through to the Company's cash position, which was reported to be materially ahead of the same time last year. It was also reported that the Company's operating loss and pre-tax losses had fallen materially relative to the comparative period last year and that the Board were optimistic that this trend would continue. I am pleased to report that these trends have continued and that the Company's turnover, cash position and operating and pre-tax losses have all improved in line with those expectations.

Performance has been strong in the first half of the calendar year 2014 with a rise in online traffic of over 25 per cent. relative to the end of the calendar year 2013, which is translating directly into increased subscription levels. This growth is being felt in our key markets, the UK and US, with our American online traffic being the main driver.

ADVFN owns a website operating under the name "Investorhub", which is used by one of the largest stock trading communities in the United States. According to a report prepared by comScore, Inc. (a U.S. market research and analytics company) in April 2014, Investorhub was the 9th largest Business/Finance, News/Research site in the United States. To put this in perspective, Forbes Digital was ranked as 8th largest, Reuters at 11th, Google Finance at 12th and Merrill Lynch at 13th. As such, ADVFN has significant exposure and a large and growing audience in the US, which according to Google analytics was over 2 million people in June of this year alone. The Board therefore believes that there is a large potential investor base for ADVFN's securities in the United States.

As announced on 24 April 2007, the Company established a Level 1 American Depositary Receipt Programme with the ADRs issued to potential US investors under the programme traded on the Pink Sheets of the US over-the-counter market. Bank of New York Mellon was appointed as the Depositary under the ADR Programme. On 2 April 2009, the Company announced that the ADRs had begun trading on the Pink Sheets under the ticker "AVFCY", with each ADR representing 100 Existing Ordinary Shares already held by the Depositary and with Capital Path Securities LLC acting as the filing market maker. On 2 July 2014, the Company's ticker was changed from "AVFCY" to "IHUBY".

The Company's existing ADRs are listed on a low level over the counter (OTC) market tier with little reporting and limited visibility. At present, only 4,000 ADRs have been issued with each ADR representing 100 Existing Ordinary Shares. Accordingly, the ADR Programme has had very little profile to-date. The Board has therefore elected to upgrade its listing of ADRs to the top tier OTCQX market, which represents the top tier of OTC markets and to appoint a U.S. investment bank, commission research and have "blue sky" clearance (which regulates the offering and sale of securities to protect the public from fraud) enabling brokers to discuss the Company's securities with potential investors. It is anticipated that this will enable the Company to access US investors, including the Company's online user base with a strong message about the Company and its securities. The change in status of the ADR Programme to a Level 1 programme will require the Company to comply with certain additional U.S. securities law requirements regarding the accuracy of documents affecting the market for the ADRs (such as press releases or annual or interim reports) and there are certain associated liabilities that would be imposed on the Company if those standards were not met. However, as the Company is already under similar obligations in respect of the preparation of such documents as a UK and AIM quoted company, the Board is confident that these additional requirements would not result in much of an additional burden being placed upon the Company.

The Board believes that the U.S. has an appetite for internet media plays like ADVFN. It is therefore expected that demand in the U.S. for ADRs should enhance the Company's price performance, as well as increase its profile. The ADR Programme will be facilitated from effecting Share Buybacks in the United Kingdom, in order to provide liquidity for US demand. The Board believes this should provide positive price tension for the Company's quotation on AIM.

In order to satisfy demand for the ADRs in the US, it is necessary for the Company to issue or transfer a corresponding number of Ordinary Sharesto the Depositary in respect of which certificates representing those shares (in the form of ADRs) are issued to the relevant U.S. investors. The Board is keen to ensure that existing Shareholders are not substantially diluted as a result of the anticipated demand arising under the ADR Programme. Accordingly, the Board is keen to satisfy this demand as far as possible by the Company purchasing Ordinary Shares in the market and holding them in treasury for onward transfer to the Depositary as and when required to enable it to satisfy demand and issue the corresponding number of ADRs to US investors. However, the Board may elect to issue new Ordinary Shares from time to time in order to satisfy demand for ADRs instead of or in addition to transferring Ordinary Shares held in treasury pursuant to the exercise of the Share Buyback Authority.

