CGLO.L Regulatory News (CGLO)

Chagala Group Limited

14 June 2016

Issuance of Direction Notice to Concert Parties

Chagala Group Limited (the "Company"), the London-listed specialist services and facilities provider to the oil and gas industry in Kazakhstan (symbol: CGLO), announces that, as a result of the acquisition by TIPP Investments PCC ("TIPP"), a public investment fund, of 3,075,000 ordinary shares representing 14.47% common shares in the Company which was notified to the Company as having occurred on 31 May 2016 at a price of $1.85 per share (the "Acquisition"), the board of directors of the Company (the "Board") has concluded that TIPP became obliged, under Regulation 13.1 of the Articles of Association of the Company (the "Articles"), to make an offer to holders of all of the issued shares in the Company, in cash (or accompanied by a cash alternative), at a price equal to at least the highest price paid by TIPP (or any person acting in concert with TIPP) for ordinary shares of $0.40 each in the capital of the Company pursuant to the Acquisition or during the previous 12 months. TIPP has failed to extend such an offer, nor has it announced any intention to do so.

Consequently, the Company further announces that, pursuant to Regulation 13.8 of the Articles, the Board has served a "direction notice" on TIPP and certain other shareholders of the Company, collectively representing approximately 40% of the issued ordinary share capital of the Company. The effect of the direction notice is, among other things, to suspend the voting rights attached to such shareholders' shares in the Company, as well as to suspend certain other rights attached to such shares, including certain rights to participate in distributions. The direction notices were issued prior to the Annual General Meeting of the Company held in Hong Kong on 13 June 2016.

The Company also announces that, following the Acquisition, the Company received a letter dated 6 June 2016 (the "Requisition Letter") from Eagle Resource Holdings Limited ("Eagle") and Typhoon Developments Ltd ("Typhoon") pursuant to which Eagle and Typhoon have purported to exercise certain rights to requisition a general meeting of the Company, among other things to propose the appointment of three new individuals to the Board. The Company is currently taking legal advice as to the implications of, and its obligations pursuant to, that letter, given the service of the direction notices.

As a result of the Requisition Letter, and certain other correspondence and communications, the Board concluded that, based on the information available to it, each of TIPP, Eagle and Typhoon, together with funds managed by East Capital and Nautilus Fiduciary (Asia) Limited (all such shareholders together, the "Concert Parties"), were acting in concert with each other for the purposes of Regulation 13 of the Articles of Association. Following the Acquisition, pursuant to which the Concert Parties collectively hold shares in the Company representing more than 30% of the voting rights in the Company, the Board has concluded that TIPP became obliged to extend an offer under Regulation 13.1 of the Articles. The Board is satisfied that TIPP has not made an offer in accordance with, and as required by, Regulation 13.1. As a result, in accordance with the Articles and in order to protect the interests of the holders of shares other than the Concert Parties, the Board unanimously resolved to deliver a direction notice to each of the Concert Parties, which notice was delivered on 10 June 2016.

Regulation 13.1 of the Articles provides that, except with the consent of the Board, when any person acquires, whether by a series of transactions over a period of time or not, shares which (taken together with shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of the Company, such person is required to extend an offer, on the basis set out in the Articles, to the holders of all the issued shares in the Company (a "Mandatory Offer").

Regulation 13.8 of the Articles provides that, if at any time the Board is satisfied that such person, having incurred an obligation under the Articles to extend an offer to the holders of all of the issued shares, shall have failed so to do, then the Board may, in its absolute discretion at any time thereafter issue a notice (a "direction notice") to such shareholder and any other shareholders acting in concert with such shareholders (together the "Defaulters") which disenfranchises the Defaulters as follows:

· the Defaulters shall not be entitled to vote at any general meeting of the Company either personally or by proxy;

· the Defaulters shall not be entitled to exercise any other right conferred by membership in relation to meetings of the Company;

· except in a liquidation of the Company, no payment shall be made of any sums due from the Company on the shares held by the Defaulters, whether in respect of capital or dividend or otherwise, and the Company shall not meet any liability to pay interest on any such payment if and when it is finally paid to the Defaulters; and

· no other distribution shall be made on shares held by the Defaulters.

The Board is currently in communication with the Concert Parties and the Company will make a further announcement in due course.

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Chagala Group

 Chagala is a service company focused on providing long and short term accommodation solutions to domestic and international oil and gas companies developing Kazakhstan's largest hydrocarbon discoveries. With the ownership of hotels, guest houses, serviced apartments, remote site facilities, restaurants and offices in its portfolio, Chagala is well positioned to capitalize on the oil and gas investment being made in Kazakhstan.