TIDMADD
Advance Developing Markets Trust plc
Recommended proposals for the voluntary winding up of the Company and
the rollover of Shareholders' interests into Advance Developing
Markets Fund Limited
On 25 September 2009 the Board announced proposals to redomicile
Advance Developing Markets Trust plc (the "Company") through
a voluntary winding up of the Company and a rollover of shareholders'
interests into a newly established Guernsey fund, Advance Developing
Markets Fund Limited ("ADMF").
Today, the Company is pleased to announce that it is publishing a
Circular setting out further details of these proposals together with
a Prospectus in connection with the proposed issue of Ordinary Shares
and Subscription Shares by ADMF.
The text of the Chairman's letter in the Circular is as follows:
"Dear Shareholder
RECOMMENDED PROPOSALS FOR THE VOLUNTARY WINDING UP OF THE
COMPANY AND THE ROLLOVER OF SHAREHOLDERS' INTERESTS INTO
ADVANCE DEVELOPING MARKETS FUND LIMITED
1. INTRODUCTION
On 25 September 2009 your Board announced that it was considering
proposals for the Company to re-domicile to Guernsey. The Board
believes that the need for the Company to comply with section 842 of
the Taxes Act, so as to maintain investment trust status (and thereby
be exempt from any tax on capital gains), is increasingly acting as a
restriction on the investments which the Company might otherwise make
and thereby potentially constraining the investment returns which may
otherwise be achievable by the Company. The Board believes that by
re-domiciling to Guernsey the Company will have greater investment
flexibility. Further, the proposed re-domicile to Guernsey will
eliminate any charge to UK corporation tax in respect of investment
in "non-distributing funds".
This document explains the background to and effects of the
Proposals. The proposed re-domicile will be effected by means of the
voluntary winding-up of the Company and a scheme of reconstruction
under section 110 of the Insolvency Act 1986.
The day to day running of the successor vehicle will not change from
that of the Company, the same executive team will remain in place,
and the investment policy of the successor vehicle will be the same
as that of the Company.
The Scheme requires the approval of Ordinary Shareholders by the
passing of all the resolutions to be proposed at the Meetings. The
Board recommends Ordinary Shareholders to vote in favour of the
resolutions to be proposed at the Meetings. Notices of the Meetings
which are to be held on 29 October 2009 and 9 November 2009 are set
out at the end of this document.
2. BACKGROUND TO THE PROPOSALS
When the Company was launched in 1998, its investment policy was
focused on investing in investment trusts and other closed-end funds,
many of which offered opportunities to invest at significant
discounts to underlying asset value. By exploiting discount anomalies
the Investment Manager generated impressive returns both in relative
and absolute terms.
However, in the years following the launch of the Company, the
available universe of closed-end emerging market funds declined,
making it increasingly difficult for the Investment Manager to
achieve global emerging market exposure: in some cases, markets in
which the Investment Manager wished to invest were not represented at
all in the universe of closed-end funds; or were represented only in
global or regional funds not otherwise suitable for the Company; or
were represented only in funds which the Investment Manager perceived
to be unattractive because of poor management or otherwise.
In 2002 the Investment Manager sought and obtained permission from
the Board to invest in open-ended as well as closed-end funds: whilst
open-ended funds would not generally offer opportunities to invest at
discounts, the Investment Manager believes it can add value by using
its expertise and knowledge of underlying markets to identify "best
of breed" managers as well as negotiating competitive terms on which
to invest. This would also provide more flexibility in terms of asset
allocation. In its early years, the out-performance by the Company
was driven primarily by exploiting discount anomalies: this remains
an important factor, but latterly both asset allocation and manager
selection have also become significant factors. In some cases value
has also been generated by moving between closed-end and open-ended
funds with similar investment remits and under common management.
Since 2002, open-ended funds have become increasingly important to
the Company and as at 30 September 2009 (the latest practicable date
prior to the publication of this document) some 46.1 per cent. of the
Company's portfolio is invested in such funds.
