Proposed acquisition&placing

RNS Number:8030R
AFA Systems PLC
07 November 2003


Friday 7 November 2003

                                AFA Systems plc

                         Proposed Acquisition & Placing

AFA Systems plc, the AIM listed global provider of advanced software solutions
for the banking and asset management industries, is today pleased to announce
the following:

Highlights

 *  Acquisition of Strategic Asset Management Solutions Limited ("SAMS") for
    a total consideration of #1.2 million, based on the placing price of 17
    pence per share, satisfied by a combination of cash and convertible loan
    notes
 *  AFA is proposing to raise #1.7 million before expenses (approximately
    #1.5 million, net of expenses) through an institutional placing,
    underwritten by Bridgewell at a price per share of 17 pence



 *  The acquisition is consistent with AFA's stated strategy of complementing
    its organic product development with strategic acquisitions, supported by
    low cost offshore development based in South Africa
 *  In the six months to 30 September 2003, SAMS achieved turnover of #1.2m
    from its core Socrates product suite
 *  SAMS also has contracted revenue of #0.6 million for the year to 31
    December 2004 from its outsourced application management contract for UBS AG
 *  The Socrates products are complementary to AFA's existing products for
    the asset management industry, AIMS and Interlink
 *  The Directors believe that it will be possible to make material cost
    savings as a result of integrating SAMS, combining support and central
    functions and also using the Company's development staff and facilities in
    South Africa
 *  Moreover, the Directors believe that the savings are of a quantum such
    that, at its current expected levels of revenue, the SAMS business will make
    a positive contribution to AFA in the short term
 *  EGM to be held on 1 December 2003 to enable the placing to proceed

Mike Hart, Chairman & Chief Executive, commented:

"I am delighted to announce this important acquisition, which we believe will
increase AFA's presence in the asset management industry and will also allow AFA
to offer a more complete suite of complementary products to its customers. SAMS'
customers include several major European asset managers, bringing a number of
opportunities for the enlarged group.

"The proceeds of the Placing will generate additional working capital for the
business as it integrates SAMS into the Group and will enable AFA to continue to
position itself as well as possible for the anticipated upturn in the markets,
the first indications of which are already being seen in terms of new order and
enquiry levels."

For further information please contact:

AFA Systems plc                                            www.afa-systems.com
Mike Hart, Chairman & Chief Executive                            020 7337 7250
Henry Sallitt, Finance Director

Bridgewell Limited
Greg Aldridge/Nick Lovering                                      020 7003 3000

Weber Shandwick Square Mile
Reg Hoare/Sara Musgrave                                          020 7067 0700

  A meeting for analysts and investors will be held today at 10.15 for 10.30am
  at the offices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road,
                                  London, WC1.
                                        
AFA Systems plc

Proposed Acquisition & Placing

The Board of AFA is pleased to announce that it has entered into a conditional
agreement for the acquisition of the entire issued share capital of SAMS, and
its intention to raise #1.7 million before expenses through a placing. As part
of these Proposals it is necessary to seek Shareholders' approval for the grant
of the necessary authorities to conduct the Placing, details of which are set
out below.

The acquisition of SAMS

AFA's strategy has been to complement its organic software product development
with strategic acquisitions of software products for global financial markets.
This strategy is supported by low cost offshore development based in South
Africa. In recent years, as a result of acquisitions and investment, the Group
has built up a portfolio of products for the banking and asset management
sectors. The proposed acquisition of SAMS is consistent with this strategy.

The Board of AFA has reached a conditional agreement to acquire SAMS. The
consideration, to be satisfied on completion of the Acquisition is as follows:

 *  Cash of #250,000
 *  The issue of the #250,000 Loan Notes
 *  The issue of the #1.5m Loan Notes

Based on the Placing price per Ordinary Share of 17 pence, the value of the
consideration is #1.2 million.

LDC is a major creditor and significant shareholder in the parent company of
SAMS. The Vendor has indicated that it intends to instruct the Company to pay
the cash element of the consideration and to issue the Loan Notes to LDC, in
part satisfaction of its debt.