As at 31 December 2013, the Company had significant retained accumulated losses of £10,902,609. Accordingly, the Board proposes to effect the Share Capital Reduction and thereby create distributable reserves in order to fund the purchase of the Ordinary Shares pursuant to the Share Buyback Authority. The Board also intends to increase the marketability of the ADRs by increasing the trading price of each ADR and Ordinary Share through a Share Consolidation. This will be implemented on the basis of 1 New Ordinary Share being issued for every 25 Existing Ordinary Shares held by Shareholders on the Record Date and will thereby reduce the number of shares in issue. The Company will limit the percentage of Ordinary Shares represented by the ADRs to no more than 25% of the total issued share capital (including the 4,000 ADRs already in issue as at the date of this announcement).

As a result of the Share Capital Reduction, any distributable reserves and future profits of the Company earned after the Effective Date on which the Share Capital Reduction takes place would be available for the Directors to use for the purposes of buying back Ordinary Shares of the Company and/or paying dividends (should the circumstances in the future make it desirable to do so). However, the principal objective of the Share Capital Reduction is to assist the ADR Programme and there are no plans to pay any dividends at the present time.

3. Share Consolidation

As at 31 July 2014, the Company had 630,505,244 Existing Ordinary Shares in issue, with each Existing Ordinary Share having a mid-market price at the close of business on such date of 2.95 pence (as derived from AIM Appendix to the Daily Official List). The Board believes that the Share Consolidation is necessary in order to increase the marketability of the ADRs and the Ordinary Shares through the creation of a higher price per ADR and Ordinary Share.

The Board is therefore of the view that it would benefit the Company and its Shareholders to reduce the number of Existing Ordinary Shares in issue (with a resulting adjustment in the market price of such shares) by consolidating the Existing Ordinary Shares on the basis of 1 New Ordinary Share for every 25 Existing Ordinary Shares.

Upon implementation of the Share Consolidation, Shareholders on the register of members of the Company on the Share Consolidation Record Date, which is expected to be 6:00 p.m. on 20 August 2014, will exchange every 25 Existing Ordinary Shares they hold for 1 New Ordinary Share. The proportion of the issued Ordinary Share capital of the Company held by each Shareholder following the Share Consolidation will, save for fractional entitlements and the issue of Ordinary Shares pursuant to the exercise of any outstanding options granted by the Company, be unchanged.

To effect the Share Consolidation it is likely to be necessary to issue a minimal number of additional Ordinary Shares (which is anticipated to be 6 additional Ordinary Shares) prior to the Share Consolidation Record Date so that the aggregate nominal value of the Ordinary Share capital of the Company is exactly divisible by 25.

No Shareholder will be entitled to a fraction of a New Ordinary Share and where, as a result of the consolidation of Existing Ordinary Shares described above, any Shareholder would otherwise be entitled to a fraction of a New Ordinary Share in respect of their holding of Existing Ordinary Shares at the Share Consolidation Record Date (a "Fractional Shareholder"), such fractions shall be aggregated with the fractions of New Ordinary Shares to which other Shareholders of the Company may be entitled so as to form full New Ordinary Shares and sold in the market. The proceeds arising from the sale of New Ordinary Shares formed by the aggregation of fractions of New Ordinary Shares will be retained for the benefit of the Company in accordance with the relevant Resolution. Other than the change in nominal value, the New Ordinary Shares arising on implementation of the Share Consolidation will have the same rights as the Existing Ordinary Shares, including in respect of voting rights, entitlement to dividends and other rights. Further (and ignoring the effect of fractional entitlements), although the Share Consolidation will reduce the number of Ordinary Shares held by each Shareholder by a factor of 25, the Share Consolidation should not, by itself, affect the market value of their shareholding.

If you hold a share certificate in respect of your Existing Ordinary Shares in the Company, your certificate will no longer be valid from the time that the proposed Share Consolidation becomes effective. If you hold more than 25 Existing Ordinary Shares on the Share Consolidation Record Date, you will be sent a new share certificate evidencing the New Ordinary Shares to which you are entitled under the Share Consolidation.

Such certificates are expected to be despatched by no later than 28 August 2014. Upon receipt of the new certificate, you should destroy any old certificates. Pending the despatch of the new certificates, transfers of certificated New Ordinary Shares will be certified against the Company's share register.

If you hold your Existing Ordinary Shares in uncertificated form, you should expect to have your CREST account credited with the New Ordinary Shares to which you are entitled under the Share Consolidation on 21 August 2014, or as soon as practicable after the Share Consolidation becomes effective.

The effect of the Share Consolidation will be to reduce the number of Ordinary Shares in issue from 630,505,250 (after the issue of the additional 6 Ordinary Shares for the purpose of effecting the Share Consolidation, given that the number of Existing Ordinary Shares in issue is not divisible by 25) to 25,220,210 and to increase the nominal value of the Company's Ordinary Shares from £0.01 to £0.25. However, the nominal share capital of each Ordinary Share will then reduce again to £0.002, following the Share Capital Reduction becoming effective.