The Company was incorporated in the UK and is resident in the UK for
tax purposes. Since inception, the Directors have conducted the
affairs of the Company in such a way as to ensure that the Company
qualifies as an investment trust. This has meant that the Company,
whilst liable for UK tax on its net income, has ordinarily had no
liability for tax on capital profits.
However, under UK tax legislation, where the Company invests in what
are called "non-distributing funds", any profits realised by the
Company on the disposal of those investments are treated for tax
purposes as though they are income - and taxed accordingly: at 28 per
cent., being the current rate of corporation tax.
The investment trusts and other closed-end funds which the Company
initially focused on are not treated as "non-distributing funds" so
no tax has been payable in respect of profits realised by the Company
on their disposal. However, some of the open-ended funds which have
formed an increasingly important part of the Company's portfolio
since 2002 may be treated as "non-distributing funds", giving rise to
potentially punitive liability to UK corporation tax.
Implementation of the Proposals will, as a result of the Company
being placed formally into liquidation, crystallise existing
unrealised gains on its investments in non-distributing funds. Based
on the Company's assets held at 31 August 2009, the Company's
estimated deferred tax liability at that time was GBP1.3 million. This
figure assumes full utilisation of the Company's carried forward
excess management expenses at that time and is subject to change
(both up and down) as a result of realisations since 31 August 2009
and market movements up to the time of the commencement of the
Company's liquidation.
In the future, and subject to prevailing market conditions, it seems
increasingly likely that gains may continue to be generated at a rate
significantly in excess of the rate at which excess management
expenses are generated. Accordingly, the Proposals are expected to
benefit Shareholders by eliminating any further charge to UK
corporation tax and will provide the Investment Manager with greater
investment flexibility and the potential to enhance further the
investment returns achievable. These benefits should be achieved with
only a small increase in annual costs.
As stated above the Company is currently approved as an investment
trust in accordance with section 842 of the Taxes Act and, as a
result of its status as an investment trust, it is not liable to UK
corporation tax on any capital gains arising on the disposal of its
investments. However, in order to obtain approval from HMRC as an
investment trust for a particular accounting period, the Company must
comply with the strict requirements prescribed by section 842 of the
Taxes Act. These restrictions are more onerous than the restrictions
which apply to the Company by virtue of its admission to the Official
List and the conditions and continuing obligations contained in the
Listing Rules. In particular, in order to qualify as an investment
trust, the Company must comply, inter alia, with each of the
following requirements of section 842 of the Taxes Act: (i) that not
more than 15 per cent. of its assets may be invested in an investee
company; and (ii) that its income must consist wholly or mainly of
eligible investment income, thereby restricting the level of income
which may arise from the use of derivatives.
The Directors believe that these existing requirements are
potentially constraining the investment returns which the Company
might otherwise be able to achieve if it were not subject to these
restrictions. In addition, the continuing need to ensure compliance
with the requirements of section 842 of the Taxes Act (because of the
potentially very serious consequences (including corporation tax
being applied at a rate of 28 per cent. of realised capital gains),
which would arise if the Company did not obtain investment trust
status) takes up a significant amount of management time which could
be better spent managing the existing portfolio and identifying new
investments.
The Board believes that the proposed re-domicile of the Company to
Guernsey will provide the Investment Manager with greater investment
flexibility and the potential to enhance further the investment
returns achievable.
3. THE SCHEME
Pursuant to the Scheme, ADMF, a Guernsey company, will be
incorporated and an application will be made to the UK Listing
Authority and the London Stock Exchange for the ADMF Shares to be
issued in connection with the Scheme to be admitted to the Official
List and to trading on the London Stock Exchange's main market. ADMF
will have the same investment policy as the Company and the Company's
existing executive team will remain in place. The existing investment
manager will act as ADMF's investment manager on the same commercial
terms as it currently manages the Company save that the relevant
performance fee calculation period in respect of ADMF will be (i) the
period from Admission to 31 October 2010, and (ii) thereafter each
one year period ending on 31 October in each year. For the purpose of
calculating any performance fees payable by ADMF to the Investment
Manager the applicable high water mark will be the higher of (i)
505.2p (being the current high water mark of the Company) and (ii)
the net asset value per share of ADMF at the end of the latest
performance fee calculation period in respect of which a performance
fee was payable by ADMF. As ADMF will not be an investment trust it
will not be subject to the requirements of section 842 of the Taxes
Act.
