Takeover, Placing&Appointment

6th Mar 2007 07:06

Asfare Group plc06 March 2007 For Immediate Release 6 March 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR THEIR RESPECTIVE TERRITORIES AND POSSESSIONS ASFARE GROUP PLC PROPOSED £80.2 MILLION REVERSE TAKEOVER OF ASSETCO GROUP LIMITED PROPOSED PLACING OF NEW ORDINARY SHARES TO RAISE £20.0 MILLION AND APPOINTMENT OF HOARE GOVETT AS NOMAD Asfare Group plc ("Asfare" or the "Company"), a leading supplier of products andservices to the emergency and homeland security markets in the UK, announcesthat it has entered into a conditional agreement to acquire the entire issuedshare capital of AssetCo Group Limited ("AssetCo"), a leading provider of totalmanaged services to UK fire and rescue authorities, for a consideration ofapproximately £80.2 million (the "Acquisition"). Of this amount, £70.2 millionwill be satisfied by the issue of new shares at 145 pence per share to AssetCo'sordinary shareholders and convertible preference shareholders and the remaining£10.0 million will be paid in cash in respect of the AssetCo preference shares. Furthermore, the Company has today conditionally placed 13,793,104 new shares at145 pence each with institutional investors to raise approximately £20.0 millionbefore expenses. By reason of the size of AssetCo relative to Asfare and the fundamental changein Asfare's business, board and voting control, the Acquisition will beclassified as a reverse takeover under the AIM Rules. The Acquisition and thePlacing are conditional, inter alia, on shareholder approval. Key points: Information on AssetCo •AssetCo is a leading provider of total managed services to UK fire and rescue authorities. •In 2001, AssetCo won the largest outsourced emergency services contract worldwide, the 20-year contract for London Fire Brigade with current estimated contract revenues of £400 million over the life of the contract. •In 2006, AssetCo won a £60 million 20-year total managed services contract with Lincoln Fire and Rescue. The transaction £€80.2 million consideration for AssetCo of which £70.2 million will be satisfied by issue of new shares at 145 pence to AssetCo's ordinary shareholders and convertible preference shareholders and the remaining £10.0 million will be paid in cash in respect of the AssetCo preference shares. •Conditional placing of new shares in Asfare to raise approximately £20.0 million before expenses. •The net proceeds of the placing will be used to satisfy the consideration for the AssetCo preference shares, refinance existing debt obligations and for working capital purposes. •The market capitalisation of the Company at the placing price is £97.4 million. •Upon Admission, Asfare will change its name to AssetCo plc. Profit forecast and forecast net debt •The Ongoing Directors estimate that the pro-forma forecast turnover, EBITDA and profit before taxation and amortisation for the year ending 31 March 2007 for the enlarged group will be approximately £103.2 million, £17.9 million* and £6.2 million* respectively. •At 31 March 2007, the Ongoing Directors estimate that the Enlarged Group will have net debt of approximately £52.7 million. * Before transaction costs and the cost of share based payments. Enlarged Group strategy •Capitalise on AssetCo's first mover advantage in total managed services for the fire and rescue service. •Build on long term contracted client relationships and engage at strategic planning level. •Leverage off Asfare's and FSE's existing relationships to further organic growth. •Horizontally integrate into the supply chain through selective acquisitions and strategic partnerships. •Pull-through additional value added services into the existing client base. •Replicate total managed services model across other emergency services agencies. Proposed board It is proposed that, on Admission, John Shannon, the Chief Executive Officer ofAssetCo, and Frank Flynn, the Chief Finance Officer of AssetCo, will join theboard of Asfare as Chief Executive Officer and Chief Finance Officerrespectively. It is also proposed that, following their management of Asfarethrough a period of organic and acquisitive growth, Tony O'Neill and TimO'Connor will stand down from the board of Asfare following Admission. Appointment of NOMAD The board of Asfare is pleased to announce the appointment of Hoare Govett asnominated adviser with immediate effect. Tim Wightman, Chairman of Asfare, said: "This transaction brings together two experienced and specialist UK fireservices companies and management teams. The fire market is moving towardsoutsourced solutions where significant growth opportunities for the enlargedgroup exist. AssetCo already has, through its contracts with the London andLincoln fire authorities, a highly successful and proven total managed servicessolution." John Shannon, Chief Executive Officer of AssetCo, said: "The market for outsourcing is growing rapidly driven by the demands placed onmodern fire and rescue services. AssetCo has first mover advantage within thefire and rescue market. We have proven success with London Fire Brigade, thelargest urban fire authority, and Lincoln Fire and Rescue, one of the largestrural fire authorities. This transaction will enable us to use the combinedstrengths of both AssetCo and Asfare to continue to build upon the leadershipposition we have developed." For more information please contact: Asfare Group plcTim Wightman Tel: +44 (0)1789 262 664 AssetCo Group Limited Tel: +44 (0) 20 8515 3999 John ShannonFrank Flynn Hoare Govett Limited Tel: +44 (0) 20 7678 8000 John MacGowanSean WegerhoffBertie Whitehead Buchanan Communications Tel: +44 (0) 207466 5000 Tim AndersonIsabel Podda High resolution images are available for the media to view and download free ofcharge from www.vismedia.co.uk. Hoare Govett, which is regulated by the FSA, is acting as nominated adviser,financial adviser and corporate broker exclusively for Asfare and no-one else inconnection with the matters set out in this announcement, the Admission Documentor any other document published in connection with the matters set out herein.Its responsibilities as Asfare's nominated adviser under the AIM Rules forNominated Advisers will be owed solely to London Stock Exchange plc and are notand will not be owed to Asfare or to any director or proposed director of Asfareor to any other person. No representation or warranty, express or implied, ismade by Hoare Govett as to any of the contents of this announcement. HoareGovett is and will be acting for Asfare and no one else and will not beresponsible to anyone other than Asfare for providing advice in relation to theAcquisition, the Placing or Admission or otherwise. Hoare Govett will not beoffering advice and will not be responsible for providing the protectionsafforded to customers of Hoare Govett in relation to the matters described inthis announcement or in respect of the Acquisition, the Placing or anyacquisition of shares or securities in Asfare or otherwise. The Placing is only made in the United Kingdom. This announcement does notconstitute an offer to sell or the solicitation of an offer to buy shares in anyjurisdiction in which such offer or solicitation is unlawful and in particularis not an offer of securities for sale in the United States and the OrdinaryShares have not been and will not be registered under the United StatesSecurities Act of 1933 or under the laws of any state, district or otherjurisdiction of the US or of Australia, Canada, Japan or the Republic of SouthAfrica or any of their respective territories and possessions and no regulatoryclearances in respect of the Ordinary Shares have been or will be applied for inany such jurisdiction. This summary should be read in conjunction with the full text of thisannouncement. Appendix I sets out the timetable of principal events and placing statistics. Appendix II sets out the terms and conditions of the Placing. Appendix III sets out the definitions used in this announcement. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR THEIR RESPECTIVE TERRITORIES AND POSSESSIONS ASFARE GROUP PLC PROPOSED £80.2 MILLION REVERSE TAKEOVER OF ASSETCO GROUP LIMITED PROPOSED PLACING OF NEW ORDINARY SHARES TO RAISE £20.0 MILLION AND APPOINTMENT OF HOARE GOVETT AS NOMAD INTRODUCTION The Company announces that it has entered into a conditional agreement toacquire the entire issued share capital of AssetCo, a leading provider of totalmanaged services to the UK fire and rescue authorities, for a consideration ofapproximately £80.2 million. Of this amount, £70.2 million will be satisfied bythe issue of the Consideration Shares at 145 pence per share to AssetCo'sordinary shareholders and convertible preference shareholders and the remaining£10.0 million will be paid in cash to Brook Henderson in respect of its holdingof AssetCo preference shares. Furthermore, the Company has today conditionally placed 13,793,104 new shares(the "Placing Shares"), at 145 pence each with institutional investors, raisingapproximately £20.0 million before expenses. The Placing Shares are being issuedon a non-pre-emptive basis. By reason of the size of AssetCo relative to Asfare and the fundamental changein Asfare's business, board and voting control, the Acquisition is classified asa reverse takeover under the AIM Rules. The AIM Rules require that completion ofthe Acquisition is subject to the prior approval of Shareholders, which will besought at the EGM, and the publication of an AIM Admission document which isbeing posted to Shareholders today. Furthermore, the Placing is conditional,inter alia, on shareholder approval. In conjunction with the Acquisition, Asfareproposes to change its name to AssetCo plc and make certain changes to itscapital. In addition, because the Concert Party will, as a result of the Acquisition,receive Ordinary Shares representing more than 30 per cent. of the EnlargedShare Capital, the Company is seeking a waiver of Rule 9 of the Takeover Code,which would otherwise require the Concert Party to offer to acquire thoseOrdinary Shares that they do not own. The Acquisition and the Placing are conditional, inter alia, upon the passing ofthe Resolutions by Shareholders at the EGM. Subject to the passing of the necessary resolutions at the EGM, trading in theExisting Ordinary Shares will be cancelled and it is expected that the EnlargedShare Capital will be admitted to trading on AIM on 30 March 2007. INFORMATION ON ASSETCO Introduction The origins of the AssetCo business date back to 1995 when British Gas created asubsidiary, The Leasing Group plc ("TLG"), to manage independently the fleet andfleet-related equipment of British Gas (now National Grid). In February 2001, TLG commenced a 20-year PFI contract for LFB (London FireBrigade) issued by LFEPA (London Fire and Emergency Planning Authority). Thiswas the largest outsourced emergency services equipment contract worldwide andthe first FRA total managed services contract in the UK to be outsourced. Thecontract includes the procurement, supply, maintenance and lifecycle replacementof LFB's fire appliances, specialist fire and rescue vehicles and operationalequipment. The contract also included a transfer of ownership of all vehiclesand 20,000 items of equipment, workshop staff (under TUPE), management ofexisting workshops and all risk associated with operational processes and frontline vehicle and equipment availability from LFB to TLG. TLG was acquired by a privately owned leasing company, Brook Henderson inOctober 2002. Brook Henderson subsequently rebranded itself as AssetCo anddisposed of certain non-core assets, retaining other business interests andclient contracts including the contract with LFEPA. Whilst under Brook Henderson's ownership, AssetCo completed the followingacquisitions: Date of Company Cost Activityacquisition name September SVO £5.1m Conversion of standard vehicles to meet the2003 enhanced vehicle specification requirements for police authorities. October Papworth £2.4m Design and build of vehicles for all emergency2003 services agencies, including FRAs, police authorities and ambulance services trusts. October FMI £1.3m Fleet management services.2003 November Fleet £11.0m Fleet managed services and contract hire.2003 Solutions Limited On 5 October 2005, John Shannon led the management buy-in/buy-out ("BIMBO"),backed by HBOS plc, of AssetCo's emergency and fleet-related business, includingPapworth, SVO and the Ireland fleet management operations, for a considerationof £45 million. The strategic rationale for the BIMBO was that FRAs, both locally andnationally, were embarking upon a period of major change which presented asignificant opportunity for