London Capital Group Holdings Regulatory News (LCG)

The following amendment has been made to the 'Proposed Financing' announcement released on 17 June 2014 at 18.00 under RNS No 8635J.

The first sentence of the announcement incorrectly contained the word 'million', which has now been removed.

All other details remain unchanged. The full revised text is shown below:

London Capital Group Holdings plc

("London Capital" or the "Company")

Proposed Financing and Notice of General Meeting

The Board of London Capital is pleased to announce that it intends to raise up to £17,500,000 through a proposed Financing.

The Proposed Financing is conditional, inter alia, on the passing of the Resolutions, by shareholders to be proposed at the General Meeting convened for 3 July 2014.

It is intended that Charles-Henri Sabet will be appointed to the Board of the Company and the board of London Capital Group Limited ("LCG"), and will hold the position of Executive Chairman of the Company and of LCG.

A circular containing the details of the Proposed Financing (the "Circular") has today been posted to shareholders and will be available to view shortly on the Company's website at: www.londoncapitalgroup.com.

The same definitions apply throughout this announcement as are applied in the Circular.

Commenting, Kevin Ashby, CEO of London Capital said,"This is an exciting development for the London Capital group. The additional funds and the involvement of Charles-Henri Sabet will enable the business to accelerate our strategy of introducing new products and growing internationally."

ENDS

For further information, please contact: www.londoncapitalgroup.com

London Capital Group

GLIO Holdings Limited

Introduction

On 1 May 2014, the Company and GLIO signed heads of terms setting out the terms of the Financing (the "GLIO Heads of Terms"). Pursuant to the GLIO Heads of Terms, the Company and GLIO agreed a legally binding term that, subject to the prior approval (if required) by the Takeover Panel, if (following the first public announcement on 2 May 2014 referred to above):

· the Company elects not to proceed with the Financing, due to the announcement of an alternative proposal or any form of offer from a third party (including any form of capital distribution), then the Company shall pay to GLIO a break/abort fee of £225,000 (being equal to 1.5% of GLIO's maximum investment), to cover fees and expenses incurred by GLIO in connection with matters referred to in the GLIO Heads of Terms; or

· if GLIO elects not to proceed with the Financing for any reason, save for the Approvals not being granted, then GLIO shall pay to the Company a break/abort fee of £112,500 (being equal to 0.75% of GLIO's maximum investment), to cover fees and expenses incurred by the Company in connection with matters referred to in the GLIO Heads of Terms.

In addition, upon completion of the Financing, the Company will pay Peterhouse Corporate Finance Limited, the sole financial advisor to GLIO, a fee equal to 1.5% of the investment made by GLIO under the GLIO Convertible Loan Note Instrument.

GLIO will, conditional on the passing of the Resolutions and the grant of the Approvals, subscribe for the GLIO Convertible Loan Notes in an aggregate principal amount of between £12,500,000 and £15,000,000.

The Company is seeking commitments from the Institutional Investors to subscribe the Institutional Investors Convertible Loan Notes. There is no guarantee that any such commitments will be received. It is proposed that, if any such commitments are received, then the Institutional Investors will, conditional on the passing of the Resolutions, the grant of the Approvals and the GLIO Convertible Loan Note Instrument becoming unconditional in all respects in accordance with its terms, subscribe for the Institutional Investors Convertible Loan Notes in an aggregate principal amount of between £500,000 and £2,500,000.

Therefore the Financing is conditional upon, amongst other things, the grant of the Approvals, and the passing of the Resolutions by Shareholders to authorise the Directors to grant rights to subscribe for or to convert any security into Ordinary Shares in connection with the issue of the Convertible Loan Notes and the Warrants. Accordingly, the General Meeting is being convened for the purpose of considering the Resolutions to approve such authorities. Further details of these Resolutions are set out below.

Please note that there is no guarantee that the Approvals will be obtained by the Long Stop Date. Further details of the Approvals which are sought (and the status of the applications in connection with the Approvals) are set out below under the heading "Approvals".

