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Octagonal PLC (OCT)

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Friday 12 June, 2015

Octagonal PLC

Proposed Acquisition and Shareholder Circular

RNS Number : 9793P
Octagonal PLC
12 June 2015
 



Octagonal Plc / Index: AIM / TIDM: OCT

 

 

7.00am on 12 June 2015

 

Octagonal Plc ('Octagonal' or the 'Company')

 

Proposed Acquisition of Global Investment Strategy

Proposed change of Board

Share Reorganisation

Posting of AIM Admission Document to Shareholders

Notice of General Meeting

Change of Nominated Adviser and Broker

 

 

Octagonal, the AIM traded investing company focused on opportunities within the financial services' sector, is pleased to announce that, following the Company's announcement on 10 April 2014 that it had completed the acquisition of a 9.97 per cent. interest in Global Investment Strategy UK Limited (''Global Investment Strategy'' or ''GIS''), the Company today announces it has entered into conditional agreements to acquire the issued share capital of GIS that it does not currently own. The Acquisition, which is in line with the Company's investing policy will, however, result in a fundamental change in the business of the Company and will constitute a reverse takeover under the AIM Rules. As a consequence, the Directors are seeking Shareholder approval for the Acquisition at the General Meeting, notice of which is set out at the end of this announcement. The Company's Admission document has been posted to Shareholders overnight.

 

Should the Acquisition complete, the Enlarged Group will become a financial services company, which provides settlement and safe custody services to smaller institutional funds, family wealth offices and high net worth investors along with other ancillary services.

 

Global Investment Strategy is a financial services business offering a wide range of services to institutional, family office and high net worth clients. Its main business activities, accounting for approximately 80 per cent. of its 2014 turnover, focuses on providing global settlement and safe custody services for institutional clients, family wealth offices and high net worth individuals which it has been offering in its current form since 2011. It also offers a range of stockbroking services, including execution-only trading, discretionary fund management, direct market access online trading, equity capital markets, corporate finance and corporate broking. GIS's global settlement and safe custody clearing business alone currently transacts for over 600 clients, including global hedge funds and family wealth offices. GIS manages on average over 6,000 transactions per month with quarterly settlement values exceeding £2 billion on behalf of global institutional accounts.

 

In conjunction with the Acquisition, the Company has raised £1,700,000 (before expenses) by means of the Subscription which will be used to part fund the Acquisition and for general working capital requirements.

 

Again and in conjunction with the Acquisition the Company proposes to change the Board, further details of which are set out in Appendix 1 and 3 of this announcement. As a result, on Admission, the Board will comprise Grant Roberts (Chairman), John Gunn (CEO), Nilesh Jagatia (Finance Director) and Martin Davison (Non-Executive Director).

 

Following the implementation of the Proposals, which are conditional, inter alia, on the approval of Independent Shareholders voting on a poll at the General Meeting of the waiver of any obligations of the Concert Party to make a general offer to shareholders pursuant to Rule 9 of the Takeover Code, certain Shareholders of the Enlarged Group who are deemed to be acting in concert will hold 345,336,133 New Ordinary Shares, representing 61.64 per cent. of the Enlarged Issued Share Capital pursuant to the terms of the Acquisition. This Concert Party comprises the Vendors, being John Gunn, Suki Gunn and Corstone LLP as well as David Lenigas and Nilesh Jagatia.

 

Under Rule 9 of the Takeover Code, the Concert Party would normally be obliged to make a general offer to all Shareholders (other than the Concert Party) to acquire their New Ordinary Shares. The Panel has agreed to waive this obligation of the Concert Party to make a general offer that would otherwise arise as a result of its resultant shareholding in the Company, subject to the approval of the Independent Shareholders (on a poll) at the General Meeting. Your attention is drawn to the Rule 9 Waiver section contained in paragraph 10 of Part I of the Admission document.

 

As part of the Proposals, the Company is proposing to undertake a capital reorganisation of its issued Existing Ordinary Shares as shown on the Register of Members at 6.00pm on 25 June 2015. This will be achieved by undertaking a 1 for 11 share consolidation whereby the Existing Ordinary Shares become 0.55p new ordinary shares. These 0.55p new ordinary shares are then sub-divided and reclassified into one New Ordinary Share of 0.05p and one Deferred Share of 0.50p each.

 

Finally, the Company has appointed Beaumont Cornish Limited ("BCL") as its Nominated Adviser and Broker with immediate effect. On Completion of the Acquisition, BCL will continue as Nominated Adviser and Northland Capital Partners Limited will act as the Company's Broker.

 

If the Resolutions are duly passed at the GM, trading in the Existing Ordinary Shares will be cancelled and it is expected that the New Ordinary Shares will be readmitted to trading on AIM on 30 June 2015.

 

Implementation is subject to approval from Shareholders at the General Meeting, which is to be held at 200 Strand, London, WC2R 1DJ on 29 June 2012 at 10.00 a.m. A copy of the Re-admission Document will also be available on the Company's website, www.octagonalplc.com.

 

Further details and extracts from the Admission document are contained in the Appendices to this announcement. All definitions used in this announcement are those used in the Admission Document.

 

 

For further information please visit www.octagonalplc.com or contact:

 

Enquiries:

 

Octagonal plc                                                +44 (0) 20 7440 0640        

Donald Strang                                

Jason Berry                                 

David Lenigas                                

                                        

Beaumont Cornish Limited                             +44(0) 20 7628 3396

Nominated Adviser and Broker

Roland Cornish/ James Biddle

 

Northland Capital Partners Limited                 +44(0) 20 7382 1100 

Proposed Broker

Patrick Claridge/ John Howes/ David Hignell                   

                                        

 

EXTRACTS FROM THE ADMISSION DOCUMENT

 

Appendix 1

 

Global Investment Strategy

History and background

 

Incorporated in 2002, Global Investment Strategy is a financial services business offering a wide range of services to institutional, family office and high net worth clients. Its main business activities, accounting for approximately 80 per cent. of its 2014 turnover, focuses on providing global settlement and safe custody services for institutional clients, family wealth offices and high net worth individuals which it has been offering in its current form since 2011. Global Investment Strategy also offers a range of stockbroking services, including execution-only trading, discretionary fund management, direct market access online trading, equity capital markets, corporate finance and corporate broking. GIS's global settlement and safe custody clearing business alone currently transacts for over 600 clients, including global hedge funds and family wealth offices. GIS manages on average over 6,000 transactions per month with quarterly settlement values exceeding £2 billion on behalf of global institutional accounts.

 

GIS is authorised to offer a broad scope of settlement, custody, banking, broking and advisory services to professional, retail, corporate and eligible counterparty clients and has over 100 counterparty relationships, including most of the major local and international investments banks transacting in the UK. In addition to its core business of global settlement and custodial services, GIS has an investment management division, managing funds for both domestic and overseas clients on a discretionary basis.

 

Global Investment Strategy is a London Stock Exchange member firm, is authorised and regulated by the Financial Conduct Authority and is entered in the Financial Services Register under number 437558 www.fsa.gov.uk/register. Its website address is  www.gisukltd.com.

 

The directors of GIS are John William Gunn, Nilesh Jagatia and Samantha Esqulant.