The Acquisition is conditional upon the passing of the Shareholder Resolutions.
Completion of the Acquisition is expected to take place immediately following
completion of the Placing.

Information about SAMS

SAMS specialises in the provision of business solutions systems and services to
asset management organisations, through its Socrates suite of products. Socrates
provides performance information to the managers of equity and fixed income
portfolios and their customers. This information includes daily valuation
methodology, stock level attribution, customised benchmarks and risk
calculations. SAMS' customers are leading European asset management
organisations.

SAMS was founded recognising the need for value-added reporting and analysis
services within asset management companies. The first implementation of the
Socrates product was completed in 1998 and since that time the product has been
enhanced to include daily stock level attribution and fixed income attribution.

In addition, the asset management industry has had to increase investment in its
performance measurement as a result of the pressures on them to provide more
detailed and comprehensive reporting to customers than has been the case in the
past. Asset management companies also need to comply with the Global Investment
Performance Standards ("GIPS"), which are being implemented internationally. The
Directors believe that the Socrates products address this growing demand from
the asset management industry.

Benefits of the Acquisition

In the six months to 30 September 2003, SAMS achieved turnover of #1.2 million
from the core Socrates product suite. In addition, SAMS operates an outsourced
application management contract for UBS AG, from which contracted revenue for
the year to 31 December 2004 is #0.6 million.

The Socrates products are complementary to, but not competitive with, AFA's
existing suite of products for the asset management industry, AIMS and
Interlink, as they address different requirements of the same customers. Whereas
AFA's AIMS and Interlink products are concerned principally with the processing
of asset management transactions, the Socrates product range provides detailed
analysis regarding the performance of the underlying assets within an asset
manager's portfolio. As a consequence, the Directors believe that the
Acquisition will increase AFA's presence in the asset management industry and
will also allow AFA to offer a more complete suite of products to its customers.
In addition, SAMS' customers include a number of major European asset management
institutions and AFA will be able to use its sales team to sell AFA products to
these customers.

SAMS integration plan

Senior operational members of SAMS will be retained by AFA. However, the
Directors believe that it will be possible to make material cost savings within
the Enlarged Group as a result of integrating the business of SAMS with the
Company's existing asset management division combining support and central
functions. It may also be possible to use the Company's development staff and
facilities in South Africa to continue the development of the Socrates products
more cheaply than would be possible in the UK. Moreover, the Directors believe
that the removal of these items of cost will not be detrimental to the revenue
performance of SAMS and that the savings are of a quantum such that, at its
current expected levels of revenue, the SAMS business will make a positive
contribution to AFA in the short term.

The Placing

AFA is proposing to raise #1.7 million before expenses (approximately #1.5
million, net of expenses) through the Placing, which is being fully taken up by
placees, including certain existing and new shareholders, some of whom are
venture capital trusts.

The Placing is being made of the New Ordinary Shares, at a price per Ordinary
Share of 17 pence and has been arranged and underwritten by Bridgewell. The
Directors believe that the additional funds will generate additional working
capital for the business as it integrates SAMS into the Group and will enable
AFA to continue to position itself as well as possible for the anticipated
upturn in the markets, the first indications of which are already being seen in
terms of new order and enquiry levels.

The Placing is conditional on the passing of the Shareholder Resolutions and on
the New Ordinary Shares being admitted to AIM. It is expected that these
conditions will have been satisfied by 2 December 2003.

The Loan Notes

As part of the consideration for the Acquisition, AFA intends to issue the Loan
Notes, the principal terms of which are as follows:

The #250,000 Loan Notes

The #250,000 Loan Notes are redeemable (in whole or in part) at the sole option
of the Company at their nominal value at any time within the 12 month period
following completion of the Acquisition. Interest will accrue on the #250,000
Loan Notes at a rate of 2% above LIBOR for the first six months and thereafter
at the rate of 4% above LIBOR, payable quarterly in arrears.