The Financing will comprise:-

· in the case of GLIO, between £12,500,000 and £15,000,000 of GLIO Convertible Loan Notes and for up to 75,000,000 GLIO Warrants (assuming the maximum principal amount of GLIO Convertible Loan Notes is subscribed and the Conversion Price is calculated as being £0.27); and

· in the case of the Institutional Investors (assuming the Institutional Investors Convertible Loan Notes are subscribed pursuant to the Institutional Investors Convertible Loan Note Instrument), between £500,000 and £2,500,000 of Institutional Investors Convertible Loan Notes and for up to 12,500,000 Institutional Investors Warrants (assuming the maximum principal amount of Institutional Investors Convertible Loan Notes is subscribed and the Conversion Price is calculated as being £0.27).

The number of Warrants to be issued may be greater than the number of Warrants specified above depending on the Conversion Price and the amount of Convertible Loan Notes subscribed by the Investors.

The Convertible Loan Notes will pay interest on the principal amount at 5 per cent. per annum and will be convertible at any time into Ordinary Shares at the Conversion Price. Any redemption of the Convertible Loan Notes prior to, on or after the Maturity Date, shall only be made after relevant permission to do so has been granted by the FCA. The Convertible Loan Note Issue has not been underwritten.

Background to and reasons for the Financing

As stated in the Company's 2013 Annual Report the Board has adopted a three-stage strategy with the aim of returning the Group to growth. 

The first stage has already been completed with the successful migration of the Group's IT platform. The Company has also made improvements in the level of management information available and are also starting to improve key business processes.

As LCG's activities are centered on the UK market, one of the most competitive markets in the world, the Board believes that product innovation is the primary route to differentiating LCG from its competitors. Accordingly, the Board believes that the Group should focus its efforts on creating and promoting new products utilising viral marketing, PR and online campaigns to attract new clients at a reduced cost with a view to being recognised as a Company with innovative products.

To further support the Company's growth the Board also intends to develop business channels in less mature markets, attracting new clients and reducing the Group's current dependence on the UK market. 

Whilst the Board has a clear plan and strategy for the Group's future growth the Board recognises that, despite the Group being well capitalised, the Company faces considerable risks in being able to deliver on its growth plan and will be, to an extent, reliant on growing in a static UK market, trading conditions improving from their current level and being able to deliver innovative products that appeal to the trading community. However, the Board is mindful that in order to continually develop products and drive overseas expansion, the Company is likely to at some stage require additional funds.

In 2013 the Board was introduced to Charles-Henri Sabet as a potential non-executive director. Mr Sabet spent a considerable amount of time getting to know the Company's business, understanding the Group and the Board's longer-term growth strategy, following which it was proposed that he become more involved in the day-to-day running of the Company. He also recognised that the execution ability of the Company could be enhanced and accelerated with new capital, improved technology and improved access to institutional and global markets.

Given the breadth of Mr Sabet's connections he identified a group of individuals who he believed could help deliver the capital and technology that the Company needed to execute its growth plan and created GLIO as a vehicle through which their contribution could be channelled.

The Convertible Loan Notes and the Warrants allow for a mechanism whereby the Group can embark on the acceleration of its strategy as well as increase its capabilities in the institutional markets. The net proceeds of the Financing shall be made immediately available to LCG without limitation to fund LCG's regulatory capital requirements. Whilst the capital injection is very attractive to the Group, the Board further believes that the additional technological capability and market access that GLIO brings will have a significant impact on the prospects for the Company in the short and medium term.

The Board believes that the combination of proposed new capital from GLIO and the proposed involvement of Mr Sabet and GLIO is highly attractive and in the best interests of the Company. In addition, the Board believes that the conditional subscription of the Institutional Investors Convertible Loan Notes would be in the best interests of the Company and therefore the Board is continuing to seek commitments from the Institutional Investors to subscribe the Institutional Investors Convertible Loan Notes. There is no guarantee that any such commitments will be received.

Information on the Investors

GLIO

The Company has agreed to issue GLIO with the GLIO Convertible Loan Notes and the GLIO Warrants.

GLIO is a Jersey incorporated special purpose vehicle, which has been established for the sole purpose of making this investment into London Capital. GLIO was incorporated on 3 April 2014 and will not commence business operations until an investment into London Capital has been completed.

The largest shareholder in GLIO is ILOG Investments Limited, a Jersey-incorporated company which is wholly owned by Mr Charles-Henri Sabet. The other large shareholders of GLIO are STP Fund (EUR) Ltd, Dr Jamal Kaddaj and Simon Benhamou. The remaining shareholders in GLIO each hold less than 10 per cent. of the issued share capital of GLIO.