 

Market Overview

Whilst settlement and safe custody services are provided on a large scale by global Investment Banks, there are relatively few competitors in the UK offering similar services to Global Investment Strategy, which is effectively a service provider to smaller institutions, family offices and high net worth clients. The Directors are aware of two companies that offer competitive services in the UK. Due to the Company's broader scope of regulatory permissions and affiliations and its strong relationships with clients and service partners such as banks, settlement custodians and brokerages, the Directors believe that GIS has a competitive advantage over these firms.

 

The Directors do not believe that Global Investment Strategy's current client base or its ability to expand will be adversely affected by the competition and still see considerable opportunity to expand its business both organically and through possible acquisition.

 

Business Model

Global Investment Strategy principally acts as an intermediary entity between certain large counterparty banks (with which it has established relationships) and its own clients. Its primary business is settlement and safe custody, although it has ancillary businesses which utilise its expansive FCA permissions where profitable or commercially attractive. One of GIS's overall aims is to transact business generally by acting as an intermediary (in such a way as to avoid balance sheet risk to the greatest extent possible). All of GIS's clients are institutional clients, professionals or high net worth self-certified investors, with the vast majority being professional investors, although it retains authorisation to act for retail clients on a discretionary or execution only basis.

 

The Directors believe that there are several key benefits for its clients in using Global Investment Strategy's services: the principal benefit is the ability for a client to use GIS's services to benefit from better dealing and settlement arrangements with large financial counterparty institutions which is gained from pooling a number of clients (who individually may not be big enough to settle directly through such institutions) and trading through GIS's relationship, and the provision of an outsourced settlement and custody business for smaller institutions and family offices to save them fixed overhead costs; for institutional clients it allows them to maintain a central point register of their positions; and for clients involved in the trading of financial products it allows them to deal with multiple brokers at the same time whilst maintaining confidentiality between these brokers.

 

Global Investment Strategy has chosen to build strong relationships with both its clients and counterparty banks and the Directors believe these relationships are vital to its long term success, even at the expense of growth. GIS has nonetheless grown rapidly since 2011 when it started operating in its current form, principally by expansion of its client base into overseas markets (with a particular focus on the American, European and Asian markets), where the majority of its clients are now located (both by number and size of transactions).

 

Whilst GIS's business is not unique, it aims to provide a low risk, low cost services where sales growth is down to the number of transactions undertaken by clients and to growth in the client base.

 

Settlement Services

Global Investment Strategy provides a settlement capability to its clients through its relationships with certain major international banks and custody agents. GIS is required to deposit with the banks a security deposit to enable it to have settlement capability with its banks. GIS in turn funds this from the pool of money received from its clients, who are typically required to enter into non-client money segregation agreements in respect of the funds deposited. GIS also holds the underlying securities owned by its clients which further reduces risks to GIS of a trade not completing or a client not paying.

 

GIS's clients typically execute security purchases and sales through their own bank or broker (and they may each have a number of such relationships), and report the trades to GIS through a 'trade file'. This in turn is analysed by GIS from a risk management perspective, and also to ensure that trade details are correct. GIS then files the complete 'trade file' to the bank.

 

GIS principally operates on a 'back to back' basis, and on a 'received vs payment, delivery vs payment' basis (i.e. where stock is not released until the cash to pay for it has been received, and vice versa, thereby vastly reducing risk of non-payment or non-delivery for GIS), but puts together bespoke packages for each client. The fees payable for its services are deducted from the amounts held by it for its clients and as such there is no bad debt. Should there be, in the view of GIS, insufficient funds held to cover anticipated fees, services are suspended and clients are required to deposit further funds with GIS prior to the resumption of trading.

 

Global Investment Strategy builds safeguards into its business by ensuring all of its counterparties have been pre-approved by its clearing banks and by scrutinising trade files to check that they balance and that the client has sufficient funds on its account. The vast majority of trades are processed automatically, with others, GIS may contact the bank in question. GIS has, in the opinion of the Directors and Proposed Directors, suitable risk mitigation and does not have to settle any trade which does not fit within its risk model.

 

GIS charges its clients a fixed fee per transaction. Traditionally brokers charge a percentage on the value of each trade their clients undertake. The GIS business model is different in that the same fee is applied irrespective of the value of the transaction; thereby appealing to clients with high frequency daily trading patterns. It reconciles cash and stock movements daily and is able to charge ancillary fees based in stock lending, finance, custody of assets and amendments requested by the clients.

 

GIS has a number of relationships with clearing banks and brokers who act as agent for GIS and provide custody and settlements services to GIS for a fixed fee per transaction. These agents will invoice GIS monthly for their services and will deduct their fees from pooled clients' monies that GIS hold, on behalf of its clients, with these agents. GIS will likewise deduct the fees that it charges its clients on a monthly basis. These funds are deducted from the clients' retained cash balances. Given that clients must maintain positive cash balances and that the GIS business model and terms of business do not provide for guaranteed services, there are no requirements to operate a billing system.

 

GIS seeks to offer clients a dependable, low cost service for settling trades at a fixed cost per trade; it believes this high quality level of service and simplified charging structure will enable the Company to expand its business in this sector.

 

Settlement services accounted for approximately 80 per cent. of GIS's turnover in the year ended 31 March 2014.

 

Custody Services

Global Investment Strategy acts as a custodian for stocks and securities. GIS typically charges for this service on a quarterly basis in arrears, such fees are based on the value of the assets held. GIS is in turn charged a fee from its agents and so would typically charge its client a margin over cost.

 

Finance

Global Investment Strategy will occasionally offer finance to clients. This primarily arises where settlement of a transaction has not occurred and an amendment is required. Where there is an overnight shortfall in the client's account, GIS will lend the client the money available to it through existing financing facilities. GIS typically charges a margin over cost for such short term lending (i.e. only overnight until the trade can be corrected and settled). Risk is mitigated to a large extent by GIS holding the underlying security the subject of the loan.

 

Asset Management and Investment Advisory Services

Global Investment Strategy has developed an asset management business on behalf of discretionary clients. A team of three people manage this arm of the GIS business, with oversight from the Chief Executive Officer of GIS. The focus of the fund management division is to achieve an absolute return by trading index options with a hedged risk strategy. GIS hold the clients' cash and assets in relation to this activity in segregated trust status accounts.

 

Additionally, GIS has been appointed as investment adviser over a number of funds which operate with a similar strategy. As investment adviser it does have a discretionary mandate (which resides with the manager) but rather provides investment advice to the manager whilst also offering it settlement and custody services. Although still in its infancy, the intention is to build up the level of Assets Under Advisory Management (''AUM'') to around US$500 million.

 

Global Investment Strategy charges its asset management clients a fixed fee per transaction, which is similar to its other settlement activities. The fees that are charged by GIS are at a margin over charges that are levied by the banks and agents it trades with. For the investment management business, GIS invoices its client for its advice and again it charges on the number of transactions the client undertakes. GIS does not currently charge a management fee based on AUM.

 

Global Investment Strategy believe that the business model is robust in that its revenues will increase as the funds managed increase in size and the quantity of trades increases. This is an incentive for new clients who may be attracted to use GIS in their infancy to avoid large entry fee costs if they were to establish direct relationships with similar agents or banks to those with whom GIS are contracted.

 

Global Investment Strategy is currently in the process of applying for AIFMD accreditation, which the Directors believe will broaden the potential scope of their investment management activities, primarily in respect of fund management, but which they are advised is not required for their present operations.

