Restructure Proposals

RNS Number:2508R
London Asia Capital PLC
14 February 2007


14 February 2007

                            LONDON ASIA CAPITAL PLC
       Restructuring, Expansion of Activities and Fund Management Update

London Asia Capital plc ("London Asia" or "the Company") the UK listed (AIM:
LDC.L) Asia focused merchant bank, is pleased to provide an update for
shareholders on its planned restructuring, further progress within its fund
management operations and expansion of the Company's operations, which in
summary includes:

   * The Board's intention to restructure London Asia into a new simplified
     structure containing an Operations Holding Company and an Investments
     Holding Company
   * Future expansion of both divisions via commitment of more capital to
     investments, an increase in funds managed, the launch of new products and
     services, acquisition of additional licenses, territorial expansion and new
     strategic partnerships
   * Launch of a new fund for Western China in partnership with leading local
     investment group
   * Receipt of fund manager authorisation in Kingdom of Brunei Darussalam -
     one of a handful of international companies to meet the requirements

Background
As highlighted in the Company's interim results announcement in September last
year, the Board of London Asia has remained concerned about the performance of
the Company's share price. This concern exists despite what it considers to be
considerable progress made by the Company both at the operational level, where
the significant expansion of our activities in the last two years has generated
diversified revenue streams and recurring revenue, and in strengthening our
balance sheet and beginning to realise the value of the Company's investment
portfolio.

Restructuring
In order to simplify and bring greater clarity to the value of the business, the
non-executive members of the Board are currently finalising with its advisers
the proposed route which it intends to take to separate the operating side of
the business, which includes the fund management and corporate finance
divisions, from the investment side. The intention is that two new holding
companies will be formed, an Operations Holding Company, and an Investments
Holding Company. The Board believes that this will help remove much of the
current confusion as to whether London Asia should be valued on an asset or a
profit multiple basis.

The Operations Holding Company will take over all the operational businesses,
including the staff and running of all the offices, which make up the bulk of
the overheads, with its income coming from corporate finance and fund management
fees. This division can then be valued on a traditional revenue/profits multiple
basis.

The Investments Holding Company will comprise the bulk of what is currently
shown on the Company's balance sheet, with minimal operational overheads going
forward. This division can then be valued on an assets basis.

Expansion
Given the significant changes taking place in China at present, the Board is
aware of the need for London Asia to expand much more rapidly to take advantage
of its leading position in its sector. This expansion will involve committing
more capital to investments, through expanding the Company's investment division
and also increasing the funds it currently manages.

Additionally, expansion of the operational side of the business will involve
launching new products and services, acquiring additional licenses, expanding
into new territories and entering into new partnerships.

The opening of the financial services industry to foreign participation this
year under China's World Trade Organisation commitments has presented a range of
new possibilities for London Asia to expand more rapidly in providing financial
services within China, such as the new fund it intends to launch within China,
detailed below.

The Board recognises that London Asia will also need access to fresh capital to
take advantage of the current window of opportunity, and needs a mechanism to
incentivise and recruit the staff to exploit the opportunities available.

Jack Wigglesworth, non-executive Chairman commented: "Since 2002 we have been
investing in China very successfully, initially using our own funds and since
March last year managing funds on behalf of third parties. We have to date
invested in over 35 China focused businesses; made a number of partial and full
realisations; advised on the listing of 12 portfolio companies; and made a
number of investments in already listed businesses with an Asian focus. Our
first fund was fully committed within 11 months of raising the money, and has
generated a number of follow-on investment opportunities, adding to the existing
substantial proprietary deal flow generated by our network of 32 offices in
China. We have been looking for some time at various ways of meeting the
challenge of raising new funds to exploit the opportunities we are turning down
on a daily basis through lack of resources, in a way that satisfies the
aspirations of all our stakeholders.

"I mentioned in the Interim Statement last September that we were looking at
ways of bringing greater clarity to the business structure in order to highlight
what we believe is an unreasonably low market value, ignoring much of London
Asia's inherent value. The restructuring has taken longer than originally
anticipated due to the immense difficulty and cost of complying with the
regulations and procedures in the UK, which have made most of the obvious
solutions too expensive due to the level of management time involved and fees
the company would incur. However I am pleased that we are now finalising plans
with our advisers, which should result in a new structure that properly
incentivises management and also creates value for shareholders, by unlocking
the Company's potential, enabling significant growth of our operations.

"The current structure of the business gives us neither the ability to raise
cash on terms attractive to existing shareholders, nor the ability to suitably
reward and recruit staff, particularly given the accounting and UK tax penalties
associated with options and free carries which are a common feature of the
industry to motivate staff."