The directors of GLIO are:

Kathleen Gillen; and

Dermot Joseph Boylan.

Ms Gillen and Mr Boylan are both Partners of Moore Stephens, Jersey.

Institutional Investors

As stated above, the Board believes that the conditional subscription of the Institutional Investors Convertible Loan Notes would be in the best interests of the Company and therefore the Board is continuing to seek commitments from the Institutional Investors to subscribe the Institutional Investors Convertible Loan Notes. There is no guarantee that any such commitments will be received. Further announcement(s) will be made in due course if appropriate including as regards the identity of the Institutional Investors who will subscribe for the Institutional Investors Convertible Loan Note Instruments and their subscriptions (if any).

Current Trading and Prospects

The Company released a trading statement through a Regulatory Information Service on 2 May 2014, the full text of which can be found on the Company's website at www.londoncapitalgroup.com.

In summary, whilst the Company experienced an increase in trading activity in January and February 2014, activity in March was muted resulting in trading revenue for Q1 2014 being £4.7 million (2013 continuing operations: £7.6 million). Average daily spread betting and CFD trades in the quarter were down 11 per cent. on the prior year, moving from 24,298 to 21,586.

The loss before tax for Q1 2014 was £0.4 million (2013 continuing operations: £0.7 million profit).

The Group's net cash resources (including amounts due from brokers) were £18.1 million at 31 March 2014 and, following the payment of settled claims in Q1 2014, the FOS claims provision at 31 March 2014 was £1.5 million.

The Company is in initial discussions (subject to contract) with Algoweb S.A.R.L ("Algoweb"), a company in which Mr Charles-Henri Sabet currently has an interest, in connection with the possible licensing to LCG of a straight-through processing (STP) trading solution. The Company will commence due diligence in connection with the proposed licensing referred to above as soon as reasonably practicable following the entry into the GLIO Convertible Loan Note Instrument, and the GLIO Convertible Loan Note Instrument recognises that a licensing agreement will not be entered into until after the issue of the GLIO Convertible Loan Notes. There is no guarantee that any licensing agreement will be concluded or concluded on the basis referred to above. A further announcement will be made in due course as appropriate.

From time to time the Company is in discussions with third parties (including competitors) with regard to possible mergers and acquisitions transactions. The Company, as at the date of the Circular, has no current intention to pursue any such mergers or acquisitions or similar transactions (other than as disclosed in the Circular). Should the position change, an appropriate announcement will be made

The Approvals

The Financing is conditional on the following approvals being granted by the FCA:

1. Approved Persons Regime

An approved person is a person who has been approved by either or both of the FCA and the Prudential Regulation Authority to perform certain functions for or on behalf of an authorised firm (known as "controlled functions"). Section 59 of FSMA requires authorised firms to take reasonable care not to allow persons to perform controlled functions without the approval of the appropriate regulator. An application was submitted to the FCA using Form A under section 59 of FSMA on 28 April 2014, seeking approval for the appointment of Charles-Henri Sabet to carry on the CF1 (Director) function in relation to LCG (this being on the basis of his proposed appointment as Executive Chairman of the Company and of the Company itself. The approval process can take up to three months, and without approval being granted, Charles-Henri Sabet will not be able to be appointed as Executive Chairman of the Company, nor carry out any other controlled functions for LCG.

2. Change of Control Regime

Any person who decides to acquire or increase control over an authorised firm must notify the appropriate regulator in writing before proceeding with the acquisition or increase in control in accordance with section 178 of FSMA. Failure to obtain the appropriate approval constitutes a criminal offence. GLIO would become an indirect "controller" of LCG on the basis that it plans to convert a portion of the Convertible Loan Notes it will acquire under the Financing into approximately 25% of the Ordinary Shares. As the Company is the parent company of LCG, an FCA-authorised firm, a section 178 notice was submitted to the FCA by GLIO on 1 May 2014. A section 178 notice was also submitted by Charles-Henri Sabet to the FCA on the same date. Charles-Henri Sabet would become an indirect "controller" of LCG on the basis that he would be able to exercise a significant influence on LCG through his shareholding in GLIO. The FCA can take up to 90 working days to assess a complete application, and until such time as approval is granted, the Financing cannot be completed.