 

Appointed Representatives

Global Investment Strategy also acts as a principal firm supervising several appointed representatives. This service allows the appointed representative to operate in a limited capacity within the regulatory framework of the FCA.

 

Global Investment Strategy currently provides this service for one entity, however this is intended to increase to three entities during the current financial year. GIS charges a fixed fee which is settled either through on-going use of the firm's custody and settlement services or by paying an enhanced transaction fee.

 

Whilst Global Investment Strategy acknowledges the risk associated with an appointed representative service offering, this is mitigated by GIS's procedures, according to which appointed representatives are monitored by one of GIS's employees and all commercial transactions are carried out by GIS on behalf of the appointed representative. In addition, all clients of appointed representatives are subject to GIS's ''know your client'' take-on procedures.

 

Corporate Finance and Broking

Global Investment Strategy is able to act as broker to AIM companies and it also undertakes limited fundraising for corporate clients who are typically listed on AIM. GIS has seen continued growth in this area, even though it only contributes marginally to revenue. GIS can act as agent and represent the company when it is seeking to raise money. The company can deposit shares with GIS that it can then place/sell to its client or other regulated financial institutions. GIS will charge a fixed fee for this service and can also receive commission for the placing of shares.

 

Investments

Global Investment Strategy also holds a limited portfolio of public and private investments. These are largely legacy investments and the Group's strategy is gradually to divest these when sale opportunities arise. As at 10 June 2015 the portfolio was as follows:

 

 

 

 

 

 

 

Date investment

made

 

Carrying value as at 30 September

2014

Carrying value as at 10 June 2015, being last practical date before the publication of the Admission document

Inspirit Energy Holdings plc

2009

£817,000

£359,570

Argentina Farming Loan

2010

US$215,000

US$215,000

City Golf Clubs Limited

2015

£224,000

£240,000

 

Historic Financial Information on Global Investment Strategy

Set out below are extracts from the comprehensive income statement and statement of financial position for the period from 31 March 2012 to 30 September 2014 relating to Global Investment Strategy.

 

 

Period ended

 

6 months ended

30 September 2014

12 months ended 31 March 2014

12 months ended 31 March 2013

12 months ended 31 March 2012

Revenue

£1,523,000

£2,551,000

£1,435,000

£393,000

Profit after Tax

£260,000

£419,000

£571,000

£(608,000)

Net Assets

£2,533,000

£1,937,000

£1,518,000

£947,000

 

Shareholders should note Global Investment Strategy's holding of 54,481,404 ordinary shares in Inspirit Energy Holdings plc (''Inspirit'') valued at £817,000 on 30 September 2014 has decreased in value since that date. Inspirit is an AIM traded company and as at 31 March 2015 the value of this holding was £351,405 based on a closing mid-market price of 0.72p. Accordingly, it is anticipated that in the Global Investment Strategy accounts for the year ended 31 March 2015, the Company will record a write down of £465,595 in respect of its holding in Inspirit.

 

Client Base

Approximately 10 per cent. of GIS's clients are based in the UK, with remainder spread across the Americas, Europe and Asia and comprise mainly family offices, high net worth individuals and institutions. GIS does neither any marketing nor any financial promotions in these territories, where the Directors believe all new clients are the result of referrals from existing clients. GIS is compliant with the Foreign Account Tax Compliance Act and has now been granted Qualifying Intermediary status by the US Inland Revenue Services. This will authorise GIS to report to the US Inland Revenue Service on behalf of its US clients. This is an advantage that GIS believes it has over its competitors and is part of the company's on-going policy of being compliant with the regulatory practices where its customers are located.

 

Operations

The business operates from rented offices in London Wall, in the City of London, and currently has fourteen people working within it, either as employees or as consultants. Eight people work within settlements and relationship management, one in treasury/finance and two in senior management with a further two consultants and one employee having responsibility for the asset management business.

 

IT Systems

Global Investment Strategy currently uses an IT system called Flagship, under a licence provided through 3i Infotech (UK) Limited. ''Flagship'' is a client-facing website that allows GIS to manage its international and safe custody services. ''Flagship'' is an industry-standard system used by the majority of GIS's clients. As part of this package, 3i Infotech provide an interface between GIS and the agent banks it partners with. GIS also relies on the settlement systems provided by its agent banks to effect its services. Global Investment Strategy is currently trialling ''Altimis'', a successor, cloud-based system provided by 3i Infotech; only when Global Investment Strategy is completely comfortable that this is operating currently will it migrate across to Altimis. Both ''Altimis'' and ''Flagship'' are widely used IT systems in the global settlements and safe custody markets. Additionally, GIS uses trading platforms offered by Realtick and Bloomberg, who are both globally  recognised.

 

Principal Terms of the Acquisition

On 11 June 2015, the Company entered into the Acquisition Agreements, pursuant to which it has conditionally agreed to acquire the entire issued share capital of Global Investment Strategy (not already owned by the Company) for a purchase price comprising:

*              £1.5 million in cash; and

*              the issue of 336,136,132 Consideration Shares at a price of 2p per share.

 

The purchase price is payable in full on Admission and is payable to the Vendors in proportion to their respective holdings in Global Investment Strategy. The Acquisition Agreements contain warranties from each of the Vendors confirming unencumbered title to the shares in GIS held by them and from John Gunn in relation to the business, assets and operations of Global Investment Strategy.

The Acquisition Agreement relating to John Gunn includes an additional clause whereby John Gunn agrees to use part of the cash consideration receivable by him in connection with the Acquisition to repay a total amount of £732,000 owed by him to the Company.

The Acquisition is conditional upon, inter  alia,:

*              the passing of the Resolutions at the General Meeting;

*              FCA Approval; and

*              Admission.

 

Current Trading, Strategy and Prospects of the Enlarged Group

The Company is currently an investing company (as defined by the AIM Rules) with two investments including its 9.97per cent. interest in Global Investment Strategy. As at 30 September 2014, it had a cash balance of £92,000.

On 15 April 2015, Octagonal announced the following trading update on GIS:

''Octagonal Plc (AIM: OCT), the investment company whose principal investment is a 9.97per cent. equity holding in global custody and clearing company, Global Investment Strategy UK Ltd (''GIS''), announces strong operational performance and growth for GIS for the quarter ended 31 March 2015.

Quarter Trading Summary Update - GIS

*        55.9 per cent. increase in settlement values for the quarter, with settlement values exceeding US$6.3 billion (approximately £4.3 billion at 1.462 exchange rate of 14/04/15), up from the US$4.1 billion (approximately £2.8 billion) for the same period last year.

*        32.7 per cent. increase in total settled transactions for the quarter, with total transactions exceeding 23,000, up from the 17,664 settlements for the same period last year.''

Following Admission, the Company will focus on the organic development of its existing settlements and safe custody business, improving relationships with both clients and counterparties and seeking new client relationships. The Directors believe that they have reached a point where the business is scalable and provides a suitable platform from which to expand the number of clients and the number of services offered, without the need for significant new capital. Improvements have been made in operating systems, reporting capabilities and automation. In addition, the Company will seek to utilise its various FCA permissions to grow revenue; for instance, it is targeting the growth of the Assets under Advisory Management from AUM as at 31 March 2015 of approximately $20 million to around $500 million.

It is the intention of the Directors to pay dividends, however, the ability of the Company to do so is dependent on a number of factors and there is no guarantee that the Company will pay a dividend, or, if a dividend is paid, what the amount of such dividend will be.