AssetCo. Additional statutory responsibilities hadbeen placed upon them through government legislation with emphasis on the needfor FRAs to adapt and change established practices and thinking. One of the mainelements of the modernisation agenda is that all FRAs in England and Wales arenow required to produce an annual action plan supporting incremental change indelivery of services and usage of resources in order to meet the expectations ofcentral government as outlined in the National Framework Document. In April 2006, AssetCo commenced a 20-year PPP contract for the LincolnshireFire and Rescue Service ("LFR"). This was the second fully managed servicecontract issued on behalf of an FRA and was for the procurement, supply,maintenance and lifecycle replacement of LFR's fleet, fire and rescue vehiclesand operational equipment. Since the BIMBO, AssetCo has entered into the following acquisitions: Date of Company Cost Activityacquisition name December 2006 FSE £1.4m Distributor of hydraulic rescue equipment Acquisitionagreed 23November 2006(completionexpected onthe day ofAdmission) Simentra £0.5m Homeland security and civil contingency planning Since the BIMBO, the directors of AssetCo: •have positioned AssetCo to capitalise on its first mover advantage in the fire market through equipping the company with the capability and competencies to win future total managed services contracts; •have reduced the high fixed cost base to a more variable cost base, thereby allowing increased flexibility to align AssetCo's cost base with its operations; •exited, or are in the process of exiting, from pre-BIMBO fleet management contracts which had low margin returns; •have relocated the main headquarters from an administrative centre in Reading to an existing under-utilised operational facility in London, thereby delivering significant operational and financial benefits; and •have relocated the back office functions to Ireland to manage group business support and deliver a lower cost base. In December 2006, AssetCo secured £5.0 million of funding from J O Hambro whichenabled AssetCo, inter alia, to complete the acquisition of FSE. The Ongoing Directors believe that the LFB and LFR contracts endorse AssetCo'stotal managed services model and provide a template upon which FRAs and otheremergency services can base their service delivery. With first mover advantage in the delivery of total managed services to the firemarket, the Ongoing Directors believe that AssetCo is well positioned to build asignificant and leading position in the provision of total managed services forvehicles and equipment, equipment supply and specialist vehicle design and buildto the FRAs and other emergency services. The Ongoing Directors also believethat with change and modernisation high on the agenda for all emergencyservices, AssetCo is well placed to meet the needs for similar outsourcedrequirements within ambulance service trusts and police authorities. Accordingly, AssetCo's focus and capability is now predominantly geared towardsthe fire market. AssetCo has approximately 380 employees across five primary locations. AssetCo's business AssetCo is a leading provider of total managed services to UK fire and rescueauthorities. AssetCo also designs, builds and converts specialist vehicles andequipment for emergency and mission critical service clients. The breadth ofAssetCo's capabilities allows it to provide clients with a service covering allof their vehicle and operation equipment needs. The directors of AssetCo believe that the company's success in the fire marketis not only attributable to the value and service it brings, but also in itsadoption of a partnering approach to operational solution design, an approachcompatible with the partnering philosophy advocated by the FRAs. In addition,following the transfer of staff from LFB and LFR, AssetCo has direct knowledge,skills and experience in running mission critical operational infrastructures,which the directors of AssetCo believe is a key cultural and operationaldifferentiator to its competitors. A substantial number of AssetCo employeeshave previously been employed in the fire service. AssetCo Total Managed Services AssetCo's total managed services model is built on long-term contractedrelationships and brings together the capabilities of AssetCo in order toprovide for its clients' vehicle and equipment needs. AssetCo creates aninterdependent partnering approach with its clients where both parties shareknowledge and work collaboratively to deliver improved availability for vehiclesand operational equipment, which the directors of AssetCo believe is essentialif the long term capability and expectations of the FRAs in meeting theirimmediate and future Integrated Risk Management Plans ("IRMPs") are to berealised. AssetCo's total managed services model is designed to deliver value for moneysolutions and be affordable (within budget) in the provision, supply,maintenance and lifecycle management of all vehicles and operational equipment.Transferring the ownership, risk and management of vehicles and equipment fromthe FRAs to AssetCo enables the FRAs to concentrate on their core activities. Risk transfer to AssetCo takes place under a contractual arrangement wherebyAssetCo provides guaranteed levels of vehicle and equipment availability acrossdefined territories, at defined locations. Through this risk transfer andcontractual arrangement, FRAs are able to equip themselves with a mechanism thatdelivers their vehicle and equipment requirements and enables change to vehicleand equipment inventories over the total contracted period thereby assistingFRAs in fulfilling their future IRMP requirements. Vehicles and equipment are designed to meet client performance and diversityspecification requirements and are regularly refreshed to incorporate newtechnologies. AssetCo provides familiarisation training on new equipmentsupporting the FRAs' statutory duty under the Fire and Rescue Services Act 2004to maintain competency of their personnel. The Ongoing Directors believe that AssetCo's total managed services modelprovides clients with the following benefits: •guaranteed levels of vehicle and equipment availability at the point of need; •early life replacements and refreshed technologies that enable faster access to technologically advanced vehicles and equipment which assists clients in meeting their statutory obligations under the Civil Contingency Act 2004 and the Fire and Rescue Services Act 2004; •flexible solutions, designed in partnership with FRAs to meet local needs; •release of front line staff from non-core activities thereby enabling clients to meet the increased demand in delivering community safety initiatives brought about by the modernisation agenda; and •budgetary stability, assisting in eliminating the uncertainty of future payments brought about by public sector planning cycles. AssetCo's largest contract is the 20-year PFI contract with LFEPA for totalmanaged services of LFB vehicles and equipment. This was the first FRA totalmanaged services contract in the UK to be outsourced. The original statedcontract value was £292 million. The Proposed Directors estimate that thecurrent contract value is £400 million based on additional equipment addedthrough the PFI contract change procedure. The existing contract includes theprocurement, supply, maintenance and lifecycle replacement of LFB fireappliances, specialist fire and rescue vehicles and operational equipment.Following Admission, Asfare will be substituted as the guarantor, in place ofAssetCo, under the LFB contract. Under the terms of the LFEPA contract, AssetCo is required to repair or replaceany critical vehicle or equipment item with a defect that renders it unavailableto LFB within up to two hours of the defect being reported. Revenue abatementsare applied in the event of failure to meet this performance target. Over thelast five years, the level of revenue abatement applied by LFB has been lessthan one per cent. of contract revenues. Further controls have been introducedsince the BIMBO to service delivery management, which the directors of AssetCoexpect to reduce revenue abatement costs further. In April 2006, AssetCo commenced a 20-year PPP contract with LFR. This is a £60million total managed services contract for the procurement, supply, maintenanceand lifecycle replacement of LFR's fleet, fire and rescue vehicles andoperational equipment. Services provided to LFR include managed services forhoses and supply of general consumables, a new service which expands AssetCo'soffering over that which is provided as part of the PFI contract with LFEPA.LFR's vehicles and equipment are currently on contract hire from a third partysupplier. As these vehicles and equipment reach contract end date, they will bereplaced with vehicles and equipment owned by AssetCo. This replacementprogramme is due to commence in June 2007. Under the terms of the LFR contract, AssetCo is required to repair or replaceany critical vehicle or item of equipment with a defect that renders itunavailable within up to four hours of the defect being reported, with revenueabatements being applicable in the event of failure. Since the start of the LFRcontract, there have been no revenue abatements. During the six months ended 30 September 2006, total managed services revenue(including the LFEPA and LFR contracts) was £9.1 million and gross margins were33.1 per cent. (source: audited non-statutory financial statements). The contracts secured by AssetCo represent the total managed services contractfor the largest urban fire brigade in Europe (LFB) and the largest total managedservices contract with a rural fire brigade in England (LFR). AssetCo now ownsand manages approximately 650 fire and rescue vehicles and appliances,approximately 50,000 items of operational equipment and approximately eleven percent. of all of England's frontline and reserve pumping appliances. AssetCo hasthe scalability, design, capability and the range of services required to meetthe needs of county, metropolitan and combined FRAs. The Proposed Directorsestimate that the replacement cost for all vehicles and equipment provided aspart of the total managed services to LFB and LFR is approximately £73 million. AssetCo Engineering AssetCo Engineering manages eight specialist vehicle and equipment workshopsservicing existing clients, including a dedicated emergency workshop coveringapproximately seven acres in London. AssetCo Engineering's workshops are an integral component in delivering thevehicle and equipment availability service levels set out in the individualclient contracts. Engineers are emergency trained and have the specialistknowledge and skills required to maintain vehicles and equipment unique to thefire market. AssetCo Engineering has also established a network of mobile technicians whodeliver fast and effective roadside repair to vehicles and equipment, andprovide engineering support to clients that operate in remote locations. AssetCo Engineering's clients include AssetCo Total Managed Services, the UKMinistry of Defence, HM Prison Service and various local authorities and healthauthorities. Services provided by AssetCo Engineering include: •emergency workshop and equipment engineering services; •collection and delivery of vehicles and equipment; •testing and inspection of vehicles and equipment; and •technical maintenance scheduling. During the six months ended 30 September 2006, AssetCo Engineering's revenue was£1.2 million and gross margins were 18.5 per cent. (source: auditednon-statutory financial statements). AssetCo Specialist Vehicle Design and Build Re-focused since the BIMBO, and with a strong heritage based on the Papworth andSVO operations, AssetCo's specialist vehicle design, build and conversionoperation, located in Papworth, Cambridgeshire is one of the UK's leadingsuppliers of emergency services vehicles. AssetCo is an approved supplier of fire-pumping appliances to the fire market.During 2007, AssetCo intends to build 130 fire-pumping appliances representingover 55 per cent. of the UK's estimated new fire-pumping appliances expected tobe produced for 2007. AssetCo currently provides a range of fire rescue unitsand operational service vehicles to LFB and LFR. AssetCo is an NHS PASA (purchasing and supply agreement) framework approvedsupplier for fast response (accident and emergency) vehicles and built over 100ambulances in 2006. AssetCo designs and provides a specialist build service forpolice vehicles. In 2006, over 2,000 vehicles were supplied by AssetCo to policeauthorities in the UK. AssetCo has recently been awarded a national framework agreement for the supplyof fire-pumping appliances to the fire and rescue service. The Ongoing Directorsintend to leverage off this agreement and increase further AssetCo's focus onpromoting capability in specialist design and build in the fire and rescuemarket. AssetCo Specialist Vehicle Design and Build provides clients with the followingbenefits: •turnkey vehicle design, development and manufacturing services; •coordination of all supply chain and build activities, through to commissioning and handover; •modifications to vehicle body or standard features tailored to meet specific needs; and •installation of data and communication systems. During the six months ended 30 September 2006, AssetCo Specialist Vehicle Designand Build revenue was £6.4 million and gross margins were 10.6 per cent.