The Financing

The Financing is to be structured as follows:

The Convertible Loan Notes

GLIO will, conditional on the passing of the Resolutions and the grant of the Approvals, subscribe for the GLIO Convertible Loan Notes in an aggregate principal amount of between £12,500,000 and £15,000,000.

The Company is seeking commitments from the Institutional Investors to subscribe the Institutional Investors Convertible Loan Notes. There is no guarantee that any such commitments will be received. It is proposed that, if any such commitments are received, then the Institutional Investors will, conditional on the passing of the Resolutions, the grant of the Approvals and the GLIO Convertible Loan Note Instrument becoming unconditional in all respects in accordance with its terms, subscribe for the Institutional Investors Convertible Loan Notes in an aggregate principal amount of between £500,000 and £2,500,000.

The Convertible Loan Notes are convertible into new Ordinary Shares at the Conversion Price. The Convertible Loan Notes will be issued in multiples of £1.00.

Payments of interest (whether by way of the issue of Ordinary Shares or otherwise) on the Convertible Loan Notes will be subject to deduction on account of UK income tax at the basic rate (currently 20%) unless, at the time the payment is made, either: (a) the Company reasonably believes that the person beneficially entitled to the interest is: (i) a company resident in the UK; or (ii) a company not resident in the UK that carries on a trade in the UK through a permanent establishment and which brings into account the interest in computing its UK taxable profits; or (iii) a partnership each member of which is a company referred to in (i) or (ii) above, provided that HMRC has not given a direction (in circumstances where it has reasonable grounds to believe that it is likely that one of the above exemptions is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax, or (b) the Company has received a direction permitting payment without withholding or deduction from HMRC in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty.

The principal terms of the Convertible Loan Note Instruments are, inter alia, as follows:

GLIO Convertible Loan Note Instrument

Status/Security

The GLIO Convertible Loan Notes will be unsecured and shall be fully subordinated to the liabilities of all other unsecured creditors of the Company.

Interest

Until the GLIO Convertible Loan Notes are redeemed or converted in accordance with the provisions of the GLIO Convertible Loan Note Instrument, interest shall accrue on the principal amount of the GLIO Convertible Loan Notes, which are outstanding at 5% per annum (the "Interest Rate") and be convertible into Ordinary Shares at the Conversion Price at the election of GLIO. In addition, the Company is also liable to pay a minimum interest return (by means of the issue of Ordinary Shares at the Conversion Price in satisfaction thereof) calculated using the following formula:

MIR = (P x IR) x Y

Where:

Pis the principal amount of Notes subscribed for by GLIO;

MIRis the Minimum Interest Return

IRis the Interest Rate; and

Yis 7 years.

On conversion of some or all of the GLIO Convertible Loan Notes all of the accrued but unpaid interest and a pro rata amount of the Minimum Interest Return on such GLIO Convertible Loan Notes less any interest already paid or accrued but unpaid shall be converted into new fully paid Ordinary Shares at the Conversion Price. Such conversion will be in satisfaction of the Company's obligation to pay interest in respect of those GLIO Convertible Loan Notes.

No interest under the GLIO Convertible Loan Note Instrument including the Minimum Interest Return shall be payable by the Company in cash. Where the Company is required to deduct tax from payments of interest as set out above, it is required under the GLIO Convertible Loan Note Instrument to pay such additional amounts to the relevant holder of GLIO Convertible Loan Notes so that such holder receives a net amount (after the deduction of withholding tax) as will equal the full amount which such holder would have received had no deduction of withholding tax been made.

Conversion Price

The GLIO Convertible Loan Note Instrument provides the methodology for determining the price at which both the GLIO Convertible Loan Notes and the Institutional Investors Convertible Loan Notes and interest thereon and the Minimum Interest Return are to be converted into Ordinary Shares, and such methodology is based on the net current assets of the Company to be agreed between the Company and GLIO based on a balance sheet to be prepared by the Company as at 31 August 2014. The GLIO Convertible Loan Note Instrument provides that (in the absence of relevant adjustment events) in no circumstances can the Conversion Price exceed £0.27 nor be lower than £0.10. Following agreement of the net current assets in accordance with the GLIO Convertible Loan Note Instrument, the Conversion Price shall be calculated in accordance with the following formula:

CP = CPS - D%

Where:

BCPS is the base cash per share of £0.2884 calculated as at 31 March 2014;

BP is the base price of £0.27;

CP is the Conversion Price;

CPS is the cash per share equal to (NCA/S) x 100;

D is the percentage discount applied to CPS equal to 100 - (BP/BCPS x 100);

NCA is the amount of net current assets set out in the agreed balance sheet;

S is the 55,800,908 ordinary shares in issue in the Company,

Provided that if the NCA is greater than £16,094,642, the Conversion Price shall be £0.27.