Any of the unredeemed #250,000 Loan Notes outstanding after 12 months from the
date of completion of the Acquisition will be automatically converted into
Ordinary Shares. The price of each Ordinary Share to be issued on a conversion
will be the lower of (i) the price per share at which Ordinary Shares were
issued as part of the Placing referred to above and (ii) the Market Price of an
Ordinary Share at the date of conversion. In the event that all of the #250,000
Loan Notes were converted into Ordinary Shares at the Placing Price, based on
the number of Ordinary Shares in issue after the Placing, they would account for
3.02% of the ordinary share capital of the Company.

In the event of a change of control of the Company all outstanding #250,000 Loan
Notes are immediately due to be redeemed in full by the Company.

The #1.5m Loan Notes

The #1.5m Loan Notes are constituted by 4,166,667 notes of #0.36 each. They are
redeemable at the sole option of the Company (either in whole or in part) at any
time over the 5 year period following completion of the Acquisition. The price
payable by the Company to redeem each of the notes (the "Redemption Price") is
the higher of (i) #0.36 and (ii) the Market Price of an Ordinary Share at the
date on which the notes are redeemed.

The #1.5m Loan Notes do not bear interest.

Whilst they remain outstanding, the Noteholder has the right to convert all or
part (in multiples of 500,000 notes of the outstanding #1.5m Loan Notes into
Ordinary Shares on the basis of 1 Ordinary Share for every #0.36 nominal amount
of the notes being converted (the "Conversion Rate"). The conversion of the
notes by the Noteholder is subject to certain orderly market conditions. In the
event that the #1.5m Loan Notes were converted into Ordinary Shares at the
Placing Price, based on the number of Ordinary Shares in issue after the
Placing, they would account for 8.11% of the ordinary share capital of the
Company.

Upon receipt of a notice to convert any of the #1.5m Loan Notes, the Company may
at its discretion elect to redeem the notes over which the Noteholder has served
notice to convert at the Redemption Price in lieu of conversion.

Any unredeemed or unconverted #1.5m Loan Notes will be automatically converted
into Ordinary Shares at the Conversion Rate on the fifth anniversary of
completion of the Acquisition.

In the event of a change of control of the Company all outstanding unredeemed
and unconverted #1.5m Loan Notes will be converted into Ordinary Shares at the
Conversion Rate.

Neither the #250,000 Loan Notes nor the #1.5m Loan Notes will be listed.

Shareholder Resolutions

Although the Company has sufficient authorised but unissued share capital
available to issue the New Ordinary Shares on completion of the Placing, the
Directors do not currently have authority to issue such shares. Accordingly, it
is proposed:

(a)   to authorise the Directors pursuant to section 80 of the Companies Act to
      allot up to 18,278,245 Ordinary Shares generally, such authority to expire on
      the fifth anniversary of the passing of the resolution; and
(b)   to disapply the statutory pre-emption rights contained in section 89 of the
      Companies Act in relation to the allotment of equity securities for cash, up to
      an aggregate number of Ordinary Shares of:
   (i)   10,000,000 Ordinary Shares for the purposes of the Placing,
         such authority to expire at the conclusion of the Annual General Meeting of the
         Company to be held in 2004;
   (ii)  5,637,255 Ordinary Shares for the purposes of any conversion
         of the Loan Notes, such authority to expire on the fifth anniversary of the
         passing of the resolution; and
   (iii) otherwise up to an aggregate nominal amount of 2,640,990
         Ordinary Shares (representing approximately 5 per cent of the present issued
         share capital, as enlarged by the Placing and the conversion of the Loan Notes),
         such authority to expire at the conclusion of the Annual General Meeting of the
         Company to be held in 2004.

The authority under section 80 of the Companies Act is required to create
sufficient Ordinary Shares for the purposes of the Placing and to provide an
appropriate level of authorised but unissued share capital for any conversion of
the Loan Notes. The authority under section 95 of the Companies Act 1985 is
required to facilitate the Placing and any conversion of the Loan Notes and to
provide limited authority to allot shares for cash otherwise than pro rata to
Shareholders.

Current Trading

At the time of the announcement of its interim results on 1 September 2003, the
Company stated that signs of recovery in customer spending began in the second
quarter of the current year and that it therefore expected revenues for the
second half of the current year would increase relative to the first half.