In addition to the above, the Directors intend to continue to identify and evaluate other possible opportunities for the acquisition of complementary businesses.

The Directors wish to seek Admission of the Enlarged Group in order to provide acquisition capital, incentivisation for staff when appropriate and to enhance the profile of the Global Investment Strategy business with new potential clients.

As far as the Directors are aware, there have been no known significant changes in the financial or trading position of the Company subsequent to 30 September 2014, the date to which the last published interim accounts were  prepared.

 

Directors and Senior Management

On Admission, the Board will comprise the Proposed Directors and the Existing Directors will step down from the Board on Admission. Details of the Directors and Senior Management are set out below.

Board of the Company on Admission

 

Grant Michael Roberts (aged 44), Proposed Non-Executive Chairman

Mr Roberts is a founding partner of Newgate Private Equity LLP (Newgate), an FCA regulated investment and advisory business, operating in London and the UAE. Mr Roberts has over 18 years of experience in private equity both as an investor and advisor with Newgate, Richmond Park Partners and 3i plc. Mr. Roberts has considerable corporate and international expertise, broad experience spanning most industry sectors and undertaken transactions in the UK, Europe, USA, the Middle East, Asia and Australia. Mr Roberts holds a Bachelor of Commerce from Murdoch University and a Graduate Diploma of Applied Finance and Investment.

 

John William Gunn (aged 45), Proposed Chief Executive Officer

Mr Gunn is currently the Chief Executive Officer of Global Investment Strategy, having founded the business in 2002. With a career spanning over 25 years in the financial services industry, Mr Gunn began his career in 1987 at Hoare Govett and has since worked at Carr Sheppards Limited, Merchant Securities Limited and Williams de Broe¨ plc, where he was a senior investment manager until 2002. From 2004, he has worked with renewable energy and clean tech businesses before becoming involved with Disenco in 2004. He is currently the CEO of AIM traded Inspirit Energy Holdings Plc. Mr Gunn is a director and the major shareholder of GIS.

 

Nilesh Kumar Jagatia (aged 46) Proposed Finance Director

Mr Jagatia currently serves as Finance Director of Inspirit Energy Holdings plc and also currently holds Finance Director positions with AIM traded Clear Leisure plc, Teathers Financial plc and Limitless Earth Plc. Mr Jagatia has been involved with several IPO's and was previously Group Finance Director of an AIM traded Online Media and Publishing Company for a period 5 years until July 2012. Mr Jagatia has over 20 years' experience, including senior financial roles in divisions of both Universal Music Group and Sanctuary Group plc. He served as a Finance Director for an independent record label that expanded into the US. Mr Jagatia is a qualified accountant and holds a degree in finance.

 

Martin David Davison (aged 52), Proposed Non- Executive Director

Mr Davison has held senior executive and management positions in three leading financial institutions based in London and is an experienced Wealth Manager and Private Banker serving the needs of Ultra High Net Worth Clients, Family Offices and Financial Institutions. From 2011 to 2014, he was Managing Director and head of the family office business for Oppenheimer & Co Inc. in Europe. From 2008 to 2011, he was Managing Director and Global Co-Head of Dealing and Sales Trading at Barclays Wealth and Investment Management. From 1993 to 2008, he was Managing Director and Co-Head of Private Wealth Management Europe at Lehman Brothers. Mr Davison has also held positions at Dean Witter, Merrill Lynch and Morgan Stanley and has over 30 years of financial market experience.

 

Capital Reorganisation

As part of the Proposals, the Company is proposing to undertake a capital reorganisation of its issued Existing Ordinary Shares as shown on the Register of Members at 6.00pm on 25 June 2015. This will be achieved by undertaking a 1 for 11 share consolidation whereby the Existing Ordinary Shares become 0.55p new ordinary shares. These 0.55p new ordinary shares are then sub-divided and reclassified into one New Ordinary Share of 0.05p and one Deferred Share of 0.50p each.

In addition, following the Capital Reorganisation, the exercise price of all Existing Warrants will increase by a factor of 11.

 

Admission to AIM and Dealings

Application will be made to the London Stock Exchange for the Enlarged Issued Share Capital to be admitted to trading on AIM, Subject to the passing of the Resolutions and FCA Approval. It is expected that Admission will take place, and dealings in the issued Ordinary Shares on AIM will commence, on 30 June 2015.

CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument in accordance with the CREST Regulations. The Articles permit the holding and transfer of Ordinary Shares to be evidenced in uncertificated form in accordance with the CREST Regulations. The Existing Shares can already be transferred by means of the CREST system and it is expected that the New Ordinary Shares will also be transferable by means of the CREST system.

 

Relationship Agreement

John Gunn has agreed to exercise his votes as a Shareholder and to procure the same in respect of any Connected Person in accordance with certain restrictions set out in the Relationship Agreement entered into between the Company, Northland Capital Partners, BCL and John Gunn. The restrictions seek to ensure that the Enlarged Group is capable of carrying on its business and making decisions independently and in the best interests of the Enlarged Group and that any transactions between any member of the Enlarged Group and the Controlling Shareholder or any Connected Person are made on an arm's length basis.

 

The agreement shall terminate on John Gunn and any ''associate'' ceasing to hold New Ordinary Shares or instruments capable of converting into New Ordinary Shares conferring in aggregate 20 per cent. or more of the rights to vote at general meetings of the Company.

 

 

Takeover Code and Whitewash Resolution

The issue by the Company of the Consideration Shares to the Vendors pursuant to the Acquisition along with the New Ordinary Shares issued pursuant to the conversion of warrants and options by David Lenigas and the New Ordinary Shares issued pursuant to David Lenigas' participation in the Subscription gives rise to certain considerations under the Takeover Code. Brief details of the Panel, the Takeover Code and the protections they afford to Shareholders are described below.

 

The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company with its place of central management in the United Kingdom. The Company is such a company and Shareholders are entitled to the protections afforded by the Takeover Code and its  provisions.

 

Under Rule 9 of the Takeover Code, any person or group of persons acting in concert who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he and persons acting in concert with him are already interested, carry 30 per cent. or more of the voting rights in a company which is subject to the Takeover Code is normally required to make a general offer to all the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which, in aggregate, carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person, or any person acting in concert with him, which increases the percentage of shares carrying voting rights in which he is interested. An offer under Rule 9 must be made in cash (or with a full cash alternative) at a price not less than the highest paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

 

Maximum potential controlling position

As at the date of this announcement, the only member of the Concert Party to own shares in the Company is David Lenigas. He owns 35,300,000 Existing Ordinary Shares,   representing 2.96 per cent. of the Existing Ordinary Shares and holds options and warrants to subscribe for a further 35,300,000 Existing Ordinary Shares, which he has agreed to convert into 2,740,910 New Ordinary Shares, conditional on Admission, as part of the Option Conversion and Warrant Conversion. Should Admission not occur, David Lenigas would hold interests representing up to 5.75 per cent. of the Existing Issued Share Capital. In addition, David Lenigas has agreed to subscribe for 3,250,000 New Ordinary Shares under the  Subscription.

 

As set out in Table 1 below, following the Capital Reorganisation and pursuant to the Acquisition, the Vendors are due to receive 336,136,132 Consideration Shares. Therefore, immediately following Admission, the Concert Party will own a total of 345,336,133 New Ordinary Shares which will represent 61.64 per cent. of the Enlarged Issued Share Capital of the Company.