Redemption

Unless converted, the GLIO Convertible Loan Notes will be redeemed in full on the Maturity Date or at the election of GLIO, following LCG becoming insolvent (as defined in section 123 of the Insolvency Act 1986) or is otherwise put into liquidation provided that such redemption shall only be made provided relevant permission to do so has been granted by the FCA. On redemption, any accrued but unpaid interest shall be converted at the Conversion Price into new Ordinary Shares. When the GLIO Convertible Loan Notes become payable, the Company shall pay to GLIO the full principal amount of the GLIO Convertible Loan Notes to be repaid.

Conversion

Each GLIO Convertible Loan Note (and any interest) will be convertible at the election of GLIO at any time upon 10 Business Days' notice following the issue of the GLIO Convertible Loan Notes before the Maturity Date into new Ordinary Shares at the Conversion Price, provided that any such conversion is effected in respect of not less than 5,000,000 Ordinary Shares.

The terms of the GLIO Convertible Loan Note Instrument provide that GLIO Convertible Loan Notes may not be converted unless in accordance with the terms of the GLIO Convertible Loan Note instrument.

Miscellaneous

Under the GLIO Convertible Loan Note Instrument, the Company gives certain warranties and undertakings to GLIO and GLIO gives certain warranties and undertakings to the Company.

Institutional Investors Convertible Loan Note Instrument

The Company is seeking commitments from the Institutional Investors to subscribe the Institutional Investors Convertible Loan Notes. There is no guarantee that any such commitments will be received. It is proposed that, if any such commitments are received, then the Institutional Investors will, conditional on the passing of the Resolutions, the grant of the Approvals and the GLIO Convertible Loan Note Instrument becoming unconditional in all respects in accordance with its terms, subscribe for the Institutional Investors Convertible Loan Notes in an aggregate principal amount of between £500,000 and £2,500,000. It is intended that any Institutional Investors Convertible Loan Notes will be issued substantially on the terms set out below:

Status/Security

The Institutional Investors Convertible Loan Notes will be unsecured and shall be fully subordinated to the liabilities of all other unsecured creditors of the Company.

Interest

Until the Institutional Investors Convertible Loan Notes are redeemed or converted in accordance with the provisions of the Institutional Investors Convertible Loan Note Instrument, interest shall accrue on the principal amount of the Institutional Investors Convertible Loan Notes, which are outstanding at 5% per annum (the "Interest Rate") and be convertible into Ordinary Shares at the Conversion Price at the election of the Institutional Investors. In addition, the Company is also liable to pay a minimum interest return (by means of the issue of Ordinary Shares at the Conversion Price in satisfaction thereof) calculated using the following formula:

MIR = (P x IR) x Y

Where:

P is the principal amount of Notes subscribed for by the Institutional Investors;

MIR is the Minimum Interest Return

IR is the Interest Rate; and

Y is 7 years.

On conversion of some or all of the Institutional Investors Convertible Loan Notes all of the accrued but unpaid interest and a pro rata amount of the Minimum Interest Return on such Institutional Investors Convertible Loan Notes less any interest already paid or accrued but unpaid shall be converted into new fully paid Ordinary Shares at the Conversion Price. Such conversion will be in satisfaction of the Company's obligation to pay interest in respect of those Institutional Investors Convertible Loan Notes.

No interest under the Institutional Investors Convertible Loan Note Instrument including the Minimum Interest Return shall be payable by the Company in cash.

Conversion Price

The GLIO Convertible Loan Note Instrument provides the methodology for determining the price at which the Institutional Investors' Convertible Loan Notes and interest thereon and the Minimum Interest Return are to be converted into Ordinary Shares, and such methodology is based on the net current assets of the Company to be agreed between the Company and GLIO based on a balance sheet to be prepared by the Company as at 31 August 2014. The GLIO Convertible Loan Note Instrument provides that (in the absence of relevant adjustment events) in no circumstances can the Conversion Price exceed £0.27 nor be lower than £0.10. Following agreement of the net current assets in accordance with the GLIO Convertible Loan Note Instrument, the Conversion Price shall be calculated using the same formula as the Conversion Price calculation for the GLIO Convertible Loan Note Instrument, as described above.