The New Ordinary Shares created pursuant to the Share Consolidation will be admitted to AIM and application for Admission of the New Ordinary will be made so as to enable them to be admitted to trading on AIM as soon as practicable following the Consolidation Record Date. It is expected that Admission will become effective at 8.00 a.m. on 21 August 2014, whereupon the Share Consolidation will become effective.

As a result of the Share Consolidation, the Company's share capital on Admission is expected to comprise 25,220,210 New Ordinary Shares.

Apart from the change in nominal value of the New Ordinary Shares created by the Share Consolidation, the New Ordinary Shares will have the same rights as the Existing Ordinary Shares, including voting, dividend and other rights.

The rules of the Company's existing share option plan provide that in the event of any consolidation of the share capital of the Company, the number of shares subject to an option and/or the exercise price payable on exercise of an option may be adjusted by the Board in such manner as the Board considers to be appropriate, provided that such adjustment is confirmed in writing by the auditors of the Company to be fair and reasonable to the option holders.

Subject to such written confirmation from the Company's auditors, notice of the adjustment to the outstanding options will be sent to option holders as soon as reasonably practicable following the Share Consolidation Record Date.

4. The Share Capital Reduction

The Company does not have sufficient distributable reserves to effect the Board's proposals to buy back Ordinary Shares of the Company and to supply those shares to the Depositary under the ADR Programme, should it be considered desirable to do so in the future. The Board therefore proposes that the Share Capital Reduction be effected in order to increase the distributable reserves of the Company.

It is proposed that:

· the share capital of the Company arising after the Share Consolidation of £6,305,052.50 divided into 25,220,210 New Ordinary Shares of £0.25 each be reduced to £50,440.42 divided into 25,220,210 ordinary shares of £0.002 each, by cancelling paid-up share capital in the sum of £6,254,612.08;

· the amount standing to the credit of the Company's share premium account (such amount being, as at 31 December 2013, £8,101,592) is cancelled;

· the amount standing to the credit of the Company's share based payment reserve (such amount being, as at 31 December 2013, £609,919) is capitalised by way of a bonus issue of newly created Share Capital Reduction Shares and with those Share Capital Reduction Shares subsequently being cancelled; and

· the amount standing to the credit of the Company's merger reserve (such amount being, as at 31 December 2013, £221,000) is capitalised by way of a bonus issue of newly created Share Capital Reduction Shares and with those Share Capital Reduction Shares subsequently being cancelled.

As a result of the Share Capital Reduction, the nominal value of the Company's Ordinary Shares after completion of the Share Consolidation will be reduced from £0.25 to £0.002.

In addition to the approval by the Shareholders of Resolution 2, the Share Capital Reduction requires the approval of the Court.

Accordingly, following approval of the Share Capital Reduction by Shareholders, an application will be made to the Court in order to confirm and approve the Share Capital Reduction. The Share Capital Reduction, if approved by the Court, will create realised profits of £15,187,123.08. Such profits will first be applied in eliminating the accumulated deficit on the Company's profit and loss account which existed as at 31 December 2013 in the sum of £10,902,609 and thereafter in funding the purchase by the Company of its Ordinary Shares pursuant to the Share Buyback.

In seeking the Court's approval of the Share Capital Reduction, the Court is likely to require protection for the creditors (including contingent creditors) of the Company whose debts remain outstanding on the relevant date, except in the case of creditors which have consented to the Share Capital Reduction. Any such creditor protection may include seeking the consent of the Company's creditors to the Share Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company as at the Effective Date, or not to distribute reserves arising upon the Share Capital Reduction until such creditors have been discharged.

It is anticipated that the initial directions hearing in relation to the Share Capital Reduction will take place on 4 September 2014, with the final Court Hearing taking place on 17 September 2014 and the Share Capital Reduction becoming effective on the following day, after the necessary registration of the Court Order at Companies House has taken place.

Shareholders should note that the Share Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising from the Share Capital Reduction will, subject to the terms of any undertakings required by the Court as explained above, support the Company's ability to buy back Ordinary Shares into treasury for the purpose of meeting demand for ADRs under the ADR Programme and/or pay dividends, should circumstances in the future make it desirable to do so.

