Assetco Regulatory News (ASTO)

Thursday, 12 May 2011

AssetCo plc

("AssetCo", "Company" or "the Group")

SHAREHOLDER UPDATE

BACKGROUND TO EVENTS LEADING UP TO AND SUBSEQUENT TO

THE EGM HELD ON 21/22 MARCH 2011

EGM 21 MARCH 2011

As previously announced, the EGM on 21 March 2011 to approve the Placing and Open Offer to raise £16m had to be adjourned as John Shannon CEO and holder of shares reneged on his irrevocable commitment to vote in favour of the resolution.

The Company successfully sought an injunction to ensure John Shannon's irrevocable undertaking stood. The EGM was reconvened on 22 March 2011 and the necessary resolutions to enable the placing to proceed were approved. John Shannon was ordered to pay the Company's legal costs.

APPOINTMENT OF INTERIM CHAIRMAN

Tudor Davies was appointed as Interim Executive Chairman on 23 March 2011.

RESIGNATION OF JOHN SHANNON AS A DIRECTOR

The Board requested and then effected the resignation of John Shannon as a Director of all Group Companies on account of his conduct, although he remained as an employee under suspension.

WINDING UP PETITION HEARINGS

Prior to a Court hearing on 23 March 2011,HMRC as the petitioning creditor was paid in full from the proceeds of the Placing, but the petition was not lifted because another creditor stepped into the place of HMRC supported by two other creditors, John Shannon and Frank Flynn, the former Finance Director.

As announced on 29 March 2011, the Board was not prepared to pay any of these creditors until their claims had been properly investigated.

The Company applied to restrain these creditors from petitioning for the winding-up of the Company on the grounds that their claims were disputed, and in the cases of John Shannon and Frank Flynn, the Company had substantial cross-claims which exceeded their claims. On 7 April the Company agreed a settlement with the "substituted" petitioning creditor.

After conducting investigations into the claims by John Shannon and Frank Flynn, the Company produced various witness statements disputing the debt of £875,575claimed by John Shannon and the claim for £358,216 by Frank Flynn, and setting out the basis for the counterclaims. Investigations are still continuing, but to date the Company has identified counterclaims against John Shannon amounting to £4,552,935 arising out of breaches of his fiduciary duties and counterclaims against Frank Flynn amounting to £3,364,965 arising out of breaches of his fiduciary duties.

On 8 April the Company presented evidence to the court to prevent either John Shannon or Frank Flynn from being substituted on to the petition. At this point Frank Flynn withdrew from supporting the petition. The matter was adjourned pending the provision by John Shannon of his evidence and the hearing of his application to be substituted, but the winding up petition remained in the meanwhile.

On 27 April the petition to wind up the Company was dismissed, after John Shannon had agreed to withdraw his application and to provide suitable undertakings. John Shannon has agreed to pay the Company's legal costs on an indemnity basis.

DISMISSAL OF JOHN SHANNON AS AN EMPLOYEE

John Shannon was summarily dismissed as an employee with immediate effect on 28 April 2011, as a result of serious breaches of contract and duties arising from the Company's investigation into the various matters that constituted its counterclaims against him.

WORKING CAPITAL

In the announcements made on 14, 18 and 21 March the Company stated that: firstly it was in continuing discussions concerning its future working capital requirements and that it expected to require a working capital facility of £3-4 million after the receipt of the £16 million gross proceeds from the equity placing; and secondly as a contingency, to ensure that adequate working capital would be available in the future, the Company had received indications of financial support from three investment companies ("Investors") of up to £10 million in total, and in consideration for a further issue of shares with the intention of allowing other shareholders to participate in such an issue as far as reasonably practicable.

FINANCING/DEBT SERVICING

The Board's investigation into the finances of the Company have been hampered by the absence of those involved in the past financial statements, and interim accounting staff have been brought in to assist in assessing the situation.

The main issue that the business is facing is the capital repayment profile not matching the long term nature of the Company's contracts. Whilst the Company is cash generative and can meet its interest costs, it does not generate sufficient funds to meet all the repayment of capital as currently scheduled. The banks are supportive regarding the short term financing situation and are awaiting our proposals on a financial restructuring but in the meantime we are in breach of our banking arrangements.

FUNDRAISING

The Company is also in discussions with the "Investors" with regard to the £10 million of financial support as announced on 21 March 2011. However, any proposal for a further fundraising will be dependent upon the Company agreeing a sustainable and appropriate financing structure with its bankers.

OFFER PERIOD

The Company continues to be in an Offer period under the Takeover Code and we are considering all opportunities to realise shareholder value.

Enquiries:

AssetCo plc

Tudor Davies: +44 (0) 207 614 5917

Arden Partners plc

Richard Day: +44 (0) 207 614 5917

Adrian Trimmings: +44 (0) 207 614 5920

Citigate Dewe Rogerson

Fiona Tooley: Office: +44 (0) 121 362 4035 / Mobile: +44 (0) 7785 703 523

Dealing Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.