If the net current assets are less than £8,500,000, the Investors will not be obliged to subscribe for the Convertible Loan Notes.

Redemption

Unless converted, the Institutional Investors Convertible Loan Notes will be redeemed in full on the Maturity Date or at the election of the Institutional Investors, following LCG becoming insolvent (as defined in section 123 of the Insolvency Act 1986) or is otherwise put into liquidation provided that such redemption shall only be made provided relevant permission to do so has been granted by the FCA. On redemption, any accrued but unpaid interest shall be converted at the Conversion Price into new Ordinary Shares. When the Institutional Investors Convertible Loan Notes become payable, the Company shall pay to the Institutional Investors the full principal amount of the Institutional Investors Convertible Loan Notes to be repaid.

Conversion

Each Institutional Investors Convertible Loan Note (and any interest) will be convertible at the election of the Institutional Investors at any time upon 10 Business Days' notice following the issue of the Institutional Investors Convertible Loan Notes before the Maturity Date into new Ordinary Shares at the Conversion Price, provided that any such conversion is effected in respect of not less than 1,000,000 Ordinary Shares.

The terms of the Institutional Investors Convertible Loan Note Instrument provide that Institutional Investors Convertible Loan Notes may not be converted unless in accordance with the terms of the Institutional Investors Convertible Loan Note Instrument.

The Warrants

The Company will, conditional upon the passing of the Resolutions, the grant of the Approvals and the issue of the GLIO Convertible Loan Notes to GLIO, execute the GLIO Warrant Instrument and then grant the GLIO Warrants to GLIO under the terms of the GLIO Warrant Instrument.

The Company will, conditional upon the passing of the Resolutions, the grant of the Approvals, the issue of the GLIO Convertible Loan Notes, and the issue of the Institutional Investors Convertible Loan Notes to the Institutional Investors, execute the Warrant Instruments and then grant the Institutional Investors Warrants to the Institutional Investors under the terms of the Institutional Investors Warrant Instrument.

The GLIO Warrants may be exercised in full or in part in minimum tranches of 5,000,000 and the Institutional Investors Warrants may be exercised in full or in part in minimum tranches of 1,000,000 at any time upon 10 Business Days' notice after the issue of the Convertible Loan Notes to the Investors up and until the Maturity Date, provided that the equivalent number of Convertible Loan Notes have been converted.

The number of Ordinary Shares to which a particular Investor will be entitled on exercise of the relevant Warrants will be calculated pro rata to the number of Convertible Loan Notes which such Investor subscribes calculated in accordance with the following formula:

N = (P/CP) + (MIR/CP)

Where:

CP is the Conversion Price;

MIR is the Minimum Interest Return;

N is the number of Warrants to be issued pursuant to the Warrant Deed; and

P is the principal amount of Convertible Loan Notes subscribed for by the Investor.

Board Changes

Under the terms of the GLIO Convertible Loan Note Instrument and under the Relationship Agreement (as described in more detail below), GLIO is entitled to appoint a director to the Board of the Company and the board of LCG. Accordingly, it is intended that Charles-Henri Sabet will be appointed to the Board of the Company and the board of LCG, and will hold the position of Executive Chairman of the Company and (at GLIO's election) of LCG with effect from the grant of the Approvals and the receipt by the Company of the subscription monies in respect of the GLIO Convertible Loan Notes. Any such appointment by GLIO is subject to the Company's nominated adviser from time to time confirming such appointee's suitability and to the satisfaction of the Company's reasonable requirements (including as regard compliance with the AIM Rules and any requirements in respect of the FCA).

GLIO's right to appoint directors referred to above shall apply for so long as GLIO holds GLIO Convertible Loan Notes and/or Ordinary Shares resulting from the conversion of such GLIO Convertible Loan Notes over not less than 15% of the Company's Enlarged Issued Share Capital.