Commenting on the restructuring and expansion of activities, Simon Littlewood,
CEO London Asia said: "The share price has failed to match the performance of
the business for some time, which is now having an impact on our ability to grow
the business. We are rapidly expanding our fund management operations - with our
first fund now fully invested, we are in the process of launching our next two
funds, for Mongolia, and for the Energy and Environment sector - and our
corporate finance business has a number of clients signed up for floats planned
for this year on various markets around the world. We have identified a number
of strategic acquisitions to expand our operations, both in China and
elsewhere."

New Fund For Western China
London Asia is pleased to announce that it has entered into a framework
agreement with Xingjiang Investment Corporation ("XIC") to create a new fund
management company which will launch a new fund, the West China High Growth
Fund. The new fund will focus on investments in pre-IPO opportunities in
companies with high growth potential in the western region of China. The fund
management company will be jointly managed by XIC and London Asia. XIC will
provide access to deal flow and local due diligence, with London Asia providing
expertise in investment analysis, risk management and fund management, as well
as its due diligence and investment templates and procedures. Both parties have
agreed to commit a total of RMB 100 million (#7 million) in the first phase of
the proposed fund, and will work together to expand the fund to RMB 1 billion,
with the major portion of the funds to be raised in China.

XIC is the largest investment corporation in Xinjiang Province, with strong
support from the provincial government which uses it as a vehicle for pre-IPO
investment. The XIC team, headed by Mr. Kang Jingcheng, has significant
experience of investing in western China. With over RMB2bn in total assets, XIC
has established itself as one of the key investors in Xinjiang Province.

Mr Kang Jingcheng, CEO of XIC, commented: "We are very fortunate to have teamed
up with London Asia, which has an excellent reputation, a great team, and
outstanding track record in private equity fund management in China."

Victor Ng, Director of Greater China Operations at London Asia, said: "This
agreement is in line with London Asia's strategy to tap into China's
fast-growing savings and domestic capital market, working with strong regional
partners, seeking to exit our investments in the Chinese capital markets as well
as raise money locally."

Brunei Authorisation
London Asia's Kingdom of Brunei Darussalam ("Brunei") subsidiary ("LA Brunei")
has become one of a handful of international companies to meet the requirements
to receive authorisation as a fund manager in Brunei. Brunei generates
significant revenues from crude oil and natural gas, but is seeking economic
diversification to take advantage of its highly educated workforce. In the
current Seventh National Development Plan, the government has allocated more
than US$7 billion for the implementation of various projects and programmes,
including the development of the financial services industry.

Simon Littlewood, Chief Executive of London Asia, commented: "We are very
impressed with the quality of people and commitment shown by the authorities in
Brunei to expanding their financial services industry. Brunei has been a
significant investor around the world for many decades, and is using that
experience gained to develop its own financial services industry, particularly
in the fast growing Islamic products sector. Given its geographical location and
history as a major oil and gas producer, investors in Brunei have a good
understanding of the investment areas in which we focus, namely Greater China
and the Energy & Environment sector."

                                    - ends -

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

John West/Matt Ridsdale   Simon Littlewood         Jeremy Porter/Jonathan Wright
Tavistock Communucations  London Asia Capital plc  Seymour Pierce
Tel: [phone]        Tel: [phone]       Tel [phone]

Notes to Editors

Background on Xinjiang
Xinjiang, located in northwestern China, covers an area of 1.66 million m2,
approximately one sixth of China's land area. It borders Russia, Kazakhstan,
Kirghiziastan, Tajikistan, Pakistan, Mongolia, India and Afghanistan. In 2005,
the population of the region was 1.96 million and GDP was RMB 220 billion.
Xinjiang is one of the five major pastoral areas of China. The region has
significant mineral and energy resources, including an estimated 30% of China's
oil deposits, 34% of China's natural gas deposits and 40% of China's coal
reserves.

About Brunei
Brunei is located in South East Asia, bordering the South China Sea and
Malaysia, with a population of under 400,000. The legal system is based on
English common law. In 2005, GDP reached US$9.5 billion, with GDP per capita of
US$25,754, one of the highest in the world. Economic growth in Brunei is heavily
dependent on oil and gas production. It is the third-largest oil producer in
Southeast Asia and the seventh-largest exporter of liquefied natural gas in the
world.

Brunei is seeking to diversify its economy and market itself as a financial
centre. The Brunei International Finance Centre was established to promote
Brunei as a centre for banking, insurance and securities services in accordance
with both conventional and Islamic fiscal practices. The government also
encourages more foreign investment. New enterprises that meet certain criteria
can receive preferential status, exempting profits from income tax for up to 5
years, depending on the amount of capital invested. Brunei is taking steps to
become a centre for Islamic banking as well as an international offshore
financial centre.




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