 

Table 1: Interests of the Concert Party on Completion of the Proposals

 


As at the date of the document

On Admission

Concert Party member

Number of Existing Ordinary Shares

per cent. of the Existing Issued Share

Capital

Number of Options / Warrants to subscribe for

Existing Ordinary Shares

Number of New Ordinary

Shares

per cent. of the Enlarged Issued Share

Capital

John Gunn

-

-

-

293,794,931

52.44%

Suki Gunn

-

-

-

5,165,945

0.92%

Corstone Capital Partners LLC

-

-

-

37,175,256

6.64%

David Lenigas

35,300,000

2.96%

35,300,000

9,200,001*

1.64%

Nilesh Jagatia

-

-

-

-

-


35,300,000

2.96%

35,300,000

345,336,133

61.64%

* The number of New Ordinary Shares held by David Lenigas on Admission includes 2,740,910 New Ordinary Shares to be issued pursuant to the Option Conversion and Warrant Conversion, conditional on Admission, further details of which are set out in paragraph 14.2 of Part I of this announcement.

 

Details of the Concert Party are set out in Part II of the document.

The Panel has agreed, however, to waive the obligation to make a general offer that would otherwise be required as a result of the allotment and issue of the Consideration Shares to the Vendors. Accordingly, the Whitewash Resolution seeks to waive the requirement under Rule 9 of the Takeover Code that the Concert Party having acquired a shareholding and percentage of voting rights exceeding 30 per cent., must make a general cash offer to all the remaining Shareholders to acquire their shares In accordance with the Takeover Code, the Whitewash Resolution is being proposed at the General Meeting and will be taken on a poll. David Lenigas will not be entitled to vote on the Whitewash Resolution. To be passed, the Whitewash Resolution will require a simple majority of votes entitled to be cast to vote in favour.

 

On Admission, the Concert Party will have an interest in shares carrying approximately 61.64 per cent. of the voting rights of the Company and John Gunn, a member of the Concert Party, will have acquired interests in shares carrying approximately 52.44 per cent. of the voting rights of the Company. Without a waiver of the obligations under Rule 9, the Concert Party would be obliged to make a general offer to Shareholders under Rule 9.

 

Shareholders should note that, following the completion of the Acquisition, both the Concert Party collectively and John Gunn individually will hold over 50 per cent. of the voting rights of the Company and will, in respect of the Concert Party for so long as they remain treated as acting in concert, and John Gunn individually, therefore be entitled to increase their interests in the voting rights of the Company without incurring a further obligation under Rule 9 of the Code to make a general offer. Shareholders should also note that individual members of the Concert Party will not be able to increase their percentage interests in shares through or between a Rule 9 threshold without the Panel's consent.

 

Details of the Subscription and use of proceeds

The Company has conditionally raised £1,700,000 gross pursuant to the terms of the Subscription by the issue of the Subscription Shares at 2p per Subscription Share.

The Subscription Shares will rank pari passu in all respects with the New Ordinary Shares including the right to receive all dividends and other distributions declared, paid or made after the date of issue. The Subscription, which is not underwritten or guaranteed, is conditional, inter alia, upon the Acquisition completing and Admission becoming effective.

The net proceeds from the Subscription will be used to part fund the Acquisition and for the general working capital requirements of the Enlarged Group following Admission.

As part of the Subscription, David Lenigas, a Director, has agreed to subscribe for 3,250,000 New Ordinary Shares on the same terms. As a result of this, and his agreement to convert his existing warrants and options into New Ordinary Shares, conditional on Admission, David Lenigas' holding on Admission will be 9,200,001 New Ordinary Shares representing 1.64 per cent. of the Company's share capital on  Admission.

 

Share options and warrants

As at the date of this announcement, the Company has outstanding warrants to subscribe for an aggregate of 3,666,666 Existing Ordinary Shares. Immediately following the Capital Reorganisation and assuming the Resolutions are passed, there will be outstanding warrants and options to subscribe for an aggregate of 333,333 New Ordinary Shares assuming no Existing Warrants or Existing Options are exercised following the date of this document.

Investors should note that the Company has agreed the following exercise of various options and warrants, conditional on Admission:

 

Exercise of Existing 0.1p Warrants

The holders of the Existing 0.1p Warrants have each exercised those warrants on the terms of a notice of exercise conditional only upon Admission occurring. The total number of Existing 0.1p Warrants exercised subject to Admission is 4,272,730 warrants at 1.1p per warrant on the basis that the Capital Reorganisation has been effected. The notice of exercise of the Existing 0.1p Warrants dated 29 May 2015 provides that the exercise price for those warrants, amounting in aggregate to £47,000, is payable on Admission by the holders and that where holders have elected to receive their New Ordinary Shares in CREST that the respective CREST accounts will be credited on 19 June or where they have elected to receive their New Ordinary Shares in certificated form that such certificates will be despatched within fourteen days of Admission. In the event that Admission has not occurred by 31 July 2015 then the notice of exercise provides that it automatically lapses and is of no further force and effect. Following Admission there will be no Existing 0.1p Warrants outstanding and capable of exercise.

David Lenigas, an Existing Director and a member of the Concert Party, holds 2,272,728 Existing 0.1p Warrants, on the basis that the Capital Reorganisation has been effected, and has executed a notice of exercise to convert those warrants into New Ordinary Shares on the same terms as the other holders of Existing 0.1p Warrants as set out above. Subject to Admission occurring and in consideration for the payment of the exercise price for his Existing 0.1p Warrants in an amount of £25,000 he will be issued 2,272,728 New Ordinary Shares representing 0.41per cent. of the Enlarged Issued Share Capital of the Company on Admission and following the Capital Reorganisation.

 

Cancellation of Existing Options

The holders of the Existing Options have agreed, on the terms of individual agreements dated on or about 29 May 2015 and entered into by each holder of an Existing Option and the Company, that conditional only upon Admission occurring they have agreed to the cancellation of their Existing Options in consideration for the issue to them of an aggregate amount of 5,848,485 New Ordinary Shares being a ratio of 1 New Ordinary Share issued for every 16.5 Existing Options cancelled. The total number of Existing Options cancelled under these agreements is 96,500,001 (being 8,772,730 options on the basis that the Capital Reorganisation has been effected).

The terms of the agreements entered into between the holders of the Existing Options and the Company provide for the cancellation of the Existing Options in consideration for an issue of New Ordinary Shares in the ratios as set out above and further provide that: with effect from Admission the Existing Options are terminated and rendered null and void and that all past, current or future obligations of either the Company or the holders of Existing Options are extinguished in full and final settlement. The holders of Existing Options give certain warranties to the Company as to title, ownership, authority and confirmation of no encumbrances as regards the Existing Options.

Donald Strang, an Existing Director, holds 469,697 Existing Options, on the basis that the Capital Reorganisation has been effected, and he has agreed to cancel those options in consideration for an issue of New Shares on the same terms as the other holders of Existing Options as set out above. Subject to Admission occurring and in consideration of the cancellation of his 469,697 Existing Options he will be issued 313,131 New Ordinary Shares representing 0.06per cent. of the Enlarged Issued Share Capital of the Company on Admission and following the Capital  Reorganisation.

