Panmure Gordon & Co. plc
Establishment of Panmure Capital, a Joint Venture with Bank of Scotland

Further to the announcement of 13 January 2006, the Board is pleased to confirm the terms on which Panmure Capital has been established.


Panmure Gordon & Co. plc (“Panmure Gordon” or “the Company”) and Bank of Scotland Corporate have established a new Joint Venture called Panmure Capital, a co-investment vehicle targeting late stage pre-IPO funding opportunities (the “Transaction”).

Panmure Gordon and Bank of Scotland believe that there is currently a funding gap for smaller companies who seek equity over a relatively short period prior to flotation on a public market. Panmure Capital will address this opportunity.

Panmure Capital will initially have £30m of committed equity. Panmure Gordon and Bank of Scotland will each commit up to £14.25m and the Managers (described below) a further £1.5m. It is envisaged that the committed funds will be drawn down during a 3 year period.

Structure of Panmure Capital

The first general partner of Panmure Capital will be Panmure General Partner Limited (the “General Partner”), a subsidiary of Panmure Gordon. The second general partner, manager and operator of the partnership will be Panmure Capital Partners Limited (“PCPL”), a company whose shares are owned by Edward Forwood and Richard Wyatt (the “Managers”). Richard Wyatt is executive chairman of Panmure Gordon and will commit £1m to Panmure Capital. Edward Forwood is an experienced private equity professional and was the founding chief executive of Kvault Software. He will commit £0.5m to Panmure Capital. The Company, Bank of Scotland and the Managers (together the “Investors”) will have economic interests respectively of 47.5%, 47.5% and 5% in Panmure Capital, reflecting their relative investments.

PCPL is an FSA registered firm which is owned as to two thirds by Richard Wyatt and as to one third by Edward Forwood. PCPL will be entitled to a priority profit share in the Fund of 2 per cent per annum of the total drawn down commitments of the Investors net of any VAT or similar tax and reduced by the acquisition cost of investments which have been distributed in specie or which have been realised and the proceeds of which have been distributed to Investors and the Managers (other than in respect of underwriting transactions and bridging investments) (“Priority Profit Share”). The Priority Profit Share will be subject to a minimum payment of £100,000 in the first year of operation of the Fund which shall be offset against future entitlement.

It is intended that the Fund will have a life of 5 years with a 3 year investment period. The Fund is subject to customary termination provisions together with a right for the Company or Bank of Scotland to terminate the Fund after 3 years or at any time by removing the General Partner for cause. In addition the Fund will terminate on the termination of the appointment of PCPL.

Carried Interest

After receiving their preferred return of 8% per annum and after accounting for the Priority Profit Share, the Investors will share 80 per cent of the profits generated by Panmure Capital in proportion to their economic interests. The Managers and Panmure Gordon will also be entitled to a carried interest, which equates to 20% of all profits generated above the preferred return of 8% per annum and after accounting for the Priority Profit Share.

If the preferred return is achieved, the Managers and Panmure Gordon (through their interest in the founder partner of Panmure Capital (the “Founder Partner”)) will be entitled to a “catch up” of their carried interest, such that they would receive the first share of profit over and above the preferred return, to the extent of an amount which when aggregated with the preferred return, would give them 20% of such aggregration. This equates, therefore, to 25% of the preferred return. Thereafter, the carried interest amounts to 20% of profits generated. Panmure Gordon and the Managers (through their interest in the Founder Partner) will participate in the carried interest as to one third and two thirds respectively. As regards the latter, Richard Wyatt’s share will be two thirds.

Carried interest is only payable when all outstanding partners’ loans have been repaid (together, during the 3 year investment period, with an amount equivalent to undrawn loan commitments) plus 8% annualised on repaid loans. As loan commitments are still available to be drawn down within the 3 year investment period it is possible that new investments can be made following the payment of any carry which may result in overpayment and so the carried interest is subject to a clawback mechanism whereby the Founder Partner is obliged to repay any excess to the Investors in the event of overpayment.

Investment policy and relationship with Panmure Gordon

The investment policy of Panmure Capital will be to invest in unlisted companies which the Manager considers to have a strong likelihood, within a maximum of two years of investment, of achieving a listing on AIM or another public market. The investment objective of Panmure Capital is capital growth.

The Fund will have an Advisory Committee consisting of representatives of Bank of Scotland and Panmure Gordon. PCPL will consult with the committee on general policies and guidelines, prospective investment sectors and conflicts of interests. Decisions of the Advisory Committee will be taken by a majority vote of its members.

Richard Wyatt, as Chairman of Panmure Gordon, will not participate in any decisions involving the Group’s investment in Panmure Capital, nor in any decisions as to whether Panmure Gordon participates in floating any investee companies of Panmure Capital. Prior to investment by the Fund, Panmure Gordon will not make any commitment to float investee companies.

The Directors, excluding Richard Wyatt, having consulted with Hawkpoint Partners Limited, consider that the terms of the Transaction are fair and reasonable insofar as the Company’s shareholders are concerned.