(source: audited non-statutory financial statements). AssetCo Operational Equipment Services Established since the BIMBO, AssetCo Operational Equipment Services currentlysupplies operational equipment to over 70 per cent. of all UK FRAs. The EnlargedGroup will be the largest purchaser of fire appliances and fire equipment withinthe UK and Republic of Ireland, supplying operational equipment products to allFRAs in the UK. The Ongoing Directors intend to develop further the Enlarged Group's operationalequipment capability to enhance the range of total managed services currentlyprovided through the selective acquisition of UK-based complementary businessesand strategic partnerships. AssetCo's Operational Equipment Services business provides clients with thefollowing benefits: •reduced cost through the buying power of AssetCo; •specialist procurement services that ensure only fire market compliant products are supplied; •increased equipment compatibility through integrating design technologies; and •use of "green" product technologies that assist in reducing the impact on the environment. AssetCo Business Support Services Established since the BIMBO, AssetCo Business Support Services provides backoffice support to emergency and other existing service critical clients. TheOngoing Directors intend to market these services further as a standalonebusiness service support offering. AssetCo provides a 24 x 7 x 365 call and client services centre for accidentmanagement, vehicle and equipment hire and other service/user related queries. Client services include: •operational control and call centre management; •vehicle and plant hire; •vehicle and equipment breakdown and after sales management service; and •finance and administration support services. During the six months ended 30 September 2006, AssetCo Business Support Servicesrevenue was £1.9 million (source: audited non-statutory financial statements). AssetCo Consulting Established since the BIMBO, the Ongoing Directors intend that AssetCoConsulting will provide independent advice on "best practice and best value" incivil contingency planning. AssetCo has agreed, conditional upon Admission, to acquire Simentra, aspecialist Northern Ireland based consultancy boutique, with a well establishedbrand in homeland security and civil contingency planning, for £0.45 million incash. Simentra's diverse team of experienced front line/first responders, whohave experience at all levels of emergency services operations, have spoken atinternational conferences in this evolving and critical aspect of integratedrisk management. Other operations AssetCo provides a number of other services through operations acquired as partof the BIMBO that are outside of the fire and rescue services sector. Theseinclude the provision of vehicle contract hire services for Northern IrelandElectricity, fleet management services for Scottish Water and spot hireoperations in the UK. AssetCo has exited the majority of its fleet managementcontracts. Accordingly, the Ongoing Directors expect revenue from fleetmanagement to reduce substantially. The Ongoing Directors intend to review theseoperations and consider the timing of any future exit from non-fire and rescueservice related contracts. During the six months ended 30 September 2006, revenue from other operations was£34.3 million and gross margins were 6.1 per cent. (source: auditednon-statutory financial statements). AssetCo's markets There are 59 FRAs in the UK, comprising of 47 in England, three in Wales, eightin Scotland and one in Northern Ireland. Collectively, these FRA's totalestimated annual expenditure is £2.6 billion of public money in 2006/7 (source:PKF). The Proposed Directors estimate that AssetCo's share of LFB's budgetedexpenditure for 2006/7 of £407 million will be approximately five per cent. All FRAs are responsible for tending fires, delivering community fire safety andresponding to road traffic accidents, flooding and major emergencies. Day-to-daymanagement of the FRA is undertaken by the Chief Fire Officer who is responsibleto the community through a local authority member or members appointed to theFRA. There is significant variation in the scale of, and local circumstances facing,FRAs. Some are predominantly rural authorities with relatively small populationsand others are mainly urban with large populations. Numbers of FRA staff rangefrom 25 in the Isle of Wight to nearly 7,000 in London. Whilst other organisations have the depth of resource to continue to target thismarket, the Ongoing Directors believe that AssetCo retains a significantadvantage by having won the first two outsourced fire contracts, demonstratedcapability in delivering tailored solutions to meet local FRA needs andestablished a level of trust and confidence that is essential to the missioncritical service market. Fire and rescue market drivers The Fire and Rescue Services Act 2004 requires FRAs to develop and deliver thestrategic objectives of the National Framework Document. FRAs are also underpressure to deliver savings under the Gershon Efficiency Review as well as toundertake improvement planning and manage performance against service objectivesunder the statutory basis of best value. Faced with uncertain levels ofgovernment funding, and the recognition that the reform agenda and associatedagreement on pay and terms and conditions, has and will have significantfinancial ramifications, AssetCo provides the capability and capacity to supportFRAs in seeking out alternative methods of supporting 'front end' servicedelivery. Following the 11 September 2001 attacks on the World Trade Center andaccelerated by the attacks of 7 July 2005 in London, the UK Governmentestablished the CCCP. The aim of the CCCP is to enhance the country'spreparedness and resilience by improving the capability of the FRAs and otherorganisations to respond to major and catastrophic incidents. As of July 2006,the UK Government has invested approximately £200 million in vehicles andequipment in support of this programme. The UK Government has also committed tospend up to £16 million per annum to help meet the costs of crewing these newvehicles and is working with the Chief Fire Officers association and the localgovernment association on the allocation of these funds. The Ongoing Directors expect a requirement to be placed on the FRAs to performduties that go beyond their current statutory obligations to respond to fires,special services and major incidents. In addition, FRAs will be required to planand prepare for catastrophic incidents identified by the CCCP in areas such as: •chemical, biological, radiological and nuclear incidents; •industrial and domestic accidents; •chemical spills and collapsed buildings; •natural disasters; and •floods and earthquakes. By order of the Secretary of State for Communities and Local Government,responsibility for maintaining the CCCP vehicles and equipment will transferfrom the CLG to FRAs in Spring 2007. As an interim measure, the CLG has electedto invite tenders for a one year contract for the maintenance only of CCCPvehicles. This contract is targeted by the CLG to commence in Spring 2007. The Ongoing Directors believe that a comprehensive managed service tender willbe issued to the private sector in March 2007. This will be for the provision ofsupport for FRAs in ensuring national capability is maintained through long termcapability management of CCCP vehicles and equipment. The Ongoing Directors believe that, with its successful track record in winningvehicle and equipment managed service contracts in the fire market, itsnetworked national infrastructure with the required skills and knowledge toprovide an interim solution, and with its established track record of deliveringmission critical operational infrastructures and long term capability managementacross the UK, AssetCo is well positioned to secure both the interim and longerterm CCCP contracts described above. Fire and rescue market size Based on current prices, PKF estimates that the potential market size for UKfire and rescue fleet services is approximately £172 million per annum. Inaddition, the Ongoing Directors estimate that the potential market size relatingto the CCCP is approximately £10 million per annum. Therefore, the OngoingDirectors believe that this implies a total addressable UK vehicle total managedservices market of £3.6 billion, including a market relating to the CCCP inEngland of £200 million, based on typical 20-year contract agreements. AssetCo currently holds both of the current total vehicle and equipment managedservice fire contracts, with an initial aggregate contract value of £17 millionper annum. Market and new product development AssetCo intends to expand its total managed services offering, particularly inthe areas of equipment managed service support. The Ongoing Directors intend toutilise their experience in delivering improvements and efficiencies in theprovision and support of specialist equipment to the fire services market toother emergency services agencies and organisations in the UK such as the UKMinistry of Defence. In addition, as a result of discussions with manufacturers and distributors ofspecialist equipment, the Ongoing Directors believe that there is a significantopportunity for specialist equipment "after care" service and support. TheOngoing Directors believe that the development of an expanded and nationalequipment managed service, with endorsement from specialist manufacturers anddistributors, could provide increased entry points into new clients and enablesfurther expansion into AssetCo's addressable market. New markets In addition to the FRAs, AssetCo already provides services and products intoboth the UK police and ambulance sectors. The UK police market consists of 43 police authorities which, as a result of theGershon Efficiency Review, are under pressure to deliver savings as well as toundertake reviews of how to deliver efficiencies at a local level and deliverimproved community safety. On 1 July 2006, the existing 29 UK ambulance trusts were merged to create 12 UKregional ambulance trusts, with the objective of reducing bureaucracy andcommitting more money to invest in front line vehicles and equipment. UKambulance trusts are being encouraged to adapt, change and seek alternativemeans of improving services and reducing costs through partnerships with theprivate sector. The Ongoing Directors believe that, with increased cost pressure in each of theemergency services and an increasing need to standardise products and leverageexisting infrastructure, opportunities exist to generate synergies and improveservices across the emergency services through adoption of the AssetCo totalmanaged services business model. Financial information on AssetCo Prior to the BIMBO, the AssetCo Group did not exist in its current form but waspart of a larger group. The BIMBO brought together a number of subsidiaries andcontracts. In addition, AssetCo has withdrawn from all except one of the fleetmanagement contracts acquired as part of the BIMBO. The selected consolidated financial information on the AssetCo Group(post-BIMBO) set out below, as at and for the six months ended 31 March 2006 and30 September 2006 respectively, is presented in accordance with UK GAAP. Six months Six months ended ended 30 31 March September 2006 2006 £'000 £'000 Revenue 62,119 52,941 ========== ========== EBITDA(1) 7,780 8,147 ========== ========== Operating profit 1,584 2,522Interest (1,699) (1,292) ---------- ----------(Loss)/profit before taxation (115) 1,230Taxation 302 113 ---------- ----------Profit after taxation 187 1,343 ========== ========== Net assets 3,258 4,601 ========== ========== Net debt(2) 68,645 52,786 ========== ========== (1) Earnings before interest, taxation, depreciation and amortisation. (2) Net debt excludes the AssetCo preference shares of £10 million. Turnover decreased in