Lms Capital Regulatory News (LMS)

19 Jun 2006 07:02

Leo Capital Plc19 June 2006 19 June 2006 Leo Capital plc ("Leo Capital" or "The Company") Tender Offer to purchase Shares of Leo Capital up to a maximum value of £35 million Leo Capital announces that a tender offer (the "Tender Offer") document (the "Circular") will be posted to shareholders today. In a document issued on 12 April 2006 in connection with the Company's admissionto trading on AIM, which was completed on Monday 12 June 2006, Leo Capitalannounced that it intended to use part of the cash it received pursuant to thedemerger from London Merchant Securities plc to fund a Tender Offer torepurchase its shares following admission to trading. Leo Capital also statedthat the aggregate amount of the Tender Offer would be determined by the boardshortly after admission but would not exceed £50 million. Since admission, the Board has carefully considered market conditions, tradingin the Company's shares, shareholder feedback and alternative investmentopportunities and has decided to: • utilise an aggregate amount of up to £35 million to purchase sharespursuant to the Tender Offer; and • seek authority from shareholders to make general market purchases ofup to 14.99 per cent. of its issued share capital following completion of theTender Offer, provided that such authority will not be exercised if the RayneConcert Party interests in the share capital of the Company, following suchexercise, exceeds 49.99 per cent. The Board believes that a combination of these buy back plans will provide theCompany with greater flexibility in managing its investment objectives, cashbalances, shareholder base and, ultimately, maximise shareholder value. Under the terms of the Tender Offer, shareholders in Leo Capital are invited totender shares at a range of discounts to the Company's net asset value ("NAV")of 20 per cent. to 30 per cent. The NAV will be recalculated on 12 July inaccordance with the provisions set out in the Circular. The Tender Offer is subject to, inter alia, shareholder approval, includingapproval of the waiver by the Panel of the requirement under Rule 9 of the CityCode for the Concert Party to make a general offer to the shareholders of theCompany, which will be sought at an extraordinary general meeting ("EGM") to beheld on 13 July 2006. If the Tender Offer is approved at the EGM, settlement ofthe Tender Offer is expected to take place on 19 July 2006. Full details of the Tender Offer timetable, mechanics and settlement procedure,as well as the authority to make market purchases, are set out in the Circularwhich is being posted to shareholders today, together with a notice of the EGM. At the same time, the Company is filing today initial accounts (within themeaning of Section 273 of the Companies Act 1985) with the registrar ofcompanies for the period to 12 June 2006 for the purposes of evidencing that ithas sufficient distributable reserves to implement the Tender Offer. Enquiries Leo Capital plc 020 7935 3555Robbie Rayne Acting Chief Executive OfficerTony Sweet Chief Financial Officer JPMorgan Cazenove 020 7588 2828 Michael Wentworth-Stanley Angus Gordon Lennox Roger Clarke Rothschild 020 7280 5000 Alex Midgen Duncan Wilmer Dominic Epton JPMorgan Cazenove Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting joint financial adviserand corporate broker to Leo Capital plc and no-one else and will not beresponsible to anyone other than Leo Capital plc for providing the protectionsafforded to clients of JPMorgan Cazenove Limited nor for providing advice to anyother person in relation to the Tender Offer nor any other matter referred to inthe Circular. N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting as lead financial adviserand nominated adviser to Leo Capital plc and no-one else and will not beresponsible to anyone other than Leo Capital plc for providing the protectionsafforded to customers of N M Rothschild & Sons Limited nor for providing adviceto any other person in relation to the Tender Offer nor any other matterreferred to in the Circular. The contents of this announcement which have been prepared by and are the soleresponsibility of Leo Capital have been approved by JPMorgan Cazenove Limitedand by N M Rothschild & Sons Limited solely for the purposes of section 21(2)(b)of the Financial Services and Markets Act 2000. The distribution of this announcement in certain jurisdictions may be restrictedby law. No action has been or will be taken by Leo Capital, JPMorgan CazenoveLimited or N M Rothschild & Sons Limited to permit a public offering of theshares of Leo Capital or to permit the possession or distribution of thisannouncement in any jurisdiction where action for that purpose may be required.Accordingly, this announcement may not be distributed or published in anyjurisdiction except under circumstances that will result in compliance with anyapplicable laws and regulations. Persons into whose possession this announcementcomes should inform themselves about and observe any such restrictions. Anyfailure to comply with these restrictions may constitute a violation of thesecurities law of any such jurisdictions. The Tender Offer is not being made directly or indirectly in or into or by useof mails or by any means or instrumentality (including, without limitation,facsimile transmission, telex and telephone) of interstate or foreign commerce,or any facility of a national securities exchange of Australia, and cannot beaccepted by any such use, means, instrumentality or facility or from withinAustralia. Investors