The Board confirms this expectation and since the interim announcement, the
Company has announced a significant order for our Common Knowledge product in
Scotland. The Board continues to see an increased level of activity in the
marketplace compared to 2002 but some delays in signing new business are still
being experienced.

Extraordinary General Meeting

An Extraordinary General Meeting of the Company will be held at the offices of
Eversheds at Senator House, 85 Queen Victoria Street, London EC4V 4JL at 10 a.m.
on 1 December 2003 to consider and if thought fit approve the Shareholder
Resolutions.

Recommendation

The Directors believe that the proposed Placing and the issue of the Loan Notes
as part of the consideration for the Acquisition are in the best interests of
the Company and its Shareholders as a whole. Accordingly, the Directors
recommend that Shareholders vote in favour of the Shareholder Resolutions to be
proposed at the EGM as they intend to do in respect of their own beneficial
holding of 3,424,002 Ordinary Shares, representing approximately 9.2 per cent.
of the Company's existing issued ordinary share capital.

The following definitions apply throughout this announcement, expect where the
context requires otherwise.

"#250,000 Loan   the variable rate convertible unsecured redeemable loan notes
Notes"           with an aggregate nominal value of #250,000 proposed to be
                 issued by the Company to the Vendor in satisfaction of part of
                 the consideration payable by the Company in respect of the
                 Acquisition

"#1.5m Loan      the 4,166,667 convertible unsecured redeemable loan notes of
Notes"           #0.36 each with an aggregate nominal value of #1,500,000.12
                 proposed to be issued by the Company to the Vendor in
                 satisfaction of part of the consideration payable by the
                 Company in respect of the Acquisition

"Acquisition"    the proposed acquisition by the Company of the entire issued
                 share capital of SAMS on the terms set out in the Acquisition
                 Agreement

"Acquisition     the conditional agreement between (1) the Vendor and (2) the
Agreement"       Company dated 6 November 2003 relating to the Acquisition

"Admission"      the admission of the New Ordinary Shares to trading on AIM in
                 accordance with the AIM Rules

"AIM"            the Alternative Investment Market of the London Stock
                 Exchange

"AIM Rules"      the AIM Rules for companies published by the London Stock
                 Exchange, as amended

"AFA" or "the    AFA Systems plc
Company"

"Board" or       the board of directors of the Company
"Directors"

"Bridgewell"     Bridgewell Limited

"Bridgewell      Bridgewell Securities Limited
Securities"

"Companies       Companies Act 1985
Act"

"Enlarged        the Group as enlarged by completion of the Acquisition
Group"

"Extraordinary   the extraordinary general meeting of the Company convened for 1
General Meeting" December 2003 (or any adjournment therefore), notice of which
or "EGM"         is set out at the end of this document

"Form of         the form of proxy accompanying this document for use by
Proxy"           Shareholders at the EGM

"FSA"            Financial Services Authority

"Group"          the Company and its subsidiaries and subsidiary undertakings

"LDC"            Lloyds TSB Development Capital Limited

"Loan Notes"     together the #250,000 Loan Notes and the #1.5m Loan Notes

"London Stock    London Stock Exchange plc
Exchange"

"Market Price"   The average mid-market price valuation of an Ordinary Share as
                 quoted by the London Stock Exchange over the ten business days
                 immediately preceding either the date of conversion in the case
                 of the #250,000 Loan Notes or the date on which the notes are
                 redeemed in the case of the #1.5m Loan Notes

"New Ordinary    10,000,000 new Ordinary Shares to be issued pursuant to the
Shares"          Placing

"Noteholder"     the holder of the Loan Notes

"Ordinary        ordinary shares of 5p each in the capital of the Company
Shares"

"Placing"        the proposed issue of the New Ordinary Shares

"Proposals"      the Acquisition, the Placing and the issue of the Loan Notes

"SAMS"           Strategic Asset Management Solutions Limited

"Shareholders"   holders of Ordinary Shares

"Vendor"         Strategic Asset Management Solutions Holdings Limited


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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