the six months to 30 September 2006 as build consultancyfor the UK utility contracts was reduced and AssetCo exited the majority of itsfleet management contracts during this period. As both of these activities werehigh volume but low margin, the effect of exiting these businesses improvedmargins. In addition, since the BIMBO, there has been an ongoing review of allcosts in AssetCo which resulted in further improved margins. A continuousimprovement programme has been put in place to review all aspects of the AssetCoGroup with the aim of achieving further margin improvement. Profit before taximproved from a loss of £115,000 in the six months ended 31 March 2006 to aprofit of £1,230,000 in the six months ended 30 September 2006 after charging £1million for goodwill amortisation in each period. Net debt has decreased from £68.6 million to £52.8 million due to exiting themajority of the fleet management contracts, which reduced debt by £14.3 millionand the net repayment of £1.5 million of other loans. INFORMATION ON ASFARE Asfare, a leading supplier of products and services to the emergency andhomeland security markets in the UK, was incorporated in July 2003 and wasadmitted to trading on AIM in December 2003. Asfare supplies operationalequipment products and services to more than 90 per cent. of the UK FRAs. Asfarecomprises two divisions: •the search and rescue division; and •the protection and detection division. The search and rescue division comprises AS Fire and Rescue and Collins Youldon.AS Fire and Rescue is an established manufacturer of an extensive range ofladders, gantries and ancillary equipment sold under several brand names toemergency and rescue services in the UK and internationally. AS Fire andRescue's principal customers are FRAs, airports, police forces and AssetCo withexports comprising approximately 15 per cent. of turnover. AS Fire and Rescuehas successfully launched a new lightweight roller shutter which is provingattractive to the European markets. De-mount systems and beam gantries are alsobeing developed, particularly focused on the utility and European markets. TheDirectors believe that the establishment of AS Security Equipment BV in February2006 will be a catalyst for sales into European markets with significant growthexpectations in the next two years. Within AS Fire and Rescue, the Directors areexploring opportunities in the Malaysian and Australasian markets and expectthere to be significant opportunities in these regions in 2007 and 2008. Collins Youldon, acquired by Asfare in June 2006, manufactures hose reels, cabledrums and a range of related products for both the fire-fighting and the oiltanker industries. Collins Youldon is the largest supplier of vehicle mountedhose reels in the UK, with exports comprising approximately 37 per cent. ofturnover. Collins Youldon recently recruited a new managing director, who isundertaking a review of potential new areas of product development. The sole trading entity in the protection and detection division is ToddResearch, acquired by Asfare in November 2005, which manufactures advancedpackage screening units. In 2005, Todd Research launched a full upgrade to itspremium product range including colour X-ray image and powder detectioncapability. Further developments in 2006 included a remote access and networkfunctionality for the premium range and a 'Basix' range targeting SMEs for entrylevel scanning. Todd Research has increased its direct sales approach through the recruitment of a focused salesman todevelop the existing customer base to include more facilities managementcompanies and to look beyond the traditional blue chip companies and governmentagencies, targeting high profile retail outlets, hotels and schools. Financial information on Asfare The selected financial information set out below, as at and for the three yearsended 31 March 2006, is presented in accordance with UK GAAP. Pro forma (unaudited) Year ended Year ended Year ended 31 March 31 March 31 March 2004 2005 2006 £000 £000 £000 Revenue 4,389 3,925 4,905 ========== ========== ========== EBITDA(1) 837 387 646 ========== ========== ==========Operating (loss)/profit (360) 190 456Interest (41) (81) (98) ---------- ---------- ----------(Loss)/profit beforetaxation (401) 109 358Taxation (165) 10 (45) ---------- ---------- ----------(Loss)/profit after taxation (566) 119 313 ========== ========== ========== Net assets 2,885 2,962 3,966 ========== ========== ========== Net debt 1,033 693 1,329 ========== ========== ========== (1) Earnings before interest, taxation, depreciation, amortisation andexceptional items. In order to enable useful comparison of the Group's performance pro formainformation has been set out for the year ended 31 March 2004. The pro formaresults for the year ended 31 March 2004 represent the actual consolidatedresults of Asfare from the date of incorporation together with the results ofSpeed 5019 Limited and its subsidiaries from 1 April 2003 until its acquisitionby the Company on 12 December 2003. The financial information set out above includes the trading results for AS Fireand Rescue and Todd Research since the date it was acquired on 11 November 2005. Turnover for the year ended 31 March 2006 amounted to £4,905,000, a growth of 25per cent. above turnover of £3,925,000 in the previous year (pro-forma 2004:£4,389,000). AS Fire and Rescue's turnover increased in the year to 31 March2006 by 4 per cent. to £4,092,000 over the prior year and Todd Research recorded£813,000 in sales. Gross margins in the year ended 31 March 2006 were 57.8 percent. (2005: 52.9 per cent., 2004: 54.2 per cent.). The AS Fire and Rescue grossmargin was improved by the mix of sales and higher margin products, particularlyin the second half of the year. Todd Research's gross margin was improved asmore of the new product range was sold. BACKGROUND TO AND REASONS FOR THE ACQUISITION AND THE PLACING The Ongoing Directors intend to increase the Enlarged Group's share of existingclient expenditure by providing an enlarged service offering and bycross-selling into the existing client bases of Asfare and AssetCo. Organicgrowth is planned through the sale of additional products and enhanced services,including total managed services and consultancy. The Enlarged Group will haveall the FRAs as clients. The Directors and the Proposed Directors believe that the Acquisition bringstogether two experienced and specialist UK fire services companies andmanagement teams and will: •demonstrate the Enlarged Group's commitment to the UK fire market; •establish the attractiveness of the Enlarged Group as a strategic partner for other key fire market suppliers; •provide the Enlarged Group with increased purchasing power within the total fire product supply market in the UK; and •reduce operating costs through integrated Enlarged Group support services functions. In addition, the Ongoing Directors believe that the Acquisition will provideclients of the Enlarged Group with the following benefits: •a service-led solution based on value, not cost; •increased client choice and flexibility through an expanded range of products and total managed services; •integrated supply chain management, able to deliver products and total managed services from a single source supplier; and •integrated technologies that are able to deliver technically advanced vehicles and operational equipment. As a larger listed company with a balance sheet strengthened by the net proceedsfrom the Placing the Directors and the Proposed Directors believe the EnlargedGroup will gain an enhanced profile within its chosen markets which will assistit in winning new contracts in the future, particularly in the fire servicesmarket. The recruitment, retention and reward of employees is a critical factor in thefuture success of the Enlarged Group. The Directors and the Proposed Directorsbelieve that the Acquisition and the Placing will help the Enlarged Group tocontinue to recruit and retain skilled staff and thereby continue to grow. STRATEGY OF THE ENLARGED GROUP The Ongoing Directors' objectives are to: •capitalise on AssetCo's first mover advantage in total managed services for the fire and rescue service; •build on long term contracted client relationships and engage at strategic planning level; •leverage off Asfare's and FSE's existing relationships to further organic growth; •horizontally integrate into the supply chain through selective acquisitions and strategic partnerships; •pull-through additional value added services into the existing client base; and •replicate the total managed services model across other emergency services agencies. PROFIT FORECAST FOR THE YEAR ENDING 31 MARCH 2007 AND FORECAST NET DEBT AT 31MARCH 2007 The Ongoing Directors estimate that pro-forma turnover, EBITDA beforetransaction costs and the cost of share based payments and profit beforetaxation, amortisation, transaction costs and the cost of share based paymentsfor the Enlarged Group for the year ending 31 March 2007 will be approximately£103.2 million, £17.9 million and £6.2 million respectively. This is based onthe aggregate of the forecast turnover (after the elimination of pro-formaintercompany sales of £1.1 million), EBITDA before transaction costs and thecost of share based payments and profit before taxation, amortisation,transaction costs and the cost of share based payments for the year ending 31March 2007 for each of Asfare and AssetCo. The Ongoing Directors estimate that the Enlarged Group will have net debt ofapproximately £52.7 million at 31 March 2007, comprising acquisition debt of£21.3 million, asset finance (emergency) of £25.7 million, asset finance(non-emergency) of £11.0 million and working capital of £1.0 million, less cashbalances of £6.3 million. Net debt excludes the AssetCo preference shares of £10million. CURRENT TRADING AND PROSPECTS The Ongoing Directors believe that the UK fire market is relativelyunderdeveloped and offers significant growth potential for total managedservices. AssetCo AssetCo has won both of the fully outsourced fire vehicle and equipment managedservices contracts (each being for 20 years) that the UK fire services haveawarded to date. The UK fire services sector is increasingly moving towardsoutsourcing and the Ongoing Directors are confident that the Enlarged Group iswell positioned to win additional fire service contracts. AssetCo is currently working on proposals in relation to total managed servicesprovision for ten FRAs, expected by the Ongoing Directors to be awarded over thenext three years, with potential contract values, in aggregate, of approximately£24 million per annum (£480 million over a 20-year contracted period). Inconjunction with the CCCP, the Ongoing Directors believe that contract awardswith a value of approximately £34 million per annum could be made between 2007and 2009. Asfare In the six months ended 30 September 2006, Asfare's turnover doubled to £3.6million from the same period in the prior year, growing both organically andthrough acquisition. The Directors believe that the strength of Asfare's orderbook and the continuing improvement in its markets provide a sound platform forcontinued growth. The Directors believe the prospects beyond the currentfinancial year are strong as Collins Youldon and Todd Research begin to benefitfrom the market opportunities and synergies of being part of the existing AsfareGroup. The Enlarged Group The Ongoing Directors are confident in the underlying financial and tradingprospects of the Enlarged Group for the current financial year and the financialyear ending 31 March 2008. USE OF PROCEEDS OF THE PLACING The Ongoing Directors intend to use the net proceeds of the Placing as follows: £€10.0 million to provide the Company with funds to satisfy the cash consideration due to Brook Henderson under the terms of the Acquisition Agreements; £€3.5 million to refinance existing debt obligations; and £€3.5 million for working capital purposes. DIVIDEND POLICY The Ongoing Directors intend to adopt a progressive dividend policy taking intoaccount the earnings potential of the Enlarged Group and the growth anddevelopment opportunities available to it, while maintaining appropriate levelsof dividend cover. The Board will continue to review the appropriateness of itsdividend policy as the Enlarged Group develops. SHARE OPTION PLANS The Company operates the Share Option Plans to incentivise directors andemployees of the Enlarged Group. The Ongoing Directors intend to grant optionsunder the Share Option Plans over Ordinary Shares following Completion of theAcquisition. These options will have an option exercise price equal to thePlacing Price. Immediately