should rely only on the information in the Circular. No person hasbeen authorised to give any information or make any representations other thanthose contained in the Circular and, if given or made, such information orrepresentations must not be relied on as having been authorised by the Companyor JPMorgan Cazenove Limited or N M Rothschild & Sons Limited. The delivery ofthis document shall not, under any circumstances, create any implication thatthere has been no change in the affairs of the Group since, or that theinformation contained herein is correct at any time subsequent to, the date ofthe Circular. The Tender Offer is being made for securities of an English company, andShareholders in the United States should be aware that the disclosure documentsrelating to the Tender Offer have been prepared in accordance with thedisclosure requirements for an AIM listed company and the City Code in respectof the Resolutions to approve the waivers granted by the Panel under Rule 9 ofthe City Code, the format and style, all of which differ from those in theUnited States. In addition, the financial information relating to the Investment Divisionreproduced in this document is presented in pounds sterling and has beenprepared in accordance with United Kingdom generally accepted accountingprinciples and thus may not be comparable to financial statements of UnitedStates companies or companies whose financial statements are prepared inaccordance with United States generally accepted accounting principles. Also,the settlement procedures with respect to the Tender Offer will differ from USdomestic tender offer procedures in certain material respects, particularly withregard to the date of payment. Leo Capital is organised under the laws of England and Wales. All orsubstantially all of its directors are residents of countries other than theUnited States. As a result, it may not be possible for Shareholders in theUnited States to effect service of process within the United States upon LeoCapital or such directors or to enforce against any of them judgements of theUnited States predicated upon the civil liability provisions of the federalsecurities laws of the United States. Shareholders in the United States are urged to consult their own tax advisersbefore tendering their Shares under the Tender Offer. Shareholders should be aware that, in accordance with normal UK practice,JPMorgan Cazenove will continue to act as a market maker in the Shares on AIMduring the duration of the Tender Offer. Pursuant to this activity, JPMorganCazenove may effect, or make arrangements to effect, sales and purchases ofShares during the duration of the Tender Offer, otherwise than pursuant to theTender Offer. Cautionary note regarding forward-looking statements: The Circular containsforward-looking statements that involve risks and uncertainties and relate tothe expectations, beliefs, hopes, plans, intentions or strategies regarding thefuture of Leo Capital. Factors that would cause actual results to differmaterially from those described in the Circular include those factors describedin Part 1, Risk Factors. All forward-looking statements included in theCircular are based upon information available to the Company as of the date ofthis document, and neither the Company, JPMorgan Cazenove Limited nor Cazenove,Inc., (on behalf of JPMorgan Cazenove Limited), (nor any of their respectiveofficers, directors, employees or advisers) nor N M Rothschild & Sons Limited(nor any of their respective officers, directors, employees or advisers) assumesany obligation to update any such forward-looking statements. These statementsare not guarantees of future performance. Actual results could differmaterially from the Company's current expectations. The Tender Offer will be made to Shareholders outside the United States byJPMorgan Cazenove Limited and to Shareholders in the United States by Cazenove,Inc., (on behalf of JPMorgan Cazenove Limited). Accordingly, in the Circular,all references to JPMorgan Cazenove Limited in relation to the Tender Offer orin relation to selling the Shares to the Company pursuant to the RepurchaseAgreement shall, where appropriate, be deemed to be a reference to Cazenove,Inc., (on behalf of JPMorgan Cazenove Limited). Any tenders made by a Director and/or a connected person (as defined within PartX of the Act) shall not be irrevocable and will not bind any such Director and/or connected person (as defined within Part X of the Act) and shall onlyconstitute an indication of such persons' intention to tender their Shares andall references in this announcement to Shares being tendered by any such personsor to the Tender Offer being made to such persons shall be construedaccordingly. Upon Resolution 3 being passed JPMorgan Cazenove reserves theright to treat such indications of intention as binding on such persons unlessprior to the passing of Resolution 3 Capita Registrars has received writtennotice from such persons withdrawing their indication(s) of interest. Leo Capital plc ("Leo Capital" or "The Company") Tender Offer to purchase Shares of Leo Capital up to a maximum value of £35 million 1. Introduction On 12 April 2006, the Company issued an admission document relating to theadmission of the Shares to trading on AIM. The Company was admitted to tradingon AIM on 12 June 2006. The Board is conscious that certain Shareholders who received Shares pursuant tothe Demerger may wish to sell their Shares following the Demerger, for example,because they are subject to restrictions regarding the holding of AIM-quotedshares