Mr Charles-Henri Sabet (aged 52) is, and has previously been, a significant and successful investor in online trading platforms with a track record of building online trading businesses. Mr Sabet founded Synthesis Bank in September 1999. Synthesis Bank was active in e-trading offering a multiproduct platform. Synthesis Bank was sold to Saxo Bank A/S, Denmark in December 2007. Mr Sabet was initially introduced to the Company by Kevin Ashby.

In addition to Mr Sabet's experience in the online trading sector, he has significant experience in trading, investments and risk management and has held a number of executive board positions within different financial institutions. From December 2007 until September 2008, Mr Sabet was Head of Global Trading and Chairman of the Board of Directors of Saxo Bank (Switzerland) SA.

The existing Chairman, Mr Giles Vardey, will step down from his position as Chairman but remain a non-executive director of the Company.

The composition of the Board immediately following the Financing is proposed to be:

The Board is currently seeking to appoint a further Independent Non-executive Director, who it is intended will become a member of the Audit, Risk and Remuneration Committees. The Company will announce further details in due course.

Relationship Agreement

On 17 June 2014, the Company and GLIO entered into the Relationship Agreement. The obligations of the parties under the Relationship Agreement are conditional upon the satisfaction of the conditions set out in the GLIO Convertible Loan Note Instrument and the receipt by the Company of the GLIO Convertible Loan Notes subscription monies by no later than the Long Stop Date. Under this agreement, and subject to its terms and the exceptions set out in it, GLIO gives a number of undertakings relating to certain actions, including that (except with the prior written consent of the Board, such consent not to be unreasonably withheld or delayed):

· it will refrain from , and will use reasonable endeavours to procure that its Connected Persons and Affiliates (as defined therein) will refrain from, exercising their voting rights and other rights (if any) in favour of the election or re-election of any person to the Board or the removal of any person from the Board if the election or re-election or removal (as applicable) of such person would result in a reduction in the number of Independent Director(s) (as defined in the Relationship Agreement) being members of the Board;

· it will exercise its voting rights and other rights (if any), and use its reasonable endeavours to procure that its Connected Persons and Affiliates will exercise their voting rights and other rights and take all other necessary steps so as to procure (so far as it is able) that, inter alia:

o the Company and its subsidiaries are capable at all times of carrying on their business independently of GLIO or any of its Connected Persons and Affiliates;

o all transactions, agreements or arrangements entered into between (i) GLIO or any of its Connected Persons and Affiliates and (ii) the Company (or any subsidiary of the Company) are, and will be made, on an arm's length basis and on normal commercial terms; and

o no variations are made to the Articles that would be contrary to the Company's independence from GLIO or be inconsistent with, or in violation of, any of the terms of the Relationship Agreement.

Charles-Henri Sabet's Service Agreement

Conditional on the issue of the GLIO Convertible Loan Notes, Charles-Henri Sabet shall be appointed as Executive Chairman of the Company and (at GLIO's election) LCG under the terms of a service agreement to be entered into between (1) the Company, (2) LCG, and (3) Charles-Henri Sabet. Charles-Henri Sabet will be employed by LCG. Pursuant to the service agreement, the Company agrees to pay to Charles-Henri Sabet a salary of £260,000 per annum. His salary will be reviewed by the Remuneration Committee of the Company. The appointment is for an initial term of 12 months and thereafter is terminable on 12 months' notice by either party, such notice not to be given until at least 12 months after the commencement of the employment. Either LCG or Mr Sabet may elect for a payment in lieu of notice to be made following notice of termination. He will be entitled to an Executive Bonus, details of which are to be agreed and will be entitled to a pro rata sum if his employment terminates part way through the year. The bonus is subject to compliance with the regulatory requirements and the Company's Executive Remuneration Policy. The service agreement is terminable by the Company in the limited circumstances provided for in the service agreement. The service agreement is terminable with immediate effect in the event of the FCA refusing to grant Charles-Henri Approved Person status, or withdrawing Charles-Henri's Approval at any time, or informing the Company that Charles-Henri Sabet's continued appointment will directly result in the Company or any Associated Company (as defined in the Corporation Tax Act 1988) being in breach of one or more regulatory rules or requirements applicable to the Company or Associated Company. The Company may by notice also terminate the service agreement with immediate effect if the shareholders of the Company pass a resolution to remove or fail to elect Charles-Henri Sabet in accordance with the Articles. Charles-Henri Sabet is entitled to 40 days' holiday in each holiday year and LCG will fund Critical Illness Cover for Charles-Henri Sabet for the full pay for the first 3 months of illness and for 80% of pay for the next 21 months of illness.