following Admission, the Company intends to grantoptions over an aggregate of 1,381,205 Ordinary Shares to certain employees ofthe AssetCo Group. DIRECTORS AND PROPOSED DIRECTORS It is proposed that, on Admission, John Shannon will join the Board as ChiefExecutive Officer and Frank Flynn will join the Board as Chief FinancialOfficer. It is also proposed that, following their management of Asfare througha period of organic and acquisitive growth, Tony O'Neill and Tim O'Connor willstand down from the Board following Admission and Tim O'Connor will step down asCompany Secretary. In addition, David Chisnall will step down as Deputy Chairmanbut will remain on the Board as a non-executive director. In addition, theOngoing Directors intend to appoint a further non-executive director withsignificant fire industry experience during 2007. Further details of the Proposed Directors are set out below: Marcus John Shannon, proposed Chief Executive Officer John Shannon (aged 41) led the BIMBO of the AssetCo Group in October 2005. Heacquired Star Rentals Limited in 1997 and by January 2000, following theacquisition of the Lex Transfleet subsidiary in Northern Ireland, Chart HireServices Limited, had formed Northern Ireland's largest independent commercialvehicle hire company, FMI. Upon selling FMI to AssetCo he became a board memberof AssetCo and managing director of AssetCo (Ireland) Limited, AssetCo EmergencyLimited and AssetCo Vehicles Limited. Until 1996, he worked in Bank of Ireland'sCorporate and International Banking division, prior to which he worked at KPMG.He holds a BSc (Hons) in Marine Biology, is a fellow of the Institute of Chartered Accountants in Ireland, a fellow of the Institute ofLogistics and Transport, a member of the Institute of Bankers and holds an MBA. Raymond Francis Flynn, proposed Chief Financial Officer Frank Flynn (aged 43) is currently Finance Director of the AssetCo Group and waspart of the BIMBO team that acquired the AssetCo Group in October 2005. In thefour years leading up to the BIMBO, he was an associate partner atPricewaterhouseCoopers ("PwC") with specific focus on realising shareholdervalue. He was responsible for activities in PwC's Omagh and Derry offices andmanaged human resources for Northern Ireland Assurance, a division of PwCemploying over 300 people. He also managed a portfolio of audit clients. Priorto this, he worked for three years within the corporate finance division of theIndustrial Development Board for Northern Ireland. He also spent six years withCrescent Capital / Hambro Northern Ireland Venture Capital Fund as an investmentmanager and was a non-executive director of UP Holdings Limited and ToughglassLimited. He holds a BSc (Hons) in Business and Accountancy, is a fellow of theInstitute of Chartered Accountants in Ireland and was a licensed InsolvencyPractitioner. THE TAKEOVER CODE The terms of the Acquisition give rise to certain considerations under theTakeover Code. The Takeover Code is issued and administered by the Panel. The Company issubject to the Takeover Code and therefore its shareholders are entitled to theprotections afforded by the Takeover Code. Under Rule 9 of the Takeover Code, any person who acquires, whether by a seriesof transactions over a period of time or not, an interest in shares which (takentogether with shares in which he is already interested and in which personsacting in concert with him are interested) carry 30 per cent. or more of thevoting rights of a company which is subject to the Takeover Code, is normallyrequired to make a general offer in cash to all other shareholders of thatcompany to acquire the balance of the shares not held by such a person (or groupof persons acting in concert). Similarly, when any person, together with persons acting in concert with him, isinterested in shares which in aggregate carry 30 per cent. or more of the votingrights of such a company but not more than 50 per cent. of such voting rights, ageneral offer will normally be required if any further interests in shares areacquired by any such person. An offer under Rule 9 must be in cash and at the highest price paid during thetwelve months prior to the announcement of the offer for any interests in sharesin the company acquired by any person required to make the offer or any personacting in concert with them. The parties shown in the table below are deemed to be acting in concert for thepurposes of the Takeover Code (the "Concert Party") as a result of theirpositions as directors of AssetCo and their collective participation in theBIMBO. Consideration Percentage holding Shares of Enlarged Share CapitalJohn Shannon 26,963,327 40.1Frank Flynn 7,137,351 10.6Denis Mellon 2,775,637 4.2David Smith 2,775,637 4.2Pelham Olive 2,428,682 3.6Peter Lewin 346,955 0.5 ---------- --------- 42,427,589 63.2 ========== ========= The table above shows the interest of the Concert Party assuming that theAcquisition and the Placing is completed and assuming that all the PlacingShares are issued, that no further Ordinary Shares are issued by the Companyprior to the issue of the Ordinary Shares. After completion of the Acquisition and the Placing, the Concert Party'sinterest in shares carrying voting rights in the Company will represent, inaggregate, 63.2 per cent. of the voting rights attaching to the Enlarged ShareCapital. The Panel has agreed however to waive the obligation to make a general offerthat would otherwise arise on the members of the Concert Party as a result ofthe Acquisition, subject to approval of the Shareholders. PLACING AGREEMENT The Company is proposing to raise in aggregate approximately £20.0 million(before expenses) through a conditional placing of 13,793,104 Placing Shares atthe Placing Price with institutional investors pursuant to the PlacingAgreement. The New Ordinary Shares will, when issued and fully paid, rank pari passu in allrespects with Existing Ordinary Shares and will, once allotted, rank in full forall dividends and other distributions declared, made or paid on the sharecapital of the Company in respect of the period after such allotment. It isexpected that dealings in the Existing Ordinary Shares and the New OrdinaryShares will commence on AIM on 30 March 2007 (or such later date as shall bedetermined by Hoare Govett and the Company, being not later than 13 April 2007). Completion of the Placing will be subject to satisfaction of conditionscontained in the Placing Agreement including Admission occurring and becomingeffective by 8.00 a.m. on 30 March 2007 or such later time and/or date as may bedetermined in accordance with the Placing Agreement (not being later than 3.00p.m. on 13 April 2007) and to the Placing Agreement not having been terminated. LOCK-IN AND ORDERLY MARKETING ARRANGEMENTS The Proposed Directors and the AssetCo Senior Managers have undertaken to theCompany and Hoare Govett (subject to certain limited exceptions, includingdisposals by way of acceptance of a takeover offer or the granting of anirrevocable commitment to accept a takeover offer for the entire issued sharecapital of the Company) not to dispose of any of their Ordinary Shares (and toprocure that no persons connected with them dispose of any Ordinary Shares)during the period from Admission up to publication of the Company's annualreport and accounts for the year ending 31 March 2008. The Ongoing Directors andthe AssetCo Senior Managers have also agreed with the Company and Hoare Govettthat, for as long as Hoare Govett is the Company's nominated adviser (subject tocertain conditions), they shall effect, insofar as they are able, any disposalof such shares through Hoare Govett. EXTRAORDINARY GENERAL MEETING A notice convening the EGM to be held at 11.00 a.m. on Thursday 29 March 2007 atthe offices of Nabarro, Lacon House, 84 Theobald's Road, London, WC1X 8RW, willbe despatched to Shareholders today. The Company has received irrevocable undertakings which amount to an aggregateof 1,705,555 Ordinary Shares representing 34.3 per cent. of the issued sharecapital of the Company to vote in favour of the Resolutions. Appendix I Timetable of principal events and placing statistics Timetable of principal events Latest time and date for receipt of forms of proxy in 11.00 a.m. onrespect of the EGM 27 March 2007 Extraordinary General Meeting 11.00 a.m. on 29 March 2007 Completion of the Acquisition and Placing 30 March 2007 Admission effective and dealings in the New Ordinary 30 March 2007 Shares to commence on AIM and new name effective CREST stock accounts credited in respect of New Ordinary 30 March 2007Shares Despatch of definitive share certificates Shares to be by 13 April 2007held in certificated form Placing statisticsPlacing Price 145 pence Number of Existing Ordinary Shares 4,971,112 Number of Placing Shares 13,793,104 Number of Consideration Shares 48,434,483 Enlarged Share Capital 67,198,699 Market capitalisation of the Company at the Placing Price(1) £97.4 million Placing Shares as a percentage of the Enlarged Share Capital 20.5 per cent. Consideration Shares as a percentage of the Enlarged Share 72.1 per cent.Capital Estimated net proceeds of the Placing receivable by the Company £17.0 million(2) Notes: 1. Market capitalisation has been calculated based on the number of OrdinaryShares in issue immediately following Admission multiplied by the Placing Price. 2. Net proceeds are stated after the deduction of estimated total expenses ofapproximately £3.0 million. Appendix II Terms and conditions of the Placing THIS ANNOUNCEMENT, INCLUDING THE APPENDIX IS NOT FOR RELEASE, OR PUBLICATION ORDISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA,CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR THEIR RESPECTIVE TERRITORIESAND POSSESSIONS IMPORTANT INFORMATION FOR PLACEES ONLY Eligible participants in the Placing MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THISANNOUNCEMENT AND THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN AREDIRECTED ONLY AT PERSONS WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TOINVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETSACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") OR ARE PERSONS FALLINGWITHIN ARTICLE 49(2) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONSETC") OF THE ORDER OR TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED AND AREPERSONS WHO FALL WITHIN PARAGRAPH (7) OF SECTION 86 OF THE FINANCIAL SERVICESAND MARKETS ACT 2000 (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANTPERSONS"). THIS ANNOUNCEMENT AND THIS APPENDIX AND THE TERMS AND CONDITIONS SETOUT HEREIN AND ITS CONTENTS MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARENOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THISANNOUNCEMENT AND THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREINRELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITHRELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT AND THIS APPENDIX MUSTSATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. THIS ANNOUNCEMENT AND THISAPPENDIX DO NOT CONSTITUTE AN OFFER, OR FORM PART OF, ANY OFFER TO PURCHASE ORSUBSCRIBE FOR ANY SECURITIES IN ASFARE GROUP PLC (THE "COMPANY"). THE NEWORDINARY SHARES TO BE ISSUED BY THE COMPANY THAT ARE THE SUBJECT OF THE PLACINGREFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE USSECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR UNDER ANYAPPLICABLE STATE SECURITIES LAWS, AND ABSENT REGISTRATION MAY NOT BE OFFERED ORSOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR AS A PART OFA TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIESACT AND THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITEDSTATES. Persons who are invited to and who choose to participate in the Placing("Placees") by making an oral offer to subscribe for Placing Shares, will bedeemed to have read and understood this Announcement (including this Appendix)in its entirety and to be making such offer on the terms and conditionscontained in this Appendix, and to be providing the representations, warranties,agreements, acknowledgements and undertakings, in each case as contained in thisAppendix. In particular, each Placee represents, warrants and acknowledges that it: 1. is a Relevant Person; and 2. is outside the United States and is acquiring the Placing Shares in an"offshore transaction" (within the meaning of Regulation S under the SecuritiesAct). This Announcement (including this Appendix) does not constitute or form part ofany offer or invitation to sell or issue, or any solicitation of any offer topurchase or subscribe for, any Placing Shares in the United States, Australia,Canada, Japan or the Republic of South Africa and their respective territoriesand possessions