or because they are specialist investors in property companies.Accordingly, as noted in the AIM Admission Document, the Board wishes to providean opportunity for Shareholders, who so wish, to realise their investment in theCompany. In addition, this will provide a tangible benefit for thoseShareholders who choose to retain all or any of their Shares by providing a NAVuplift for such Shareholders. The Board also stated in the AIM Admission Document that it would make adecision as to the aggregate amount of the proposed tender offer followingAdmission but that the aggregate amount of such tender offer would not exceed£50 million. The Board has carefully considered the prevailing marketconditions, trading in Shares since Admission, shareholder feedback andalternative investment opportunities at the current time. As a result of these considerations, the Board has decided that: (a) a tender offer of an aggregate amount of up to £35 million;and (b) making use of the market purchase authority (assuming thatthe general authority being sought at the Extraordinary General Meeting isgranted by Shareholders) to deploy further capital to buy back Shares over timeat the discretion of the Board, will provide the Company with greater flexibility in managing its investmentobjectives, cash balances and shareholder base and, ultimately, will maximiseshareholder value. The Tender Offer will be made by JPMorgan Cazenove and, in the United States, byCazenove, Inc. (on behalf of JPMorgan Cazenove), and will be open to allShareholders (except for those Overseas Shareholders in a Restricted Territory).JPMorgan Cazenove (and, as the case may be, Cazenove Inc. (on behalf of JPMorganCazenove)) will acquire the Shares from Shareholders pursuant to the TenderOffer and then sell such Shares to Leo Capital for cancellation. 2. Information on the Group The Group's portfolio, investment objectives and strategy The Group's portfolio is diversified, both in relation to investment type and inrelation to geography, with holdings in both quoted and unquoted companies andfund investments in the UK and the US. Furthermore, it is spread acrossdifferent sectors (primarily the applied technology, energy and industrial,healthcare and medical, media and leisure and financial services sectors). As at 31 March 2006, the value of the portfolio of the Investment Division was£226.6 million (audited under UK GAAP). The objective of the Company is to achieve medium-to-long-term growth through adiversified portfolio of investments in public and private companies and funds. In order to implement this objective, the Company's strategy is to maintain andbuild on the existing portfolio by investing in and actively managingsignificant stakes in a diversified range of investments. In pursuing its strategy, the Company will continue to act as a supportivelong-term investor, seek opportunities to obtain significant interests inportfolio companies, use investments in funds to complement the Company's coredirect investment focus and to explore new markets and use quoted securities tomaintain investment exposure whilst providing liquidity and as a means ofidentifying more substantial direct investments. Due to the non-income-producing nature of current investments, the Group relieson proceeds from realisations to generate cash flow and profits. The Companydoes not currently intend to use debt as part of its permanent capitalstructure. However, the Board retains the flexibility to utilise gearing incircumstances considered beneficial to Shareholders. As at the date of this announcement, the Company does not have any employeessince services are secured through certain secondment and transitional servicesarrangements with London Merchant Securities ("LMS"). Market opportunity, prospects, competition and trends The Group currently invests in the UK and the US through quoted securities,unquoted companies and funds. Although the Group is a relatively small player in each of these areas, theCompany believes that it has the following competitive strengths: (a) the Group's expertise and experience in the energy andindustrial markets: it is a strategic investor in the energy and industrialsector with current holdings in Energy Cranes International Limited, WeatherfordInternational Ltd, ITS Engineered Systems, Inc. and Grant Prideco, Inc.; (b) in small cap public equity investing in the US, the Groupleverages its small company experience and its knowledge of venture capitalbacked companies to identify and evaluate growth stocks; and (c) in the US and the UK, the Group participates in the broaderventure and private equity markets in a diversified way, through its investmentsin 35 funds (30 in the US and 5 in the UK). The Company will compete with both private equity groups and strategic investorsin specific sectors, many or most of whom may be larger than the Company.However, the Company believes that in pursuing its investment strategy, a keycompetitive advantage that will drive performance is the Company's strategy tobe a long-term supportive investor. The Company is seeing and expects to continue to review a good pipeline ofinvestment opportunities consistent with the Company's strategy. In the short-to-medium-term, the Company will have funding flexibility to investin attractive investment opportunities by utilising a combination of its cashbalances and proceeds from realisations of existing investments. 