Cancellation of Existing Warrants

The holders of the Existing Warrants have agreed, on the terms of individual agreements dated on or about 29 May 2015 and entered into by each holder of an Existing Warrant and the Company, that conditional only upon Admission occurring they have agreed to the cancellation of their Existing Warrants in consideration for the issue to them of an aggregate amount of 18,206,069 New Ordinary Shares being a ratio of 1 New Ordinary Share issued for every 22 Existing Warrants cancelled. The total number of Existing Warrants cancelled under these agreements is 401,200,001 (being 36,472,727 warrants on the basis that the Capital Reorganisation has been effected).

The terms of the agreements entered into between the holders of the Existing Warrants and the Company provide for the cancellation of the Existing Warrants in consideration for an issue of New Ordinary Shares in the ratio as set out above and further provide that: with effect from Admission the Existing Warrants are terminated and rendered null and void and that all past, current or future obligations of either the Company or the holder of Existing Warrants are extinguished in full and final settlement and the holders of Existing Warrants give certain warranties to the Company as to title, ownership, authority and confirmation of no encumbrances as regards the Existing Warrants.

David Lenigas, an Existing Director and a member of the Concert Party, holds 936,364 Existing Warrants, on the basis that the Capital Reorganisation has been effected, and he has agreed to cancel those warrants in consideration for an issue of New Shares on the same terms as the other holders of Existing Options as set out above. Subject to Admission occurring and in consideration of the cancellation of his 936,364 Existing Warrants he will be issued 468,182 New Ordinary Shares representing 0.08per cent. of the Enlarged Issued Share Capital of the Company on Admission and following the Capital Reorganisation.

The conversion ratio in respect of this conversion of Options and Warrants as detailed above, is based on a Black-Scholes valuation of the existing warrants and options.

Subject to the passing of the Resolutions and Admission occurring, the Company intends to adopt a share option plan to grant options to subscribe for New Ordinary Shares from time to time to incentivise directors, employees and consultants at the discretion of the New Board. Options granted to subscribe for New Ordinary Shares in this manner will not exceed 10 per cent. of the Company's issued share capital from time to time without the prior approval of the Shareholders.

The Company also intends to adopt an incentive plan under which it may award New Ordinary Shares for no cost to Directors, employees and consultants. New Ordinary Shares under this plan will not exceed 10 per cent. of the Company's issued share capital from time to time without the prior approval of the Shareholders.

 

Related Party Transaction

The conversion of David Lenigas' Existing Warrants and Options, as detailed above, along with his agreed participation in the Subscription, again as detailed above, is, in aggregate, a related party transaction as defined by the AIM Rules. Accordingly, the independent directors, being Donald Strang and Jason Berry, having consulted the Company's Nominated Adviser, Beaumont Cornish Limited, consider the terms of these transactions to be fair and reasonable insofar as Shareholders are concerned.

 

General Meeting

The General Meeting is to be held at 200 Strand, London WC2R 1DJ at 10.00 a.m. on 29 June 2015, at which the Resolutions will be proposed to approve:

Ordinary Resolutions

1.       the Capital Reorganisation;

2.       the Acquisition;

3.       the Whitewash Resolution (to be taken on a poll);

4.       authority for the Directors to allot the Consideration Shares, the Subscription Shares (including the New Ordinary Shares to be issued to a Director), the shares to be issued in respect of the Warrant Conversion and the Option Conversion, the BCL Shares and New Ordinary Shares up to the nominal amount of £100,000 by way of general authority for additional headroom for the Company;

Special Resolution

5.       authority for the Directors to disapply statutory pre-emption rights to allot New Ordinary Shares pursuant to the authority conferred by Resolution 4 (save for the authority to allot the Consideration Shares as they are not being allotted for cash); and

6.       To be passed, the Resolutions (other than the Whitewash Resolution) proposed to be passed as ordinary resolutions will require a simple majority, and the Resolutions proposed to be passed as special resolutions will require a majority of not less than 75 per cent. voting in person or on a poll by proxy in favour of the relevant Resolution.



 

 

Appendix 2

 

PART VI SECTION B

 

UNAUDITED PRO FORMA STATEMENT OF

Unaudited Pro Forma Statement of Net Assets of the Enlarged Group

 


 

Octagonal Plc

Global Investment Strategy UK Ltd

 

 

Goodwill and

 

Placing proceeds and

 

Pro forma adjusted net


As per

As per

Elimination of

Costs of

assets of


accountants'

accountants'

Assets and

acquisition

The Group


report as at

Report as at

Liabilities on

and

on admission


30 September 2014

30 September 2014

completion

admission

to AIM


(Note 1)

(Note 1)

(Note 2)

(Note 3)



£'000

£'000

£'000

£'000

£'000

Non-current assets






Goodwill

-

-

5,131

-

5,131

Property, plant & equipment

-

67

-

-

67

Available for sale investments

804

_____

817

_____

(759)

_____

-

_____

862

_____

Total non-current assets

804

884

4,372

-

6,060

Current assets






Trade & other receivables

264

1,507

(45)

(732)

994

Available for sale investments

143

213

-

-

356

Cash & cash equivalents

92

_____

236

_____

-

_____

475

_____

803

_____

Total current assets

499

1,956

-

(257)

2,153


_____

_____

_____

_____

  _____







Total assets

1,303

2,840

4,327

(257)

8,213


_____

_____

_____

_____

  _____

Non-current liabilities






Borrowings

-

(6)

-

-

(6)


_____

_____

_____

_____

_____

Total non-current liabilities

-

(6)

-

-

(6)







Current Liabilities






Borrowings

-

(49)

-

-

(49)

Trade & other payables

(147)

_____

(252)

_____

-

_____

-

_____

(399)

_____

Total current liabilities

(147)

_____

(301)

_____

-

_____

-

_____

(448)

_____

Total liabilities

(147)

(307)

-

-

(454)


_____

_____

_____

_____

  _____

Total net assets

1,156

2,533

4,327

(257)

7,759


=====

=====

=====

=====

  =====

 

Notes:

1.    The Pro Forma Statement of Net Assets on Admission is unaudited and save for the adjustments noted below, no trading or transactions by Octagonal Plc (''Octagonal'') and Global Investment Strategy UK Ltd (''GIS'') have been accounted for since 30 September 2014.

2.    The approximate Goodwill arising on purchase and subsequent consolidation of the enlarged group, and elimination of Octagonal's holding in GIS, along with the conversion of a receivable loan of £224,000 as an investment, and an investment of

£179,000 into a receivable loan. The goodwill has been calculated based on these 30 September 2014 disclosures, on the basis of a 100per cent. shareholding purchase cost of cash and shares, total value of £7,664,000 and the net assets of GIS of

£2,553,000. Please note this is an estimated indicative goodwill calculation, and not the final value on completion.

3.    The receipt of the proposed Subscription proceeds of £1,700,000, together with the debtor receipts of £732,000 on completion, and the Directors' estimated cash costs of acquisition, £1,500,000, and admission costs of £457.000, resulting in a cash positive adjustment of £475,000.

