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RAB Capital sells Northwest funds to principals for GBP1m

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RAB Capital has agreed to dispose of the business and assets vested in the Asia-focused Northwest funds to their original principals, George Philips and David Rogers, for GBP1m.

RAB Capital has agreed to dispose of the business and assets vested in the Asia-focused Northwest funds to their original principals, George Philips and David Rogers, for GBP1m.

On 14 November 2008, RAB Capital reported the ways in which it was restructuring its business in the light of unprecedented stress on the alternative asset management industry.

This included rationalising its offering down to those strategies – be they market neutral, long/short equity or deep value natural resources/energy investing – which are founded on RAB’s core competency in fundamental research.

Consistent with the above, and pursuant to comments made in September concerning the structure of RAB’s engagement with Northwest, RAB has agreed to sell the business and assets vested in the Northwest brand back to the original principals, Philips and Rogers.

After consideration of alternatives it was concluded that a complete disposal best serves the operational efficiency and liquidity position of RAB Capital, results in an offering more aligned with RAB’s core infrastructure, and reduces costs in future years.

The three Northwest funds (Northwest Fund, Northwest China Opportunities Fund and Northwest Warrant Fund) undertake Asian-focused investment management activities.

At the proposed completion date of 2 April 2009, it is anticipated that the assets under management of the Northwest funds will be approximately USD300m based on 31 December 2008 assets under management and notified redemptions.

The consideration for the disposal is GBP1m in cash. As a result of the transaction occurring within the vesting period for the original share based acquisition payment, Philips and Rogers will together forfeit the remaining 6.7 million ordinary shares, out of a total of 13.4 million ordinary shares that formed part of the original consideration. The disposal is conditional on approval from the Financial Services Authority and the Irish Stock Exchange.

The cash consideration will be allocated to general working capital purposes and RAB Capital intends to use the ordinary shares forfeited for future employee incentivisation. The disposal does not materially affect the guidance contained in RAB’s Trading Update of 21 January 2009, but it does marginally improve the liquidity position. Net current assets and investments as at 31 December 2008 increase by approximately GBP3m to a total in excess of GBP113m, equivalent to 23.1p per ordinary share.

On a pro-forma basis the business and assets which are subject to disposal generated a profit before tax of approximately GBP9m in 2007 and were expected to generate a loss before taxation in 2008 prior to accounting for the effects of this transaction. As of 30 June 2008, the book value of the assets being disposed of was approximately GBP20m, which was almost entirely comprised of goodwill and other intangible assets.

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