3. The Tender Offer Full details of the Tender Offer, including the terms and conditions on which itis made, are set out in the Circular and also, in the case of certificatedShares only, in the Tender Form. Shareholders do not have to tender any Sharesif they do not wish to do so but once submitted, subject to the provisions setout in the Circular a Tender Form or TTE instruction cannot be withdrawn and isirrevocable. Accordingly, such Shares may not be sold, transferred, charged orotherwise disposed of. The Tender Offer is conditional, amongst other things, on the passing ofResolutions 1, 2 and 3 set out in the notice of EGM, on the receipt of validtenders in respect of 3,290,015 Shares (representing 1 per cent. of the issuedshare capital of the Company as at close of business on 15 June 2006) by theClosing Date and on the other conditions specified in the Circular. The TenderOffer is only available to Shareholders (other than certain OverseasShareholders in a Restricted Territory) on the Register on the Record Date andin respect of their Shares held on the Record Date. The Tender Offer involves the following: (a) JPMorgan Cazenove will purchase the maximum number of Shareshaving a total value not exceeding £35 million (based on the Strike Price) orsuch lesser number of Shares as are validly tendered pursuant to the TenderOffer and then sell such Shares to Leo Capital for cancellation. (b) All Shareholders (other than certain Overseas Shareholders ina Restricted Territory) are being given the opportunity to participate in theTender Offer. (c) If valid, tenders will be accepted at discounts to the TenderNAV per Share in the range of 20 per cent. to 30 per cent. in increments of 1per cent., as set out in the Tender Form, in the case of certificated Sharesonly. (d) Shareholders can tender any or all of their Shares under theTender Offer in the following ways: (i) as a Strike Price Tender; (ii) as a tender at a single discount to the Tender NAV perShare, being one of the discounts in the NAV Discount Range; and (iii) as a tender at different discounts to the Tender NAV perShare in the NAV Discount Range (including Strike Price Tenders). (e) All Shares will be purchased by JPMorgan Cazenove at the sameprice, the "Strike Price". The Strike Price will be calculated by reference tothe widest discount to the Tender NAV per Share within the NAV Discount Rangethat will enable JPMorgan Cazenove to purchase the maximum number of Shareshaving a total value not exceeding £35 million or such lesser number of Sharesas are validly tendered pursuant to the Tender Offer. (f) If the aggregate value of all Shares tendered is £35 millionor less, all Shares validly tendered will be accepted and purchased. (g) In the event that the Tender Offer is over-subscribed,tenders will be accepted in the order set out below: (i) all Shares tendered at a price below the Strike Price willbe accepted in full; and (ii) all Shares tendered at the Strike Price (including theStrike Price Tenders) will be scaled down pro-rata to the number of Sharestendered at the Strike Price (including the Strike Price Tenders), such that thetotal value of Shares purchased pursuant to the Tender Offer does not exceed £35million in aggregate. If fractions arise from scaling down, the number of Sharesaccepted shall be rounded down to the nearest whole Share. (h) Shares not validly tendered or tendered above the StrikePrice will not be purchased. (i) Shareholders do not have to tender their Shares if they donot wish to do so. (j) Any rights of Shareholders who choose not to tender theirShares will be unaffected. If, in the Board's opinion, it is no longer in the interests of the Company toproceed with the Tender Offer, the Tender Offer may be terminated by the Companyin accordance with provisions set out in the Circular. Shares will be purchased free of commissions and dealing charges. Successfullytendered Shares will be purchased by the Company and cancelled and will not rankfor any future dividends. The Pro Forma NAV per Share as at 31 March 2006 was approximately 90 penceassuming that the issued share capital of the Company on such date was329,001,513 (being equal to the issued share capital of the Company on 15 June2006 (being the latest practicable date prior to the publication of thisannouncement)). The Pro Forma NAV as at 31 March 2006 will be adjusted on theCalculation Date in accordance with the provisions set out in the Circular andthe adjusted Pro Forma NAV will be the Tender NAV. If, for example, the TenderNAV per Share was 90 pence and: the Strike Price were to be 63 pence (reflecting thewidest discount of 30 per cent. to the Tender NAV per Share), the Company wouldrepurchase up to 55,555,555 Shares, equating to approximately 16.89 per cent. ofthe current issued share capital of Leo Capital; or the Strike Price were to be 72 pence (reflecting theminimum discount to the Tender NAV per Share), the Company would repurchase48,611,111 million Shares, equating to approximately 14.78 per cent. of thecurrent issued share capital of Leo Capital. Implementation of the Tender Offer will require approval by Shareholders ofResolutions 1, 2 and 3 at the EGM which has been convened for 10.00 a.m. on 13July 2006 at JPMorgan Cazenove, 20 Moorgate, London, EC2R 2DA. The Tender Offer will be made to Shareholders outside the United States byJPMorgan Cazenove and to Shareholders in the United States by Cazenove, Inc. (onbehalf of JPMorgan Cazenove). Accordingly, in this document, all references toJPMorgan Cazenove in relation to the Tender Offer or in relation to selling theShares to the Company pursuant to the Repurchase Agreement shall, whereappropriate, be deemed to be a reference to Cazenove, Inc (on behalf of JPMorganCazenove). For the reasons mentioned in paragraph 7(c) of Part 2 of the Circular, anytenders made by a Director and/or connected person (as defined within Part X ofthe Act) shall not be irrevocable and will not bind any such Director and/orconnected person (as defined in Part X of the Act) and shall only constitute anindication of such person's intention to tender his/her Shares and allreferences in this announcement to Shares being tendered by any such persons orto the Tender Offer being made to such persons shall be construed accordingly.Upon Resolution 3 being passed, JPMorgan Cazenove reserves the right to treatsuch indications of intention as binding on such persons on the terms andconditions set out in the Circular unless, prior to the passing of Resolution 3,Capita Registrars has received written notice from such person(s) withdrawinghis/her indication(s) of intention. Shares will only be purchased pursuant to the Tender Offer if the interests inShares of the Concert Party, following any such purchase, do not exceed 46.70per cent. of the issued share capital of the Company following such a purchase. 4. General authority to purchase Shares The Board is also seeking a general authority at the EGM to make marketpurchases of Shares up to a maximum number equal to either (i) 14.99 per cent.of the issued Shares immediately following completion of the Tender Offer,provided that the maximum number of Shares to be bought back does not exceed11,900,000 Shares or (ii) if the Tender Offer lapses, 14.99 per cent. of theissued Shares on the date of the publication of this document, provided that themaximum number of Shares to be bought back does not exceed 49,350,000 Shares. The minimum price per Share which may be paid for any such market purchase willbe 10 pence. The maximum price will not exceed the higher of (i) 105 per cent.of the average middle market quotations for such Shares taken from the DailyOfficial List of the London Stock Exchange for the previous five business daysbefore the repurchase is made, (ii) the price of the last independent trade and(iii) the highest current independent bid on the trading venues where thepurchase is carried out. The authority will expire at the conclusion of the Annual General Meeting to beheld in 2007 or 15 months from the passing of the resolution and will only beexercised provided that the interests in Shares of the Concert Party, followingany such exercise, do not exceed 49.99 per cent. of the issued share capital ofthe Company if the Tender Offer completes or, if it does not complete, theinterests of the Concert Party, following any such exercise, do not exceed 44.63per cent. of the issued share capital of the Company. The authority to make market purchases of Shares is subject to the passing ofResolutions 4, 5 and 6. The Tender Offer is not conditional upon the passing ofResolutions 4, 5 or 6. 5. Intentions of the Directors 5.1 The Directors intend to continue to conduct the business ofthe Company in the same manner as it is currently conducted and there are noplans to introduce any substantial change in the business of the Group. As atthe date of this document, the Group does not have any employees. 5.2 Shareholders should note that none of the Directors intend totender their Shares pursuant to the Tender Offer. 5.3 Assuming that Resolutions 4, 5 and 6 are duly passed, theDirectors have no immediate intention of exercising the general authority tomake market purchases of Shares granted to the Company and would only do so ifthe Board believed that the buy-back of Shares, at the relevant time, would bein the best interests of the Company and would be likely to result in anincrease in the Net Asset Value per Share of the Company. The Board will alsoonly exercise such Market Purchase Authority if, following exercise of suchauthority, the interests in Shares of the Concert Party do not exceed 49.99 percent. of the issued share capital of the Company following such exercise if theTender Offer completes or, if it does not complete, if the interests in Sharesof the Concert Party do not exceed 44.63 per cent. following such exercise. 6. Extraordinary General Meeting The Tender Offer is subject to Shareholder approval of Resolutions 1, 2 and 3which are to be proposed at an EGM. The Circular contains a notice conveningthe EGM to be held at 10.00 a.m. on 13 July 2006 at JPMorgan Cazenove, 20Moorgate, London, London EC2R 2DA. Shareholders will be asked to pass thefollowing Resolutions: (a) Resolution 1, which is being proposed as an ordinaryresolution will, if passed, approve the waiver by the Panel of the requirementfor the members of the Concert Party to make a general offer, which wouldotherwise be required under Rule 9 of the City Code, for the Shares not owned bythe Concert Party, as a result of the purchase of the Shares by the Company fromJPMorgan Cazenove pursuant to the Tender Offer. However, the waiver will onlyapply if, following any purchase by the Company pursuant to the Tender Offer,the interests in Shares of the Concert Party do not exceed 46.70 per cent. ofthe issued share capital of the Company immediately following such purchase. All Independent Shareholders are entitled to vote on Resolution 1. As requiredby Rule 9 of the City Code, voting on Resolution 1 will be taken by way of apoll and will require the approval of more than 50 per cent. of the votes caston a poll by the Independent Shareholders. Further details about Rule 9 of theCity Code and this waiver is set out in the Circular. (b) Resolution 2, which