or in any other jurisdiction in which such offer or solicitationis or may be unlawful and the information contained herein is not forpublication or distribution to persons in the United States, Australia, Canada,Japan or the Republic of South Africa and their respective territories andpossessions or any jurisdiction in which such publication or distribution isunlawful. Any failure to comply with these restrictions may constitute aviolation of US, Australian, Canadian, Japanese or South African securitieslaws. Persons receiving this Announcement (including, without limitation,custodians, nominees and trustees) must not distribute, mail or send it in, intoor from the United States, or use the United States mails, directly orindirectly, in connection with the Placing, and by so doing may invalidate anyrelated purported application for Placing Shares. The Placing Shares have notbeen and will not be registered under the Securities Act or under the securitieslaws of any state or other jurisdiction of the United States, and, subject tocertain exceptions from the appropriate requirements of such jurisdiction, maynot be offered or sold, resold or delivered, directly or indirectly in or intothe United States. No public offering of the Placing Shares is being made in theUnited States. The Placing Shares are being offered and sold outside the UnitedStates in reliance on Regulation S. Until the expiration of 40 days after theclosing of the Placing, an offer or sale of the Placing Shares within the UnitedStates by a dealer whether or not participating in the Placing may violate theregistration requirements of the Securities Act if such offer or sale is madeotherwise than in accordance with Rule 144A of the Securities Act. The distribution of this Announcement (including this Appendix) and the Placingand/or issue of Ordinary Shares (as defined below) in certain otherjurisdictions may be restricted by law. No action has been taken by the Companyor Hoare Govett that would permit an offer of Ordinary Shares or possession ordistribution of this Announcement (including this Appendix) or any otheroffering or publicity material relating to such Ordinary Shares in anyjurisdiction where action for that purpose is required. Persons into whosepossession this Announcement (including this Appendix) comes are required by theCompany and Hoare Govett to inform themselves about and to observe any suchrestrictions. Details of the Placing Agreement and the Placing Shares Hoare Govett has entered into a conditional Placing Agreement with the Companyand others whereby Hoare Govett has, on the terms and subject to the conditionsset out therein, agreed to use its reasonable endeavours as agent for and onbehalf of the Company to procure Placees for the Placing Shares at 145 pence pershare and, failing which, to subscribe itself for the Placing Shares at thePlacing Price. The Placing Shares will when issued be credited as fully paid and will rank paripassu in all respects with the Existing Ordinary Shares of 25 pence each of theCompany, including the right to receive all dividends and other distributionsdeclared, made or paid in respect of such Ordinary Shares after the date ofissue of the Placing Shares. Application for admission to trading Application will be made to the London Stock Exchange for Admission of theEnlarged Share Capital on AIM. It is expected that Admission will take place anddealings in the Enlarged Share Capital will commence on 30 March 2007. Bookbuilding process Hoare Govett has conducted a bookbuilding process (the "Bookbuilding Process")to determine demand for participation in the Placing. This Appendix givesdetails of the terms and conditions of, and the mechanics of participation in,the Placing. No commissions will be paid to Placees or by Placees in respect oftheir agreement to subscribe for any Placing Shares. To the fullest extent permissible by law, neither Hoare Govett nor any holdingcompany thereof, nor any subsidiary, branch or affiliate of Hoare Govett or anysuch holding company (each an "Affiliate") shall have any liability to Placees(or to any other person whether acting on behalf of a Placee or otherwise) inconnection with the Placing or the Bookbuilding Process. In particular, neitherHoare Govett nor any Affiliate thereof shall have any liability in respect ofits conduct of the Bookbuilding Process. Participation in, and principal terms of, the Bookbuilding Process By having participated in the Bookbuilding Process and the Placing, Placees willbe deemed to have read and understood this Announcement (including thisAppendix) in its entirety and to be participating and making an offer forPlacing Shares at the Placing Price on the terms and conditions, and to beproviding the representations, warranties, acknowledgements and undertakings,contained in this Appendix. Hoare Govett (whether through itself or its Affiliates) is arranging the Placingas an agent of the Company. A bid in the Bookbuilding Process will be made on the terms and conditions inthis Appendix and will not be capable of variation or revocation after the closeof the Bookbuilding Process. Any allocation will be confirmed orally to persons who have participated in theBookbuilding Process and a contract note setting out settlement instructionswill be dispatched as soon as possible thereafter. Hoare Govett's oralconfirmation will constitute a legally binding commitment upon such person (whowill at that point become a Placee) to subscribe for the number of PlacingShares allocated to that Placee at the Placing Price set out in thisAnnouncement and otherwise on the terms and conditions set out in this Appendixand in accordance with the Company's memorandum and articles of association.Each Placee's obligations will be owed to the Company and to Hoare Govettthrough whom such Placee submitted its offer. Each Placee will also have animmediate, separate, irrevocable and binding obligation, owed to Hoare Govett,to pay to it (or as it may direct) in cleared funds an amount equal to theproduct of the Placing Price and the number of Placing Shares such Placee hasagreed to subscribe for. All obligations under the Placing will be subject to fulfilment of theconditions referred to below under "Conditions of the Placing". Conditions of the Placing The Placing is conditional on the Placing Agreement becoming unconditional inall respects and not having been terminated in accordance with its terms. Theobligations of Hoare Govett under the Placing Agreement are conditional, interalia, upon: (a) the Resolutions to be proposed at the Extraordinary General Meeting of theCompany to be convened for this purpose on 29 March 2007 having been passedthereat without any amendment; and (b) Admission taking place by no later than by 8.00 a.m. on 30 March 2007. If (a) any of the conditions contained in the Placing Agreement are notfulfilled or waived by Hoare Govett by the respective time or date wherespecified (or such later time or date as Hoare Govett and the Company may agreebut not later than 3.00 p.m. on 13 April 2007) or (b) the Placing Agreement isterminated in the circumstances specified below, the Placing will lapse and thePlacees' rights and obligations hereunder shall cease and terminate at such timeand each Placee agrees that no claim can be made by or on behalf of the Placee(or any person on whose behalf the Placee is acting) in respect thereof. By participating in the Bookbuilding Process and/or the Placing, each Placeeagrees that its rights and obligations cease and terminate only in thecircumstances described above and will not be capable of rescission ortermination by it. Hoare Govett may, at its discretion and upon such terms as it thinks fit, waivecompliance by the Company with, or extend the time and/or date for fulfilment bythe Company of, the whole or any part of any of the Company's obligations inrelation to the conditions in the Placing Agreement. Any such extension orwaiver will not affect Placees' commitments as set out in this Announcement. Hoare Govett and the Company shall have no liability to any Placee (or to anyother person whether acting on behalf of a Placee or otherwise) in respect ofany decision Hoare Govett may make as to whether or not to waive or to extendthe time and/or date for the satisfaction of any condition to the Placing norfor any decision it may make as to the satisfaction of any condition or inrespect of the Placing generally. Right to terminate under the Placing Agreement Hoare Govett may, at any time before Admission, terminate the Placing Agreementin accordance with the terms of the Placing Agreement by giving notice to theCompany in certain circumstances, including the occurrence of a force majeureevent or a material adverse change in the financial or trading condition of theEnlarged Group. If the obligations of Hoare Govett under the Placing Agreement are terminated inaccordance with its terms, the rights and obligations of each Placee in respectof the Placing as described in this Announcement (including this Appendix) shallcease and terminate at such time and no claim can be made by any Placee inrespect thereof. By participating in the Placing, each Placee agrees with Hoare Govett that theexercise by Hoare Govett of any right of termination or other discretion underthe Placing Agreement shall be within the absolute discretion of Hoare Govettand that Hoare Govett need not make any reference to any such Placee and thatHoare Govett shall have no liability whatsoever to any such Placee (or to anyother person whether acting on behalf of a Placee or otherwise) in connectionwith the exercise of such rights. No prospectus No prospectus, admission document or other offering document has been or will besubmitted to be approved by the FSA in relation to the Placing and the Placees'commitments will be made solely on the basis of the information contained inthis Announcement (including this Appendix), any information published by or onbehalf of the Company in accordance with the AIM Rules, the annual report andaccounts and interim financial statements of the Company which can be found inthe "Financial" section in the Company's website http://www.asfare.com (the"Website Information") and the Admission Document. Each Placee, by accepting aparticipation in the Placing, agrees and confirms that it has neither receivednor relied on any other information, representation, warranty or statement madeby or on behalf of Hoare Govett or the Company and neither the Company nor HoareGovett will be liable for any Placee's decision to participate in the Placingbased on any other information, representation, warranty or statement. EachPlacee acknowledges and agrees that it has relied on its own investigation ofthe business, financial and trading position of the Enlarged Group in acceptinga participation in the Placing. Nothing in this paragraph shall exclude theliability of any person for fraudulent misrepresentation. Registration and settlement Settlement of transactions in the Placing Shares (ISIN: GB0033997387) followingAdmission will take place within the CREST system, subject to certainexceptions. Hoare Govett reserves the right to require settlement for anddelivery of the Placing Shares to Placees by such other means that it deemsnecessary if delivery or settlement is not possible or practicable within theCREST system within the timetable set out in this Announcement (including thisAppendix) or would not be consistent with the regulatory requirements in anyPlacee's jurisdiction. Each Placee allocated Placing Shares in the Placing will be sent a contract note(the "Contract Note") stating the number of Placing Shares allocated to it, thePlacing Price, the aggregate amount owed by such Placee to Hoare Govett andsettlement instructions. ABN AMRO Bank N.V. (London Branch) is acting as HoareGovett's settlement agent and Placees should settle against CREST ID: 521,account designation "AGENT". It is expected that such Contract Notes will bedespatched today, 6 March 2007 and that the trade date will be 6 March 2007.Each Placee agrees that it will do all things necessary to ensure that deliveryand payment is completed in accordance with the settlement instructions set outin the Contract Note. It is expected that settlement will be on 30 March 2007 in accordance with theinstructions set out in the Contract Note. Interest is chargeable daily on payments not received from Placees on the duedate in accordance with the arrangements set out above and in the Contract Noteat the rate of 2 percentage points above the base rate of Barclays Bank Plc. Each Placee is deemed to agree that if it does not comply with theseobligations, Hoare Govett may sell