 

 

Appendix 3

 

 

The following disclosures are required in respect of the proposed Directors:

 

Director

Current

Past

Proposed Directors

Grant Roberts

 

 

Doriemus plc

Horse Hill Developments Limited

Newgate Private Equity LLP

Rodin Capital Limited

Newgate CSP Partners LLP

 

 

Longwood Partners LLP

CSP Topic LLP

 

John Gunn

Inspirit Energy Holdings plc

Global Investment Strategy Limited

Pinnacle Capital Management Limited

Pinnacle Investment Management Limited

Inspirit Energy Limited

Somemore Limited

Giex (Nominees) Limited

Solar Park 1 Limited

Joyanatura Limited

Snowgun Limited

Biomass Energy Developments Limited

Real Management Limited

Nilesh Jagatia

Inspirit Energy Holdings plc

Global Investment Strategy Limited

Clear Leisure plc

Teathers Financial plc

NKJ Associates Limited

Limitless Earth plc

Ascend Capital plc

Media Corporation plc

Flight Comparison Limited

Result Online Limited

Online Flight Comparison Limited


Teather Financial Software Ltd

Mediapolis SPA


 

Martin Davison

 

None

 

Guards Polo Club Holdings

 

Nilesh Jagatia was a director of Media Corporation plc from 24 October 2007 until 1 August 2012.  On 23 July 2012, Media Corporation plc appointed liquidators in relation to its wholly owned subsidiary, Purple Lounge Limited, of which Media Corporation plc was also a corporate director.  There was a shortfall of approximately US$2.3 million.  Media Corporation plc was the only substantial creditor and represented 83per cent. of the member shortfall.   At creditors' and members' meetings of Media Corporation plc held on 8 May 2014, resolutions were passed for Media Corporation plc to enter into a company voluntary arrangement.

Grant Roberts is currently a member of Newgate CSP Partners LLP which is a dormant limited liability partnership in the process of a solvent dissolution.

John Gunn was appointed a director of Braingames Network Limited on 12 April 2000. On 3 July 2003 the company entered into voluntary creditors' liquidation and was subsequently dissolved on 18 June 2005 with no shortfall to creditors.

 

On Admission, John Gun will hold 293,794,931 Ordinary Shares representing 52.44% of the Company's Enlarged Issued Share Capital.

 

There are no further disclosures required under Schedule 2(g) (i)- (viii) of the AIM Rules for Companies.

 

Service Contracts of the Proposed Directors

Subject to completion of the Acquisition, the Proposed Directors will be appointed to the board of directors of the Enlarged Group with effect from Admission. The terms of the Proposed Directors are summarised below:

 

On 11 June 2015, Grant Roberts signed a letter of appointment with the Company under which he agreed to act as non-executive chairman of the Company from Admission. The services of Mr Roberts are supplied to the Company under the terms of a consultancy agreement between the Company and Rodin Capital Limited. The appointment of Mr Roberts is subject to re-appointment pursuant to the Company's articles of association. This appointment is with effect from Admission and will be for an initial term of twelve months and will continue unless terminated upon one month's written notice by the Company or Rodin Capital Limited, or otherwise in accordance with the agreement. Mr Roberts shall devote such time as is necessary for the proper performance of his duties to the Company. The fee payable by the Company for the provision of Mr Robert's services under the consultancy agreement is £12,000 per annum.

 

On 11 June 2015, the Company entered into a conditional agreement for services with Pinnacle under which Pinnacle provides to the Company the services of John Gunn to be effective from Admission unless and until terminated by either party giving to the other not less than 12 weeks' prior written notice. The Company will pay to Pinnacle in connection with the provision of the services of Mr Gunn the amount of £240,000 per annum exclusive of VAT and to be payable in twelve equal monthly instalments.

 

On 11 June 2015, John Gunn entered into a service agreement with the Company under the terms of which he agreed to act as Chief Executive Officer of the Company with effect from Admission. The remuneration payable under this agreement is £12,000 per annum payable monthly in arrears with effect from Admission. The agreement is for an initial term of 12 months, and continues automatically thereafter unless terminated by either party giving not less than 3 months' prior written notice to the other. Mr Gunn is required to devote such time as may be reasonably required to enable him to carry out his duties to the Company under the terms of engagement. In addition, the agreement contains restrictive covenants commensurate for an executive director.

 

On 11 June 2015, Nilesh Jagatia entered into a service agreement with the Company under the terms of which he agreed to act as Finance Director of the Company with effect from Admission. The remuneration payable under this agreement is £12,000 per annum payable monthly in arrears with effect from Admission. The agreement is for an initial term of 12 months, and continues automatically thereafter unless terminated by either party giving not less than 3 months' prior written notice to the other. Mr Jagatia is required to devote such time as may be reasonably required to enable him to carry out his duties to the Company under the terms of engagement. In addition, the agreement contains restrictive covenants commensurate for an executive director.

 

On 11 June 2015, Martin Davison signed a letter of appointment with the Company under which he agreed to act as a non-executive director of the Company. The fee payable to Mr Davison under this letter of appointment is £12,000 per annum and the reimbursement of reasonable expenses incurred in performing his duties. The appointment of Mr Davison is subject to re-appointment pursuant to the Company's articles of association. This appointment is with effect from Admission and is terminable by either party by giving the other 1 months' prior written notice following an initial term of 1 year.

 

Appendix 4

 

DEFINITIONS

The following words and expressions apply throughout this document unless the context requires otherwise:

 

''$'', ''USD'' and ''US   Dollar''

lawful currency for the time being of the United States of America;

''£'', ''British pound sterling'' and ''p''

lawful currency for the time being of the United  Kingdom;

''Acquisition''

the proposed acquisition by the Company of the issued share capital of Global Investment Strategy not already owned by the Company pursuant to the terms of the Acquisition Agreements;

''Acquisition  Agreements''

the conditional  acquisition  agreements dated 11 June 2015 between the Company and the Vendors in relation to the sale and purchase of Global Investment Strategy, further details of which are set out in paragraph 11.1 of Part VII of this  document;

''Admission''

admission of the Enlarged Issued Share Capital to trading on AIM becoming effective in accordance with rule 6 of the AIM  Rules;

''Admission  Document''

the document;

''AIM''

AIM, a market  of  that  name  operated  by  the  London  Stock Exchange;

''AIM Rules for  Companies''

the AIM Rules for Companies published by the London Stock Exchange, as amended from time to time (including, without limitation, any guidance notes) which govern the rules and responsibilities of companies whose shares are admitted to trading on AIM;

''Articles''

the articles of association of the Company at the date of this document;

''Audit Committee''

the audit committee of the New Board;

''BCL''

Beaumont Cornish Limited, the Company's nominated adviser;

''BCL  Shares''

2,300,000  New  Ordinary  Shares to  be  issued  to  BCL in connection with their role as nominated adviser, conditional on Admission;

''Board''

the Existing Directors and the Proposed Directors;

''Capital    Reorganisation''

the  proposed consolidation of the Existing  Ordinary    Shares followed by the proposed sub-division and re-designation of those shares into New Ordinary Shares and Deferred Shares;

''Companies   Act''

Companies Act 2006 (as amended);

''Company''  or  ''Octagonal''

Octagonal PLC, a company incorporated in England and  Wales with company number 06214926 and whose registered office address is at Suite 3B, 38 Jermyn Street London SW1Y  6DN;

''Completion''

completion of the Acquisition in accordance with the terms of the Acquisition Agreements;

''Concert  Party''

the Vendors, David Lenigas and Nilesh Jagatia, as set out in Part II of the document;

''Consideration   Shares''