is being proposed as a special resolutionwill, if passed, approve the Tender Offer. Resolution 2 specifies the maximumnumber of Shares which may be acquired pursuant to this authority and that theShares will be purchased pursuant to the Tender Offer at the Strike Price. Theauthority sought will expire at the conclusion of the Annual General Meeting tobe held in 2007 or if earlier on 12 October 2007. This special resolution willrequire the approval of a three-quarters majority of the votes cast at themeeting in respect of this resolution, whether such votes are cast in person orby proxy. Resolution 2 will be conditional upon Resolutions 1 and 3 beingpassed. (c) Resolution 3, which is being proposed as an ordinaryresolution will, if passed, approve purchases pursuant to the Tender Offer froma Director or persons connected (within the meaning of Part X of the Act) withsuch a Director for the purposes of section 320 of the Act. The Company will notbe able to enter into the Repurchase Agreement until this approval is obtained.This ordinary resolution will require the approval of more than 50 per cent. ofthe votes cast at the meeting in respect of this resolution, whether such votesare cast in person or by proxy. Resolution 3 will be conditional uponResolutions 1 and 2 being passed. The Tender Offer will not proceed unless Resolutions 1, 2 and 3 are passed. (d) Resolution 4, which is being proposed as an ordinaryresolution will, if passed, approve the waiver by the Panel of the requirementfor the members of the Concert Party to make a general offer, which wouldotherwise be required under Rule 9 of the City Code, for the Shares not owned bythe Concert Party, as a result of general market purchases of Shares being madeby the Company from Shareholders pursuant to the Market Purchase Authority.However, the waiver will be subject to the following limitations: (i) in the event that the Tender Offer is completed, the waiverwill only apply provided that the interests in Shares of the Concert Party donot exceed 49.99 per cent. of the issued share capital of the Companyimmediately following any general market purchase of Shares by the Companypursuant to the Market Purchase Authority; or (ii) in the event that the Tender Offer lapses, the waiver willonly apply provided that the interests in Shares of the Concert Party do notexceed 44.63 per cent. of the issued share capital of the Company immediatelyfollowing any general market purchase of Shares pursuant to the Market PurchaseAuthority. All Independent Shareholders are entitled to vote on Resolution 4. As requiredby Rule 9 of the City Code, voting on Resolution 4 will be taken by way of apoll and will require the approval of more than 50 per cent. of the votes caston a poll by the Independent Shareholders. Further details about Rule 9 of theCity Code and this waiver are set out in the Circular. (e) Resolution 5, which is being proposed as a special resolutionwill, if passed, give the Company the general authority to make market purchasesof Shares up to a maximum number equal to either (i) 14.99 per cent. of theissued Shares immediately following completion of the Tender Offer, providedthat the maximum number of Shares to be bought back by the Company shall notexceed 11,900,000 or (ii) if the Tender Offer lapses, 14.99 per cent. of theissued Shares on the date of the publication of this document, provided that themaximum number of Shares to be bought back by the Company shall not exceed49,350,000. Any such repurchases would be at prices to be determined by theDirectors although the terms of the resolution provide that such prices may notexceed the higher of (i) 105 per cent. of the average middle market quotationsfor such Shares taken from the Daily Official List of the London Stock Exchangefor the previous five business days before the repurchase is made, (ii) theprice of the last independent trade and (iii) the highest current independentbid on the trading venues where the purchase is carried out and the minimumprice must not be less than 10 pence per Share (being the nominal value of aShare). The authority will expire at the conclusion of the Annual GeneralMeeting to be held in 2007 or, if earlier, on 12 October 2007. This authorityshall be in addition to the authority conferred by Resolution 2. Resolution 5will be conditional upon Resolutions 4 and 6 being passed. (f) Resolution 6, which is being proposed as an ordinaryresolution will, if passed, approve purchases pursuant to the exercise of theMarket Purchase Authority from a Director and persons connected (within themeaning of Part X of the Act) with such a Director for the purposes of section320 of the Act. This ordinary resolution will require the approval of more than50 per cent. of the votes cast at the meeting in respect of this resolution,whether such votes are cast in person or by proxy. Resolution 6 will beconditional upon Resolutions 4 and 5 being passed. The Market Purchase Authority will not proceed unless Resolutions 4, 5 and 6 arepassed. DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise. Act the Companies Act 1985, as amended Admission the admission to trading on AIM of the Shares which became effective on 12 June 2006 AIM the Alternative Investment Market of the London Stock Exchange AIM Admission Document the AIM admission document of the Company issued on 12 April 2006 AIM Rules the rules for companies whose securities are traded on AIM and their nominated advisers published by the London Stock Exchange as amended from time to time ARAN message a registrar's adjustment