The Board reserves the right to abandon or to discontinue (in whole or in part) the application to the Court in the event that the Board considers that the terms on which the Share Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or the Shareholders as a whole. The Directors have undertaken a review of the Company's liabilities (including contingent liabilities) and consider that the Company will be able to satisfy the Court that, as at the date (if any) on which the Court Order relating to the Share Capital Reduction and the statement of capital in respect of the Share Capital Reduction have both been registered by the Registrar of Companies at Companies House and the Share Capital Reduction therefore become effective, the Company's creditors will be sufficiently protected.

5. Share Buy Back

In order to facilitate a Share Buy Back at a future date, the Board is seeking the authority of Shareholders to enable the Company to purchase Ordinary Shares in the market in accordance with the Act. The terms of the Share Buy Back Authority are set out in full in Resolution 3 as set out in the Notice of General Meeting.

The Share Buy Back Authority will be limited to a maximum of 3,783,031 Ordinary Shares (representing 15 per cent. of the total issued ordinary share capital of the Company following completion of the Share Capital Reorganisation). Ordinary Shares so purchased will be held by the Company as treasury shares. The authority is in addition to any existing share buyback authority that has been granted to the Company and will expire at the end of the next Annual General Meeting of the Company or 18 months from the passing of Resolution 3, whichever is the earlier. The Directors intend to seek renewal of the Share Buy Back Authority at future Annual General Meetings of the Company.

The minimum price that can be paid for an Ordinary Share is £0.002, which will be the nominal value of an Ordinary Share following the Share Capital Reorganisation. The maximum price that can be paid is 5 per cent. over the average of the middle market prices for an Ordinary Share, derived from the AIM Appendix of the Daily Official List of the London Stock Exchange, for the five business days immediately before the day on which the Ordinary Share is contracted to be purchased. The Directors intend to exercise this right only when, in light of demand for ADRs under the ADR Programme and where they believe that such purchases are in the best interests of the Company and Shareholders generally. The overall position of the Company will be taken into account before deciding upon this course of action. The Ordinary Shares bought back by the Company will be held in treasury and then subsequently transferred to the Depositary as and when demand exists under the ADR Programme for those Ordinary Shares for the purpose of issuing ADRs to U.S. investors.

Under the Act, the statutory pre-emption rights that arise on an issue of shares and which require the Company to offer first any such shares to each Shareholder pro rata to his existing shareholding applies equally to a sale of shares that are held by a company in treasury. In view of this, the Board is proposing a Resolution at the General Meeting for a general power to be granted to the Directors to enable the sale and transfer of the treasury shares to the Depositary as if the statutory pre-emption rights did not apply to the sale.

The ADRs will not be admitted to AIM. The London Stock Exchange has previously expressed concerns over the potential lack of visibility of the underlying trading of the ADRs where they are not admitted to trading on AIM and, in order to comply with guidance that has been issued by the London Stock Exchange on this matter, the Company will limit the percentage of Ordinary Shares represented by the ADRs to no more than 25% of the total issued share capital (including the 4,000 ADRs already in issue as at the date of this announcement).

6. Takeover Code

Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company that is subject to the Takeover Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with any persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by such a person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the Company during the 12 months prior to the announcement of the offer.

Under Rule 37 of the Takeover Code, any increase in the percentage holding of a shareholder which results from a company buying-back its own shares will also be treated as an acquisition for the purposes of Rule 9 of the Takeover Code. Where, as a result of such an increase, a shareholder comes to exceed the limits in Rule 9 of the Takeover Code referred to above, the shareholder will not normally incur an obligation to make a general offer unless the shareholder is a director, or the relationship of the shareholder with any one or more of the directors is such that the shareholder is, or is presumed to be, acting in concert with any of the directors. However, an obligation to make a general offer may be imposed if the relevant shareholder (or any relevant member of a group of persons acting in concert) acquires an interest in shares at a time when such shareholder had reason to believe that a buy back of shares by the company would take place.

In situations where the directors of a company are aware that a buy back of shares by that company would otherwise give rise to an obligation for a shareholder (or group of shareholders acting in concert) to make a general offer, the board of directors should ensure that an appropriate resolution to approve the waiver of this obligation is put to the company's independent shareholders prior to implementation of the relevant buy back of shares as a pre-condition to its implementation. In view of the proposed level of the Share Buyback Authority being sought at the GM and the extent to which the Share Buyback Authority will be used by the Company to purchase Ordinary Shares, the Directors are not aware that the Share Buyback would result in any such obligation arising for any shareholder.