any or all of the Placing Shares allocated tothat Placee on such Placee's behalf and retain from the proceeds, for HoareGovett's account and benefit, an amount equal to the aggregate amount owed bythe Placee plus any interest due. The relevant Placee will, however, remainliable for any shortfall below the aggregate amount owed by it and may berequired to bear any stamp duty or stamp duty reserve tax (together with anyinterest or penalties) which may arise upon the sale of such Placing Shares onsuch Placee's behalf. If Placing Shares are to be delivered to a custodian or settlement agent,Placees should ensure that the Contract Note is copied and delivered immediatelyto the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of itsnominee or in the name of any person for whom a Placee is contracting as agentor that of a nominee for such person, such Placing Shares should, subject asprovided below (and in particular subject to paragraph 14 below), be soregistered free from any liability to UK stamp duty or stamp duty reserve tax.No Placee (or any nominee or other agent acting on behalf of a Placee) will beentitled to receive any fee or commission in connection with the Placing. Representations and warranties By participating in the Bookbuilding Process and/or the Placing, each Placee(and any person acting on such Placee's behalf): 1. represents and warrants that it has read this Announcement (including thisAppendix) in its entirety and acknowledges that its participation in the Placingwill be governed by the terms of this Appendix; 2. represents and warrants that it has received this Announcement (includingthis Appendix) solely for its use and has not redistributed or duplicated it; 3. represents and warrants that it has not received a prospectus, admissiondocument or other offering document in connection with the Placing other thanthe Admission Document and acknowledges that no prospectus, admission documentor other offering document has been prepared in connection with the Placingother than the Admission Document; 4. acknowledges that neither of Hoare Govett nor any of its Affiliates nor anyperson acting on behalf of Hoare Govett or its Affiliates nor the Company andits affiliates has provided, and will not provide it with any material regardingthe Placing Shares or the Enlarged Group other than this Announcement (includingthis Appendix); nor has it requested Hoare Govett, any of its Affiliates or anyperson acting on behalf of Hoare Govett or any of its Affiliates to provide itwith any such information; 5. acknowledges that the content of this Announcement (including this Appendix)is exclusively the responsibility of the Company and that neither Hoare Govett,nor any of its Affiliates nor any person acting on behalf of Hoare Govett or itsAffiliates has or shall have any liability for any information, representationor statement contained in this Announcement (including this Appendix) or anyinformation previously published by or on behalf of the Company and will not beliable for any Placee's decision to participate in the Placing based on anyinformation, representation or statement contained in this Announcement(including this Appendix) or otherwise. Each Placee represents, warrants andagrees that when making its investment decision to purchase the Placing Sharesit has relied only on information contained in this Announcement (including thisAppendix), any information published by or on behalf of the Company inaccordance with the AIM Rules, the Website Information and the AdmissionDocument, such information being all that it deems necessary to make aninvestment decision in respect of the Placing Shares and that it has relied onits own investigation with respect to the Placing Shares and the Enlarged Groupin connection with its decision to subscribe for the Placing Shares andacknowledges that it is not relying on any investigation that Hoare Govett, anyof its Affiliates or any person acting on behalf of Hoare Govett or itsAffiliates may have conducted with respect to the Placing Shares or the EnlargedGroup and none of such persons has made any representations to it, express orimplied, with respect thereto; 6. acknowledges that it has not relied on any information relating to theEnlarged Group contained in any research reports prepared by Hoare Govett, anyof its Affiliates or any person acting on behalf of Hoare Govett or itsAffiliates and understands that neither Hoare Govett, nor any of its Affiliatesnor any person acting on behalf of Hoare Govett or its Affiliates: (i) has orshall have any liability for public information or any representation; (ii) hasor shall have any liability for any additional information that has otherwisebeen made available to such Placee, whether at the date of publication, the dateof the announcement or otherwise; and (iii) makes any representation orwarranty, express or implied, as to the truth, accuracy or completeness of suchinformation, whether at the date of publication, the date of the announcement orotherwise; 7. represents and warrants that it, or the beneficial owner, as applicable, isentitled to subscribe for and/or purchase Placing Shares under the laws of allrelevant jurisdictions which apply to it, or the beneficial owner, asapplicable, and that it has fully observed such laws and obtained all suchgovernmental and other guarantees and other consents in either case which may berequired thereunder and complied with all necessary formalities (including anyapplicable foreign exchange rules); 8. represents and warrants that it has the power and authority to carry on theactivities in which it is engaged, to subscribe for the Placing Shares and toexecute and deliver all documents necessary for such subscription; 9. represents and warrants that it (or if acquiring the Placing Shares asfiduciary or agent for any investor account, such investor) will be thebeneficial owner of such Placing Shares and that the beneficial owner of suchPlacing Shares will not at the time the Placing Shares are acquired be aresident of Australia, Canada, Japan or the Republic of South Africa or theirrespective territories or possessions; 10. acknowledges that the Placing Shares have not been and will not beregistered under the Securities Act or under the securities laws of any of theStates of the United States, or under the securities legislation of Australia,Canada, Japan or the Republic of South Africa and their respective territoriesand possessions and, subject to certain exceptions, may not be offered, sold,taken up, renounced or delivered or transferred, directly or indirectly, withinthose jurisdictions; 11. represents and warrants that it is not a resident of or located in theUnited States or acting in a non-discretionary basis for a person in the UnitedStates and is purchasing the Placing Shares in an "offshore transaction" inaccordance with Regulation S under the Securities Act; 12. acknowledges (and confirms that each beneficial owner of the Placing Shareshas been advised) that the Placing Shares have not been and will not beregistered under the Securities Act or under any applicable state securitieslaws, nor approved or disapproved by the US Securities and Exchange Commission,any state securities commission in the United States or any other United Statesregulatory authority; 13. represents and warrants that if it is a pension fund or investment company,its purchase of Placing Shares is in full compliance with applicable laws andregulations; 14. represents and warrants that the allocation, allotment, issue and deliveryto it, or the person specified by it for registration as holder, of PlacingShares will not give rise to a liability under any of sections 67, 70, 93 or 96of the Finance Act 1986 (depositary receipts and clearance services) and thatthe Placing Shares are not being subscribed for by it in connection witharrangements to issue depositary receipts or to transfer Placing Shares into aclearance system; 15. represents and warrants that it has complied with its obligations inconnection with money laundering and terrorist financing under the Proceeds ofCrime Act 2002, the Terrorism Act 2000 and the Money Laundering Regulations 2003(the "Regulations") and, if making payment on behalf of a third party, thatsatisfactory evidence has been obtained and recorded by it to verify theidentity of the third party as required by the Regulations; 16. represents and warrants that it and any person acting on its behalf is aperson falling within Article 19(2) and/or 49(2) of the Order and is a personwho falls within paragraph (7) of section 86 of the FSMA; 17. represents and warrants that it has not offered or sold and will not offeror sell any Placing Shares to persons in the United Kingdom prior to Admissionexcept in circumstances which have not resulted and which will not result in anoffer to the public in the United Kingdom within the meaning of the ProspectusRules made by the FSA pursuant to Part VI of the FSMA; 18. represents and warrants that it has only communicated or caused to becommunicated and will only communicate or cause to be communicated anyinvitation or inducement to engage in investment activity (within the meaning ofsection 21 of the FSMA) relating to the Placing Shares in circumstances in whichsection 21(1) of the FSMA does not require approval of the communication by anauthorised person; 19. represents and warrants that it has complied and will comply with allapplicable provisions of the FSMA with respect to anything done by it inrelation to the Placing Shares in, from or otherwise involving the UnitedKingdom; 20. represents and warrants that it and any person acting on its behalf isentitled to subscribe for the Placing Shares under the laws of all relevantjurisdictions and that it has all necessary capacity and has obtained allnecessary consents and authorities to enable it to commit to participating inthe Placing and to perform its obligations in relation thereto (including,without limitation, in the case of any person on whose behalf it is acting, allnecessary consents and authorities to agree to the terms set out or referred toin this Announcement (including this Appendix) and to make the foregoingrepresentations, acknowledgments, warranties and agreements) and will honoursuch obligations; 21. undertakes that it (and any person acting on its behalf) will make paymentfor the Placing Shares allocated to it in accordance with this Announcement(including this Appendix) and the Contract Note on the due time and date set outherein, failing which the relevant Placing Shares may be placed with othersubscribers or sold as Hoare Govett may in its sole discretion determine andwithout liability to such Placee; 22. acknowledges that neither Hoare Govett, nor any of its Affiliates nor anyperson acting on behalf of Hoare Govett or its Affiliates is making anyrecommendations to it, advising it regarding the suitability of any transactionsit may enter into in connection with the Placing nor providing advice inrelation to the Placing nor the exercise or performance of any of Hoare Govett'srights and obligations thereunder including any rights to waive or vary anyconditions or exercise any termination right; 23. undertakes that the person who it specifies for registration as holder ofthe Placing Shares will be (i) itself or (ii) its nominee, as the case may be.Neither Hoare Govett nor the Company will be responsible for any liability tostamp duty or stamp duty reserve tax resulting from a failure to observe thisrequirement. Placees acknowledge that the Placing Shares will be credited to theCREST stock account of ABN AMRO Bank N.V. (London branch) (CREST ID: 521,account designation "AGENT") who will hold them as nominee for the subscribersof such shares until settlement in accordance with its standing settlementinstructions; 24. acknowledges that the Placing is conditional, inter alia, upon approval bythe Company's shareholders of the Resolutions set out in the notice convening anExtraordinary General Meeting of the Company to be held on 29 March 2007; 25. acknowledges that any agreements entered into by it pursuant to these termsand conditions shall be governed by and construed in all respects in accordancewith English law and it submits (on behalf of itself and on behalf of any personon whose behalf it is acting) to the exclusive jurisdiction of the courts ofEngland as regards any claim, dispute or matter arising out of any suchcontract, except that enforcement proceedings in respect of the obligation tomake payment for the Placing Shares (together with any interest chargeablethereon) may be taken by the Company or Hoare Govett in any jurisdiction inwhich the relevant Placee is