message (as defined in the CREST manual issued by CRESTCo) Board or Directors the board of directors of Leo Capital Business Day any day other than a Saturday, Sunday or public holiday in England and Wales Calculation Date 12 July 2006certificated or in certificated form not in uncertificated form City Code The Takeover Code Closing Date 3.00 p.m. on 11 July 2006, the time and date on which the Tender Offer closes Combined Code The corporate governance code issued by The Financial Reporting Council Concert Party that group of Shareholders whom the Panel has confirmed are deemed to act in concert for the purposes of the City Code, details of which are set out in the Circular CREST the relevant system (as defined in the CREST Regulations) in respect of which CRESTCo is the Operator (as defined in the CREST Regulations) CRESTCo CRESTCo Limited CREST member a person who has been admitted by CRESTCo as a system-member (as defined in the CREST Regulations) CREST participant a person who is, in relation to CREST, a system participant (as defined in the CREST Regulations) CREST proxy instruction has the meaning given to it in the notice of the EGM at the end of the Circular CREST Regulations the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755) CREST sponsor a CREST participant admitted to CREST as a CREST sponsor being a sponsoring system-participant (as defined in the CREST Regulations) CREST sponsored member a CREST member admitted to CREST as a sponsored member Demerger the demerger of the Investment Division from the LMS Group to the Group that became effective on 12 June 2006 Demerger Agreement The demerger agreement entered into on 12 April 2006 between LMS, Leo Capital and Leo Holdings derivatives includes any financial product whose value, in whole or in part, is determined directly or indirectly by reference to the price of an underlying security but which does not include the possibility of delivery of such underlying security Directors the directors of the Company Electronic Tender shall have the meaning ascribed to it in paragraph 4.3 of Part 4 of the Circular Extraordinary General Meeting or EGM the Extraordinary General Meeting of Leo Capital convened for 10.00 a.m. on 13 July 2006 (or any adjournment thereof), notice of which is set out at the end of the Circular Form of Proxy the form of proxy accompanying the Circular for use by Shareholders in connection with the EGM Group the Company and its subsidiaries and subsidiary undertakings from time to time HMRC Her Majesty's Revenue & Customs ICTA Income and Corporation Taxes Act 1988 Independent Directors Jonathan Agnew, Tony Sweet, John Barnsley, Bernard Duroc-Danner and Richard Christou Independent Shareholders the Shareholders other than any shareholder who is a member of the Concert Party Inflexion Inflexion plc, a company registered in England and Wales with company number 3918793 and registered address at 43 Welbeck Street, London W1G 8DX (currently in members' voluntary liquidation) Investment Division LMS Capital Limited and each of its subsidiaries and subsidiary undertakings and its direct or indirect interests in quoted and unquoted companies and funds JPMorgan Cazenove JPMorgan Cazenove Limited KPMG KPMG Audit Plc Leo Capital or the Company Leo Capital plc, a company registered in England and Wales with company number 5746555 and registered address at Carlton House, 33 Robert Adam Street, London W1U 3HR Leo Facility Agreement the US$53 million revolving facility agreement entered into on 11 April 2006 between the Company, LMS Capital Limited, Westpool Investment Trust plc, LMS Capital (Bermuda) Limited and The Royal Bank of Scotland plc Leo Holdings Leo Capital Holdings Limited, a company registered in England and Wales with company number 5663657 and registered address at Carlton House, 33 Robert Adam Street, London W1U 3HR Listing Rules the listing rules of the Financial Services Authority acting in its capacity as the competent authority for listing under Part VI of the Financial Services and Markets Act 2000 LMS London Merchant Securities plc, a company registered in England and Wales with company number 7064 and registered address Carlton House, 33 Robert Adam Street, London W1U 3HR LMS Circular the circular of LMS issued on 12 April 2006 LMS Carried Interest Plan the LMS Carried Interest Plan approved by shareholders of LMS on 26 July 2001 LMS Group LMS and its subsidiary undertakings from time to time London Stock Exchange London Stock Exchange plc Market Purchase Authority the authority to make general market purchases of Shares to be sought by the Company pursuant to Resolution 5 set out in the notice contained in the Circular member account ID the identification code or number attached to any member account in CREST NAV Discount Range the range of discounts to the Tender NAV per Share from which the Strike Price will be determined Net Asset Value the aggregate value of the Company's net assets from time to time Official List the Official List of the UK Listing Authority, a division of the Financial Services Authority, acting as competent authority for the purpose of the Part VI of the Financial Services and Markets Act 2000 Ordinary Shareholder or Shareholder a holder of Shares Overseas Shareholder an Ordinary Shareholder who is a resident in, or citizen of, a jurisdiction outside the United Kingdom Panel The Panel on Takeovers and Mergers participant ID the identification code or membership number used in CREST to identify a particular CREST member or other CREST participant Pro Forma NAV the