Rule 9 of the Takeover Code

The terms of the Financing give rise to certain considerations under the Takeover Code. Brief details on the Takeover Panel, the Takeover Code and the protections they afford are described below.

The Takeover Code is issued and administered by the Takeover Panel. The Takeover Code applies to all takeovers and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company resident in the United Kingdom and to certain categories of private companies. The Company is such a public company and its shareholders are entitled to the protections afforded by the Takeover Code.

Under Rule 9.1 of the Takeover Code, except with the consent of the Panel, when:

(a) any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30% or more of the voting rights of a company; or

(b) any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested,

such person shall extend offers, to the holders of any class of equity share capital whether voting or non-voting and also to the holders of any other class of transferable securities carrying voting rights. An offer under Rule 9 must be made in cash or be accompanied by a cash alternative at not less than the highest price paid by the offeror or any person acting in concert with it for any interest in shares of that class during the 12 months prior to the announcement of that offer.

Under the Takeover Code, a concert party arises where persons acting together pursuant to an agreement or understanding (whether formal or informal) co-operate to obtain or consolidate control of that company.

Control means an interest, or interests, in shares carrying 30 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.

No dispensation from Rule 9 of the Takeover Code in relation to the Financing

Under Note 10 to Rule 9.1 of the Takeover Code, in general, the acquisition of securities convertible into, warrants in respect of, or options or other rights to subscribe for, new shares does not give rise to an obligation under Rule 9 of the Takeover Code to make a general offer, but the exercise of any conversion or subscription rights or options will be considered to be an acquisition of an interest in shares for the purposes of Rule 9.

The Panel will not normally require an offer to be made following the exercise of conversion of subscription rights provided that the issue of convertible securities, or rights to subscribe for new shares carrying voting rights, to the person exercising the rights is approved by a vote of independent shareholders in general meeting in the manner described in Note 1 on the Notes on the Dispensations from Rule 9 (i.e. the shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him pass an ordinary resolution on a poll at a general meeting approving such a waiver). Therefore, if any dispensation from Rule 9 is to be sought by the Concert Party, this will need to be done prior to the date on which the Convertible Loan Notes are issued not the date on which the Convertible Loan Notes are converted.

In connection with the Financing, the Concert Party has not sought or obtained dispensation from Rule 9 of the Takeover Code and therefore, in the event of any of the Concert Party becoming interested in shares representing 30% or more of the voting rights of the Company, the Concert Party would be obligated to make a general offer to existing Shareholders pursuant to Rule 9 of the Takeover Code.

Concert Party

GLIO has confirmed that as at 17 June 2014, the Concert Party does not hold any Ordinary Shares.

General Meeting

Set out at the end of the Circular is a notice convening the General Meeting to be held at 2nd Floor, 6 Devonshire Square, London, United Kingdom, EC2M 4AB at 9.00am on 3 July 2014 for the purposes of considering and, if thought fit, passing the Resolutions.

The Resolutions deal with the following matters:

Resolution 1 - Authority to allot shares in the Company or to grant rights to subscribe for, or convert any security into, shares in the Company

Resolution 1, which will be proposed as an ordinary resolution, authorises the Directors to allot shares or grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £47,250,000 in connection with the Financing. The authority granted by this Resolution will expire on the Long Stop Date in the event that the Convertible Loan Notes have not been issued by such date.

Resolution 2 - Disapplication of pre-emption rights

Resolution 2, which will be proposed as a special resolution, and will be conditional on the passing of Resolution 1 above, allows the Directors to allot equity securities up to an aggregate nominal amount of £47,250,000 on a non pre-emptive basis, provided this power is limited to the equity securities to be allotted in connection with the Financing. The authority granted by this Resolution will expire on the Long Stop Date in the event that the Convertible Loan Notes have not been issued by such date.

Recommendation

The Directors consider that the Financing, the Resolutions, and the proposed changes to the Board are fair and reasonable and in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their own beneficial holdings amounting, in aggregate, to 7,249,352 Existing Ordinary Shares, representing approximately 12.99 per cent. of the existing issued share capital of the Company.

Expected timetable of principal events