incorporated or in which any of its securities havea quotation on a recognised stock exchange; 26. acknowledges that Hoare Govett may (at its absolute discretion) satisfy itsobligations to procure Placees by itself agreeing to become a Placee in respectof some or all of the Placing Shares or by nominating any connected orassociated person to do so; 27. agrees that the Company, Hoare Govett and others will rely upon the truthand accuracy of the foregoing representations, warranties, acknowledgements andundertakings which are given to Hoare Govett on its own behalf and on behalf ofthe Company and are irrevocable; and 28. agrees to indemnify and hold the Company and Hoare Govett harmless from anyand all costs, claims, liabilities and expenses (including legal fees andexpenses) arising out of or in connection with any breach by it (or any personon whose behalf it is acting) of the representations, warranties,acknowledgements, agreements and undertakings in this Appendix and furtheragrees that the provisions of this Appendix shall survive after completion ofthe Placing. No UK stamp duty or stamp duty reserve tax should be payable to the extent thatthe Placing Shares are issued into CREST to, or to the nominee of, a Placee whoholds those shares beneficially (and not as agent or nominee for any otherperson) within the CREST system and registered in the name of such Placee orsuch Placee's nominee provided that the Placing Shares are not issued to aperson whose business is or includes issuing depositary receipts or theprovision of clearance services or to an agent or nominee for any such person. Any arrangements to issue or transfer the Placing Shares into a depositaryreceipts system or a clearance service or to hold the Placing Shares as agent ornominee of a person to whom a depositary receipt may be issued or who will holdthe Placing Shares in a clearance service, or any arrangements subsequently totransfer the Placing Shares, may give rise to UK stamp duty and/or stamp dutyreserve tax, for which neither the Company nor Hoare Govett will be responsibleand the Placee to whom (or on behalf of whom, or in respect of the person forwhom it is participating in the Placing as an agent or nominee) the allocation,allotment, issue or delivery of Placing Shares has given rise to such UK stampduty or stamp duty reserve tax undertakes to pay such UK stamp duty or stampduty reserve tax forthwith and to indemnify on an after-tax basis and to holdharmless the Company and Hoare Govett in the event that any of the Company and/or Hoare Govett has incurred any such liability to UK stamp duty or stamp dutyreserve tax. In addition, Placees should note that they will be liable to pay any capitalduty, stamp duty and all other stamp, issue, securities, transfer, registration,documentary or other duties or taxes (including any interest, fines or penaltiesrelating thereto) payable outside the UK by them or any other person on thesubscription by them for any Placing Shares or the agreement by them tosubscribe for any Placing Shares. All times and dates in this Announcement (including this Appendix) may besubject to amendment. Hoare Govett shall notify the Placees and any personacting on behalf of the Placees of any changes. This Announcement (includingthis Appendix) has been issued by the Company and is the sole responsibility ofthe Company. Hoare Govett, which is authorised and regulated by the FSA, is actingexclusively for the Company and for no one else solely in connection with thePlacing and will not be responsible to anyone other than the Company forproviding the protections afforded to the customers of Hoare Govett or forproviding advice in relation to the Placing. When a Placee or person acting on behalf of the Placee is dealing with HoareGovett, any money held in an account with Hoare Govett on behalf of the Placeeand/or any person acting on behalf of the Placee will not be treated as clientmoney within the meaning of the rules and regulations of the FSA made under theFSMA. The Placee acknowledges that the money will not be subject to theprotections conferred by the client money rules; as a consequence, this moneywill not be segregated from Hoare Govett's money in accordance with the clientmoney rules and will be used by Hoare Govett in the course of its own business;and the Placee will rank only as a general creditor of Hoare Govett. Past performance is no guide to future performance and persons needing adviceshould consult an independent financial adviser. Appendix IIIDefinitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Acquisition" the proposed acquisition of the entire issued share capital of AssetCo pursuant to the Acquisition Agreements; "Acquisition the conditional agreements dated 5 March 2007 between theAgreements" Vendors and the Company; "Admission" admission of the Enlarged Share Capital to trading on AIM and such admission becoming effective in accordance with Rule 6 of the AIM Rules; "AIM" the AIM market of the London Stock Exchange; "AIM Rules" the AIM Rules for Companies published by the London Stock Exchange and those other rules of the London Stock Exchange which govern the admission of securities to trading on, and the regulation of, AIM; "ambulance a National Health Service trust providing ambulance servicesservices trust" for a specified region; "Asfare" or the Asfare Group plc, a company registered in England and Wales"Company" with registration number 4966347, whose registered office is at Commercial Road, Totton, Southampton SO40 3AE; "Asfare Group" the Company and its existing subsidiary undertakings;or the "Group" "AS Fire and AS Fire and Rescue Equipment Limited;Rescue" "AssetCo" AssetCo Group Limited, a company registered in Northern Ireland with registration number NI053848, whose registered office is at 34 Roughfort Road, Mallusk, Newtownabbey, BT36 4RE; "AssetCo Group" AssetCo and its existing subsidiary undertakings; "AssetCo Senior Denis Mellon and David Smith;Managers" "Board" the board of directors of the Company; "Brook Brook Henderson Group Limited, a company registered in EnglandHenderson" and Wales with registration number 4450947 and whose registered office is at Brook Henderson House, 173 to 175 Friar Street, Reading, RG1 1HE; "CCCP" Civil Contingency Capability Programme; "certificated" a share which is not in uncertificated form (that is, a shareor "in not held in CREST);certificatedform" "Chief Fire individual responsible for the day-to-day operational commandOfficer" of an FRA; "Civil an Act of Parliament, which received Royal Assent in NovemberContingencies 2004, intended to deliver a single framework for civilAct 2004" protection in the United Kingdom; "CLG" the Communities and Local Government, a department of the UK Government; "Collins Collins Youldon, a division of AS Fire and Rescue Limited;Youldon" "Completion" completion of the Acquisition Agreements, which is expected to occur on the day of Admission; "Concert Party" John Shannon, Frank Flynn, Denis Mellon and David Smith, each of 34 Roughfort Road, Mallusk, Newtownabbey, BT36 4RE and Pelham Olive and Peter Lewin, both of Brook Henderson House, 173 to 175 Friar Street, Reading, RG1 1HE; "Consideration the 48,434,483 Ordinary Shares to be issued pursuant to theShares" Acquisition Agreements; "CREST" the electronic settlement system operated by CRESTCo, which facilitates the transfer of title to securities in uncertificated form; "CRESTCo" CRESTCo Limited, a company incorporated under the laws of England and Wales and the operator of CREST; "CREST the Uncertificated Securities Regulations 2001 (SI 2001 No.Regulations" 3755) as amended from time to time and such other regulations as are applicable to CRESTCo; "Directors" Tim Wightman, David Chisnall, Tony O'Neill, Tim O'Connor and Adrian Bradshaw; "EBITDA" earnings before interest, taxation, depreciation and amortisation; "Enlarged Group" the Company together with its subsidiaries and subsidiary undertakings, as enlarged by the Acquisition; "Enlarged Share the number of ordinary shares in the capital of the Company inCapital" issue immediately following Admission, consisting of the Existing Ordinary Shares and the New Ordinary Shares; "Existing the Ordinary Shares in issue at the date of this announcement;Ordinary Shares" "Extraordinary the extraordinary general meeting of the Company, convened forGeneral Meeting" 11.00 a.m. on 29 March 2007;or "EGM" "FMI" Fleet Management Ireland Limited; "FRA" Fire and Rescue Authority; "FRS" Fire and Rescue Service; "FSA" the Financial Services Authority; "FSE" Fire Safety Equipment Limited; "FSMA" the Financial Services and Markets Act 2000, as amended; "Gershon the HM Treasury report entitled "Releasing Resources to theEfficiency Front Line - Independent Review of Public Sector Efficiency"Review" published on 14 July 2004; "HBOS" HBOS plc and any member of the HBOS Group; "Hoare Govett" Hoare Govett Limited; "IRMP" Integrated Risk Management Plan: a risk managed assessment of local response to incidents prepared by each FRA; ''J O Hambro'' funds managed or advised by North Atlantic Value LLP, part of the J O Hambro Capital Management Group, being North Atlantic Smaller Companies Investment Trust plc, discretionary investment management clients of North Atlantic Value LLP, Oryx International Growth Fund Limited and Oryx International Growth Fund Limited - C Shares; "LFB" the London Fire Brigade; "LFR" the Lincolnshire Fire and Rescue Service; "LFEPA" the London Fire and Emergency Planning Authority; "London Stock London Stock Exchange plc or its successor;Exchange" "National The Fire and Rescue National Framework 2006-08, published byFramework the Office of the Deputy Prime Minister on 6 April 2006;Document" "New Ordinary the Placing Shares and the Consideration Shares;Shares" "NHS PASA" the National Health Service Purchasing and Supply Agency, an executive agency of the Department of Health, established on 1 April 2000, to act as a strategic advisor to the National Health Service on procurement issues; "Ongoing Messrs. Wightman, Chisnall, Bradshaw and the ProposedDirectors" Directors; "Ordinary ordinary shares of 25 pence each in the capital of the Company;Shares" "Panel" the UK Panel on Takeovers and Mergers; "Papworth" AssetCo Papworth Limited, a company registered in England and Wales with registered number 3048528 and whose registered office is at 800 Field End Road, South Ruislip, Middlesex, HA4 0QH; "PFI" Private Finance Initiative; "PKF" PKF (UK) LLP; "Placing" the conditional placing of 13,793,104 Placing Shares pursuant to the Placing Agreement; "Placing the agreement dated 6 March 2007 between the Company, HoareAgreement" Govett, the Directors, the Proposed Directors and the AssetCo Senior Managers; "Placing Price" 145 pence per Ordinary Share; "Placing Shares" the 13,793,104 new Ordinary Shares to be issued by the Company for cash at the Placing Price pursuant to the Placing; "Proposed John Shannon and Frank Flynn;Directors" "PPP" Public Private Partnership; "Resolutions" the resolutions to be proposed at the EGM; "Securities Act" the United States Securities Act of 1933, as amended; "Shareholders" holders of Ordinary Shares; "Share Option the Unapproved Share Option Plan and the Enterprise ManagementPlans" Incentive Share Option Plan; "Simentra" Simentra Limited; "Speed 5019 a subsidiary of AS Fire and Rescue and holding company ofLimited" Asfare No.1 Limited, Fire Guns Limited and Sacol Group 1990 Limited, acquired by the Asfare Group plc in December 2003; "SVO" Special Vehicle Operations Limited (now AssetCo SVO Limited); "Takeover Code" the City Code on Takeovers and Mergers issued from time to time by or on behalf of the Panel; "Todd Research" Todd Research Limited; "uncertificated" a share or shares recorded on the register of members as beingor "in held in uncertificated form in CREST, entitlement to which byuncertificated virtue of the CREST Regulations, may be transferred by means ofform" CREST; "United Kingdom" the United Kingdom of Great Britain and Northern Ireland;or "UK" "United States" the United States of America, its territories and possessions,or "US" any state of the United States of America and the District of Columbia; and "Vendors" Denis Mellon, Peter Lewin, Pelham Olive, David Smith, John Shannon, Frank Flynn, J O Hambro, Brook Henderson, Gerald Andrews, Damian Murphy, Lou Gill, Stephen Bristow, Dermot McDermott, Mark Clisset, Tom Joyce, Gareth White, Michael Lavender, Jeffrey Stone, Lyndon Plant, Jonathan Reid and William Campbell Walters. This information is provided by RNS The company news service from the London Stock Exchange

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