pro forma net assets of the Group on demerger (as set out in the Pro Forma Balance Sheet as at 31 March 2006 in the Circular) being £295.5 million Property Division (in respect of the period prior to the Demerger becoming effective) LMS and each of its subsidiaries and subsidiary undertakings other than the Investment Division or (in respect of the period after the Demerger becoming effective) LMS and each of its subsidiaries and subsidiary undertakings Proposals the Tender Offer, the Market Purchase Authority and the related waivers granted by the Panel of the obligation to make an offer under Rule 9 of the City Code as result of the Tender Offer and/or the exercise of the Market Purchase Authority and the authorities being sought to buyback Shares pursuant to the Tender Offer and/or the Market Purchase Authority from Directors and/or connected persons (as defined within Part X of the Act). Record Date 5.00 p.m. on 11 July 2006 Register the register of members of Leo Capital Registrars or Capita Registrars Capita IRG Plc trading as Capita Registrars Regulatory Information Service a regulatory information service approved by the London Stock Exchange for the distribution to the public of AIM announcements relevant securities Shares and securities convertible into, or exchangeable for, rights to subscribe for, options in respect of, and derivatives to, Shares and "interests in relevant securities" shall have the meaning set out in the City Code Repurchase Agreement the agreement to be entered between the Company and JPMorgan Cazenove regarding the purchase of the Shares, acquired by JPMorgan Cazenove and Cazenove, Inc. (on behalf of JPMorgan Cazenove) from Shareholders pursuant to the Tender Offer, by the Company Resolutions the resolutions to be proposed at the EGM to approve the Proposals Resolution 1 the ordinary resolution to be proposed at the EGM to approve the waiver granted by the Panel, in respect of the Tender Offer, of the obligation to make an offer under Rule 9 of the City Code Resolution 2 the special resolution to be proposed at the EGM to authorise, subject to the passing of Resolution 1 and 3, the purchase of Shares pursuant to the Tender Offer Resolution 3 the ordinary resolution to be proposed at the EGM to approve, subject to the passing of Resolutions 1 and 2, purchases pursuant to the Tender Offer from a Director or persons connected (for the purposes of Part X of the Act) with such a Director for the purposes of section 320 of the Act Resolution 4 the ordinary resolution to be proposed at the EGM to approve the waiver granted by the Panel of the obligation to make an offer under Rule 9 of the City Code as a result of any exercise of the Market Purchase Authority Resolution 5 the special resolution, to be proposed at the EGM, to authorise, subject to the passing of Resolution 4 and 6, the making by the Company of market purchases of Shares Resolution 6 the ordinary resolution to be proposed at the EGM to approve, subject to the passing of Resolutions 4 and 5, purchases pursuant to the exercise of the Market Purchase Authority from a Director and persons connected (for the purposes of Part X of the Act) with such a Director for the purposes of section 320 of the Act. Restricted Territory Australia or any state thereof as relevant Rothschild N M Rothschild & Sons Limited Secondment Agreements the agreements between (i) LMS Services Limited and (ii) the Company to second Robert Rayne, Tony Sweet and Martin Pexton to the Company Secondment Letters the letters between (i) LMS Services Limited, the Company and Robert Rayne; (ii) LMS Services Limited, the Company and Tony Sweet and (iii) LMS Services Limited, the Company and Martin Pexton, in each case setting out the personal terms relating to the secondment of Robert Rayne, Tony Sweet or Martin Pexton as relevant Shares ordinary shares of 10 pence each in the share capital of the Company Sterling or £ the legal currency of England and Wales Strike Price the price at which JPMorgan Cazenove will purchase Shares pursuant to the Tender Offer, determined according to the provisions set out in the Circular Strike Price Tender a tender of Shares for sale at the Strike Price Tender Form the tender form accompanying this document for use in connection with the Tender Offer by Shareholders who hold Shares in certificated form Tender NAV the Pro Forma NAV as at 31 March 2006, as adjusted to the Calculation Date in accordance with paragraph 3 of Part 4 of the Circular Tender Offer the invitation by JPMorgan Cazenove (outside the US) and Cazenove, Inc. (on behalf of JPMorgan Cazenove) (in the US) to Shareholders (other than certain Overseas Shareholders) to tender Shares on the terms and subject to the conditions set out in the Circular and also, in the case of certificated Shares, the Tender Form TFE instruction a transfer from escrow instruction (as defined by the CREST manual issued by CRESTCo) TTE instruction a transfer to escrow instruction (as defined by the CREST manual issued by CRESTCo) Transitional Services Agreement the transitional services agreement dated 12 June 2006 between LMS, LMS Services Limited and the Company UK GAAP generally accepted accounting principles in the United Kingdom uncertificated or in uncertificated form recorded on the Register as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST United Kingdom or UK the United Kingdom of Great Britain and Northern Ireland United States or US the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia. 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