7. Tax

The following statements are intended only as a general guide to the current tax position under UK taxation law and practice. Taxation law (including, without limitation, taxation levels, bases and reliefs) or its interpretation or application may change after the date of this announcement. These statements relate only to the UK taxation treatment of the Share Capital Reorganisation and certain limited aspects of the UK tax position of Shareholders who are the beneficial owners of Existing Ordinary Shares and who are individuals or bodies corporate that are resident or (in the case of individuals) ordinarily resident in the UK for tax purposes and who hold their shares in the Company beneficially as an investment (and not as securities to be realised in the course of a trade). Certain holders of Existing Ordinary Shares, such as dealers in securities, insurance companies, collective investment schemes and persons who have acquired their shares by reason of their or another's employment may be taxed differently and are not considered. The following is not, and is not intended to be, an exhaustive summary of the tax consequences of acquiring, holding and disposing of Existing Ordinary Shares or New Ordinary Shares. A Shareholder who is in any doubt as to his or her tax position or is subject to tax in any jurisdiction other than the UK should consult his or her duly authorised professional adviser without delay.

Capital Gains Treatment of the Share Capital Reduction

The Shareholders should not be treated as making any disposal of their Existing Ordinary Shares as a result of the Share Capital Reduction and should not therefore be subject to any capital gains tax charge at this stage of the Share Capital Reduction.

The Share Capital Reduction Bonus Issue should be treated as a "reorganisation" for the purposes of UK taxation of chargeable gains ("CGT"), so that a Shareholder should not be treated as making a disposal or part disposal of his ordinary shares in the Company for CGT purposes upon receipt of the Share Capital Reduction Shares. Instead, the Share Capital Reduction Shares will be treated as the same asset, acquired at the same time, as his ordinary shares in the Company. On the basis that the Share Capital Reduction Shares will be treated as being paid up for "new consideration" received by the Company, the issue of the Share Capital Reduction Shares should not give rise to any liability to United Kingdom income tax (or corporation tax) in a Shareholder's hands.

Due to the fact that the Share Capital Reduction Shares have no voting rights or rights to income, have no market and at the time issued, it is anticipated that the Share Capital Reduction Shares will be cancelled for no payment on the day immediately following the date of their issue, the market value of the Share Capital Reduction Shares is likely to be nil for the duration of their existence. The CGT base cost of the Share Capital Reduction Shares and ordinary shares of the Company should be calculated by apportioning the base costs of the ordinary shares between the Share Capital Reduction Shares and the ordinary shares based on their respective market values.

Consequently the issue of the Share Capital Reduction Shares should not impact the base cost of the ordinary shares, and there should be no tax charge (nor any allowable loss) on the cancellation of the Share Capital Reduction Shares.

Capital Gains Treatment of the Share Consolidation

The proposed Share Consolidation should constitute a reorganisation of the Company's share capital for UK capital gains tax purposes. To the extent that a Shareholder receives New Ordinary Shares in exchange for his Existing Ordinary Shares under the proposed Share Consolidation, he should not generally be treated as making a disposal of any of his Existing Ordinary Shares or any acquisition of New Ordinary Shares. Ultimately the New Ordinary Shares should (for UK capital gains tax purposes) be treated as the same asset as, and as having been acquired at the same time and for the same aggregate cost as, the holding of Existing Ordinary Shares from which they derive.

Stamp taxes

No liability to stamp duty or stamp duty reserve tax will be incurred by a holder of Existing Ordinary Shares as a result of the proposed Share Capital Reorganisation.

8. General Meeting

You will find set out at the end of the Circular a notice convening the General Meeting of the Company for 10.00 a.m. on 20 August 2014 to held at the offices of Fieldfisher, Riverbank House, 2 Swan Lane, London, EC4R 3TT.

9. Action to be taken

The Form of Proxy for use by Shareholders in relation to the General Meeting is enclosed with the Circular. If you are unable to be present at the General Meeting, please complete and sign the Form of Proxy and return it to Neville Registrars Limited of Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA, as soon as possible, but in any event not later than 10.00 a.m. on 18 August 2014.

You are entitled to appoint a proxy to attend and vote instead of you. However, the completion and return of the Form of Proxy will not prevent you from attending the General Meeting and voting in person if you wish to do so.

10. Recommendation

The Board believes that the Share Capital Reorganisation and Share Buyback are in the best interests of Shareholders and would promote the success of the Company for the benefit of its members as a whole. Accordingly, the Directors unanimously recommend that you vote in favour of the Resolutions to be proposed at the General Meeting

11. Definitions

The following definitions apply throughout this announcement unless the context otherwise requires: