London Capital Group Holdings Regulatory News (LCG)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL

22 March 2011

London Capital Group Holdings plc

("London Capital" or the "Company" and together with its subsidiaries, the "Group")

Proposed Placing of New Ordinary Shares

and

Notice of General Meeting

Highlights

·; The board of London Capital is pleased to announce a placing to raise up to approximately £8.0 million by the issue of up to 13,333,333 new ordinary shares (the "Placing Shares") at 60 pence per share (the "Placing");

·; Whilst the Group has sufficient cash resources to meet its current liabilities, including a provision of £3.2m (£2.3 million net of tax) for the revised Financial Ombudsman Service ("FOS") assessment announced in the Group's results for the year ending 31 December 2010, it intends to use the proceeds of the Placing to ensure it has sufficient resources in place to satisfy the FSA's capital adequacy requirements. This will allow the Group to continue trading without disruption at current levels of activity. Further, the proceeds will allow management to accelerate the Group's international expansion strategy and to pursue additional growth opportunities;

·; Certain Directors have confirmed their intention to participate in the Placing (Simon Denham CEO - Rachel Woodford, Group Director, Marketing & Strategy & Frank Chapman, Non-Executive Director);

·; The Placing is subject to approval by Shareholders at a General Meeting to be held at 9:30 a.m. on 7 April 2011 at the offices of Allen & Overy LLP, One Bishops Square, London, E1 6AD;

·; The Group has started the year well and current trading leads the Board to be optimistic for the rest of the year. The spread betting division has delivered solid revenues in line with expectations which is very satisfactory given the low volatility conditions experienced in the first two months of the year. The FX division has seen a substantial increase in trading volumes and the newly launched CFD divisions are showing signs of breakeven much earlier than anticipated.

·; A circular containing the details of these proposals is being posted to shareholders today and will be available on the Company's website: www.londoncapitalgroup.com/circulars.html.

Simon Denham, Chief Executive, commented:

"Whilst the Group has sufficient cash resources to meet its current liabilities the proposed placing of approximately £8.0 million will enable London Capital to meet the FSA's capital adequacy requirements and ensure the continued operating effectiveness and profitability of the Group. The Board is entirely confident of the underlying strength of the business as is demonstrated by the intention of a number of Directors to make a substantial investment in the Placing."

These highlights should be read in conjunction with the full text of this announcement (the "Announcement").

This Announcement, and the information contained herein, is not for publication, release or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada or Japan or any other jurisdiction in which such publication or distribution would be unlawful. This Announcement is for information purposes only and does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company in the United States, Australia, Canada or Japan or any other jurisdiction in which such an offer or solicitation is unlawful.

The Placing Shares have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the "Securities Act") or under the securities laws of any state of the United States of America or qualify for distribution under any of the relevant securities laws of Canada, Australia or Japan, nor has any prospectus in relation to the Placing Shares been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance. Accordingly, subject to certain exceptions, the Placing Shares may not be, directly or indirectly, offered, sold, taken up, delivered or transferred in or into the United States of America, Canada, Australia or Japan. This Announcement does not constitute an offer, or its solicitation, to subscribe for or buy any of the Placing Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.

This Announcement has been issued by, and is the sole responsibility of, the Company.

Cenkos Securities plc ("Cenkos Securities"), which is authorised and regulated in the United Kingdom by the Financial Services Authority ("FSA"), is acting as nominated adviser, broker and financial adviser to the Company and no one else in connection with the Placing and will not be responsible to any other person for providing the protections afforded to customers of Cenkos Securities or for advising any other person on the arrangements described in this Announcement.

Cenkos Securities has not authorised the contents of, or any part of, this Announcement and no liability whatsoever is accepted by Cenkos Securities for the accuracy of any information or opinions contained in this Announcement or for the omission of any information. Cenkos Securities as nominated adviser and broker to the Company, owes certain responsibilities to the London Stock Exchange which are not owed to the Company or the Directors.

The distribution of this Announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company to inform themselves about, and to observe, such restrictions.

The statements contained in this Announcement that are not historical facts are ''forward-looking'' statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are typically identified by the use of forward-looking terminology such as ''believes'', ''expects'', ''may'', ''will'', ''could'', ''should'', ''intends'', ''estimates'', ''plans'', ''assumes'' or ''anticipates'' or the negative of such words or other variations of them or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In addition, from time to time, the Company or its representatives have made or may make forward-looking statements orally or in writing. Such forward-looking statements may be included in, but are not limited to, press releases or oral statements made by or with the approval of one of the Company's authorised executive officers. These forward-looking statements and other statements contained in this Announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved. Actual events or results may differ materially as a result of risks and uncertainties facing the Company and its subsidiary undertakings. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this Announcement speak only as at the date of this Announcement. Except to the extent required by the FSA, the London Stock Exchange or applicable law, the Company will not necessarily update any of them in light of new information or future events and undertakes no duty to do so.

Any indication in this Announcement of the price at which ordinary shares have been bought or sold in the past cannot be relied upon as a guide to future performance. No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This Announcement does not constitute a recommendation regarding the Placing. The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares.

The Placing Shares will not be admitted to trading on any stock exchange other than the AIM Market of the London Stock Exchange plc.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS DIRECTED ONLY AT: (A) PERSONS WHO ARE QUALIFIED INVESTORS AS DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED ("FSMA"), BEING PERSONS FALLING WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE EU PROSPECTUS DIRECTIVE (WHICH MEANS DIRECTIVE 2003/71/EC AND INCLUDES ANY RELEVANT IMPLEMENTING DIRECTIVE MEASURE IN ANY MEMBER STATE) (THE "PROSPECTUS DIRECTIVE"); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR THE SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.

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

London Capital Group Holdings plc

Simon Denham, Chief Executive Officer

020 7456 7000

Cenkos Securities plc 

Nicholas Wells/Camilla Hume

020 7397 8900

Smithfield Consultants

John Kiely

020 7360 4900

Introduction

The Board of London Capital today announces that it proposes to raise up to approximately £8.0 million, before expenses, by way of a placing of up to 13,333,333 new Ordinary Shares at a placing price of 60 pence per share (the "Placing Price"), subject to the passing of the Resolutions at the General Meeting which is convened for 9.30 a.m. on 7 April 2011 (the "Placing").

The Company announced in its results for the year ending 31 December 2010 that the revised Financial Ombudsman Service ("FOS")assessment pertaining to commission rebating errors in the preparation of customer statements of a managed spot FX fund has resulted in the Group having to recognise a liability of £3.2 million during the year and disclose a further contingent liability of £3.2 million (in each case, £2.3 million net of tax).

Although the Group has sufficient cash resources to meet the above-mentioned liability, the Group's funding and capital plans are determined on a Group basis and in the event of crystallisation of the liability, the reduced capital available to the Group in the interim period would limit the Group's operations and ability to trade/generate profits. The Company therefore intends to use the proceeds of the Placing to ensure that it has sufficient resources in place to satisfy the FSA's capital adequacy requirements thereby enabling the Group to continue trading at its current levels.

The Placing is conditional, inter alia, upon the passing of resolutions by shareholders to authorise the Directors to allot the Placing Shares for cash on a non-pre-emptive basis. Accordingly, a General Meeting is being convened on 7 April 2011.

A circular containing the details of these proposals is being posted to shareholders today and will be available on the Company's website: www.londoncapitalgroup.com/circulars.html.

Background to and reasons for the Placing

In 2009, the Group made commission rebating errors whilst preparing the customer statements of a managed spot FX fund. The correction of these errors led to a series of complaints to the FOS. The Board reviewed the initial assessment from the FOS received on 18 October 2010 and concluded that the impact of the claims to the FOS would not be material to the business. A revised assessment was received on 11 February 2011, following which the Company made a regulatory news announcement on 14 February 2011. Whilst the Company believes that its actions did not directly cause any loss to the client, the revised assessment determined that the Company should repay the total losses incurred by the client of £0.1 million plus interest. The Company intends to challenge the revised assessment.

The Board has assessed that a gross provision before tax relief of £3.2 million should be booked and a contingent liability of £3.2 million should be disclosed in the Company's results for the year ended 31 December 2010. The Directors have made this assessment based on an analysis of the losses incurred in the fund attributable to clients under the protection of the FOS, the latest FOS assessment and the FOS's rules on compensation. Whilst the Directors are confident that the provision represents a best estimate of the implications of the latest FOS determination, there remains significant uncertainty as to the eventual financial outcome. The Group intends to challenge the adjudicator's assessment and, although the Directors are confident that there are grounds for challenge, the outcome of this process is uncertain. As a result of these variables, the timing of any such payment is also uncertain.

The Group's funding and capital plans are determined on a Group basis. Whilst the Group has sufficient cash resources to meet the above-mentioned liability should it crystallise, wholly or in part, the reduced capital available to the Group in the interim period would limit the Group's operations and ability to generate profits.

Taking into account the provision for the FOS claims, the regulatory capital resources of the Group as at 31 December 2010 were £11.4 million.

The Group's capital requirements fluctuate significantly depending on the residual market risk it retains from unhedged client positions. The Group has limits in place set by the Risk Committee which determine the level of market risk on an aggregate and individual protection basis it can take. A key determinant of the Group's profitability is the amount of risk it can take with respect to unhedged client positions. This is dependent on the capital resources at the Group's disposal.

If the Group had been utilising the full limit as set by the Risk Committee, it would have had a regulatory deficit at 31 December 2010.