336,136,132 New Ordinary Shares to be issued to the   Vendors pursuant to the terms of the Acquisition Agreements;

''Connected   Person''

so far as could be known from reasonable investigation, a person connected with an individual or company within the meaning of sections 252 to 255 of the Companies Act;

''Controlling  Shareholder''

John Gunn;

''CREST''

the relevant system (as defined in the CREST Regulations) in respect of which Euroclear US & Ireland Limited is the Operator (as defined in the CREST Regulations);

''CREST  Regulations''

the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended, and any applicable rules made under those regulations;

''Deferred  Shares''

the deferred shares of 0.50p each in the capital of the Company;

''Diluted Enlarged Share Capital''

the Enlarged Issued Share Capital plus the New Ordinary Shares to be issued subject to the exercise of the Existing Warrants in existence on Admission;

''Directors''

the Existing Directors and the Proposed Directors;

''Disclosure and Transparency Rules'' or ''DTR''

the Disclosure and Transparency Rules being the rules and regulations made by the FCA in its capacity as the UKLA under Part VI of FSMA, as amended and contained in the UKLA publication of the same name;

''Enlarged   Group''

the Company and  its subsidiaries following  completion of the Acquisition;

''Enlarged Issued Share Capital''

the issued ordinary share capital of the Company following the Capital Reorganisation as enlarged by the Consideration Shares to be issued pursuant to the Acquisition and the Subscription Shares to be issued pursuant to the terms of the Subscription and the BCL Shares;

''Existing Directors''

Donald Strang, David Lenigas and Jason Berry;

''Existing Issued Share Capital'' or  ''Existing  Ordinary Shares''

the 1,193,098,159 Ordinary Shares in issue at the date of this document;

''Existing   Warrants''

warrants to subscribe for 333,333 New Ordinary Shares following the Capital Reorganisation;

''Euroclear''

Euroclear UK & Ireland Limited;

''FCA''

the Financial Conduct Authority;

''FCA  Approval''

the  written  approval  of the  FCA of  the Company proposing  to acquire control of Global Investment Strategy, a FCA regulated firm;

''Form  of  Proxy''

the form of proxy which is enclosed with this document for use by holders of Existing Ordinary Shares in connection with the General Meeting;

''FSMA''

the Financial Services and Markets Act 2000 (as amended);

''General  Meeting''  or ''GM''

the general meeting of the Company convened for 10.00 a.m. on 25 June 2015, and adjournment thereof, notice of which is set out at the end of this document;

''Global Investment Strategy'' or ''Global Investment Strategy UK Limited'' or ''GIS''

Global Investment Strategy UK Limited, a company incorporated in England and Wales with company number 04576299 and whose registered office address is Brook Point, 1412 High Road, London N20 9BH;

''Group''

the Company and its Subsidiaries;

''Independent    Directors''

Donald Strang and Jason Berry;

''Independent    Shareholders''

the holders of Existing Ordinary Shares other than any person being a member of the Concert Party;

''Introduction    Agreement''

the  introduction  agreement  dated  11 June  2015  between the Company (1), the Directors (2), Northland Capital Partners (3) and BCL (4), a summary of which is set out in paragraph 11.2 of part VII of this Document;

''Issue  Price''

2p,  being  the  price  at  which  the  Consideration  Shares   and Subscription Shares are to be issued;

''Lock-in  Deeds''

the conditional lock-in deeds dated 11 June 2015, further details of which are contained in paragraph 8 of Part I of the  document;

''Locked-in   Persons''

the Directors and the Vendors, further details of which are set out in paragraph 8 of Part I of this document;

''London  Stock  Exchange''

London Stock Exchange PLC

''New Board''

the Proposed Directors;

''New Ordinary  Shares''

the ordinary shares of 0.05p each following the consolidation, sub-division and re-designation of the Existing Ordinary Shares pursuant to the Capital Reorganisation;

''Notice''

the notice of the General Meeting set out at the end of the document;

''Northland Capital Partners''

Northland  Capital  Partners  Limited,  the  Company's  broker on Admission;

''Official   List''

the Official List of the UK Listing  Authority;

''Option   Conversion''

the  issue  of  5,848,485  New  Ordinary  Shares,  conditional on Admission, in settlement of outstanding options;

''Options''

share options to subscribe for new Ordinary Shares;

''Ordinary   Shares''

the ordinary shares of 0.05p each in the capital of the Company;

''Panel''

the Panel on Takeovers and Mergers;

''Pinnacle''

Pinnacle Investment Management Limited, a company registered in England, with registered number 04434949 having its registered office located at 1412 High Road, Brook  Point, London N20 9BH.

''Proposals''

together,  the  Acquisition,  the  Capital Reorganisation,   the Subscription, the Whitewash Resolution and Admission;

''Proposed Directors''

the proposed directors;

''QCA''

Quoted Companies Alliance;

''Registrars''

Share Registrars Limited of Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey, GU9 7LL;

''Relationship    Agreement''

the  relationship  agreement  between  John  Gunn,     Northland Capital Partners, BCL and the Company dated 1 June 2015;

''Remuneration   Committee''

the remuneration committee of the New Board;

''Resolutions''

the resolutions to be proposed at the General Meeting as set out in the notice of general meeting;

''Rule 9''

Rule 9 of the Takeover Code;

''Shareholders''

holders of issued Ordinary Shares;

''Subsidiary''  or   ''Subsidiaries''

a  subsidiary  undertaking  (as  defined  by  section  1162  of the Companies Act 2006 (as amended) of the Company and ''Subsidiaries'' shall be construed accordingly;

''Subscribers''

the persons who have confirmed their agreement to participate in the Subscription and to subscribe for the Subscription Shares conditional on Admission;

''Subscription''

the conditional Subscription of the Subscription Shares    carried out by the Company;

''Subscription    Price''

2p per Subscription Share;

''Subscription    Shares''

the 85,000,000 New Ordinary Shares which are the subject of the Subscription;

''Takeover  Code''

the City Code on Takeovers and Mergers issued from time to time by or on behalf of the Panel;

''UK''  or  ''United  Kingdom''

United Kingdom of Great Britain and Northern Ireland;

''UK  Listing   Authority''

the  Financial  Services  Authority  acting  in  its  capacity  as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000;

''Vendors''

the shareholders of Global Investment Strategy not including the Company, comprising John Gunn, Corstone Capital Partners LLC and Suki Gunn;

''Waiver''

the waiver which has been granted by the Panel, conditional upon the approval by the Independent Shareholders of the Whitewash Resolution on a poll, of the obligations to make a mandatory offer for the entire issued and to be issued share capital of the Company not already held by the Concert Party which might otherwise be imposed on the Concert Party under Rule 9 of the Takeover Code, as a result of the issue of the Consideration Shares to the Concert Party pursuant to the  Acquisition;

''Warrants''

warrants  to  subscribe  for  New  Ordinary  Shares  following the Capital Reorganisation;

''Warrant   Conversion''

the issue of 22,478,800 New Ordinary Shares, conditional on Admission, in settlement of outstanding warrants in issue as at the date of this document;

''Whitewash   Proposals''

the Waiver, covering the issue of the Consideration Shares to the Vendors pursuant to the terms of the Acquisition along with those existing shares held by other members of the Concert Party; and

''Whitewash    Resolution''

an ordinary resolution to approve the Waiver set out in the Notice.





 


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