The Board therefore intends to use the proceeds of the Placing to ensure the continued operating effectiveness and profitability of the Group.

Current trading and prospects

The Group has started the year well and current trading leads the Board to be optimistic for the rest of the year. The spread betting division has delivered solid revenues in line with expectations which is very satisfactory given the low volatility conditions experienced in the first two months of the year. The FX division has seen a substantial increase in trading volumes and the newly launched CFD divisions are showing signs of breakeven much earlier than anticipated.

The Placing

The Company is proposing to raise up to approximately £8.0 million before expenses (or £7.57 million net of expenses), by way of the issue of the Placing Shares at the Placing Price, which represents a discount of approximately 12.5 per cent. to the closing middle market price of 68.6 pence per Existing Ordinary Share on 21 March 2011, being the last practicable date prior to the publication of this Announcement. Assuming the Placing is fully subscribed, the Placing Shares would represent approximately 25.1 per cent. of the Company's issued share capital immediately following Admission.

Certain of the Directors have confirmed their intention to participate in the Placing but are permitted to do so only after the release of the Company's annual results for the financial year ending 31 December 2010. Simon Denham, Chief Executive Officer, has indicated his intention to subscribe for 1,333,333 Placing Shares, Rachel Woodford, Group Director, Marketing and Strategy, has indicated her intention to subscribe for 1,000,000 Placing Shares and Frank Chapman, Non-Executive Director, has indicated his intention to subscribe for 500,000 Placing Shares.

The Placing is conditional upon:

·; the passing of the Resolutions as set out in the notice convening the General Meeting;

·; the Placing Agreement having become unconditional in all respects and not having been terminated; and

·; Admission.

The Placing is not being underwritten.

The Placing Agreement

Cenkos Securities has entered into the Placing Agreement with the Company under which it has agreed to use its reasonable endeavours, as agent for the Company, to procure placees for the Placing Shares.

The placing of the Placing Shares is conditional upon, inter alia, the Resolutions being duly passed at the General Meeting and Admission becoming effective on or before 8:00 a.m. on 11 April 2011 or such later time and/or date as the Company and Cenkos Securities may agree, but in any event by no later than 8:00 a.m. on 26 April 2011. The Placing Agreement contains warranties from the Company in favour of Cenkos Securities in relation to, inter alia, the accuracy of the information in this Announcement and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Cenkos Securities in relation to certain liabilities it may incur in respect of the Placing. Cenkos Securities has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties.

The payment of certain fees and commissions payable to Cenkos Securities in relation to its obligations under the Placing Agreement shall be satisfied by the issue and allotment of Ordinary Shares to Cenkos Securities. These Ordinary Shares will form part of the Placing Shares. The issue and allotment of such Ordinary Shares shall be subject to the satisfaction or waiver of the conditions set out in the Placing Agreement, and the Placing Agreement not having been terminated.

Dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8:00 a.m. on 11 April 2011.

The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Related party transaction

As at 21 March 2011 (the latest practicable date prior to the publication of this Announcement), Simon Denham, Rachel Woodford and Frank Chapman held 5,967,720, 3,365,000 and 4,000,000 Ordinary Shares respectively representing approximately 15.0, 8.6 and 10.0 per cent. of the Existing Ordinary Shares respectively. As stated above, these Directors have indicated their intention to subscribe for Placing Shares. Under the AIM Rules, as Directors of the Company, Simon Denham, Rachel Woodford and Frank Chapman are each a related party of the Company and the intended subscription by them for Placing Shares would constitute a related party transaction if the numbers of Placing Shares subscribed by all those Directors were aggregated. Where a company enters into a related party transaction, under the AIM Rules the independent directors of the company are required, after consulting with the company's nominated adviser, to state whether, in their opinion, the transaction is fair and reasonable in so far as its shareholders are concerned. Having consulted with Cenkos Securities, the Company's nominated adviser, the Independent Directors believe that the participation by Simon Denham, Rachel Woodford and Frank Chapman in the Placing would be fair and reasonable in so far as Shareholders are concerned.

Lock-In Deed

In connection with the Placing, should Simon Denham, Rachel Woodford and Frank Chapman agree to subscribe for Placing Shares, they will enter into the Lock-In Deed with the Company and Cenkos Securities. Pursuant to the Lock-In Deed, each of those Directors would give undertakings not to dispose of or transfer any Ordinary Shares (including any Placing Shares allotted to them) in which they are interested, or any rights over or to acquire the same, in each case for a period of 12 months from Admission and subject to certain exceptions (including where any such disposal or transfer is made with the prior written consent of Cenkos Securities).

Expected timetable of principal events

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

Neither the content of the Company's website nor the content of any other website accessible from hyperlinks on the Company's website is incorporated into, or forms part of, this Announcement.