If the Proposals are approved and implemented, the Company will be
placed into members' voluntary liquidation and its investments and
other assets, after providing for its liabilities will be transferred
in specie to ADMF.
Ordinary Shareholders
Under the Proposals, the Company will be wound up voluntarily and a
scheme of reconstruction under section 110 of the Insolvency Act 1986
will be put in place. Under the Scheme, Ordinary Shareholders will
receive one ADMF Ordinary Share for each Ordinary Share held in the
Company by them on the Record Date.
The ADMF Ordinary Shares will be issued with substantially the same
rights as those attaching to the Ordinary Shares. Further details of
the rights attaching to the ADMF Ordinary Shares are set out in
paragraph 5 of Part 1 of this document and in Part 6 of the
accompanying Prospectus. ADMF Ordinary Shares will be admitted to the
Official List and will be traded on the main market of the London
Stock Exchange.
Unless the Directors are satisfied that any Overseas Ordinary
Shareholders can be issued ADMF Ordinary Shares pursuant to the
Scheme without breaching any relevant securities laws or regulations,
such Overseas Ordinary Shareholders will have their entitlement to
ADMF Ordinary Shares sold in the market on their behalf immediately
following the implementation of the Scheme, and the proceeds of such
sale (net of associated costs) will be remitted to them.
Subscription Shareholders
Under the Scheme, Subscription Shareholders will receive one ADMF
Subscription Share for every Subscription Share held in the Company
by them on the Record Date.
The ADMF Subscription Shares will be issued with substantially the
same rights as those attaching to the Company's existing Subscription
Shares. Further details of the rights attaching to the ADMF
Subscription Shares are set out in paragraph 5 of Part 1 of this
document and in Part 6 of the accompanying Prospectus. ADMF
Subscription Shares will be admitted to the Official List and will be
traded on the main market of the London Stock Exchange.
Unless the Directors are satisfied that any Overseas Subscription
Shareholders can be issued ADMF Subscription Shares pursuant to the
Scheme without breaching any relevant securities laws or regulations,
such Overseas Subscription Shareholders will have their entitlement
to ADMF Subscription Shares sold in the market on their behalf
immediately following the implementation of the Scheme, and the
proceeds of such sale (net of associated costs) will be remitted to
them.
Further details regarding these arrangements are set out in Parts 2
and 3 of this document.
4. BENEFITS OF THE PROPOSALS TO THE COMPANY
The principal benefit of the proposed re-domicile to Guernsey will
be: (i) the elimination of any charge to UK corporation tax in
respect of investment in "non-distributing funds" referred to under
the heading "Background to the Proposal" above; and (ii) the greater
investment flexibility given to the Investment Manager than is
currently possible as a result of the strict requirements of section
842 of the Taxes Act referred to under the heading "Background to the
Proposals" above, which will no longer have to be adhered to. The
Board believes that this greater investment flexibility has the
potential to enhance further the investment returns achievable. In
addition, for efficient portfolio management purposes only, ADMF will
be permitted to enter into contracts for differences and other
derivative instruments which under the current structure are
difficult to accommodate. Gains from such positions are currently
considered as revenue and therefore due to the restrictions on income
under section 842 of the Taxes Act, their use would represent undue
exposure to the risk of a tax liability. Finally, the significant
time currently spent by the executive team ensuring compliance with
the requirements of section 842 of the Taxes Act will be better spent
by them managing the existing portfolio and identifying new
investments.
5. ADVANCE DEVELOPING MARKETS FUND LIMITED
Introduction
ADMF is a newly formed Guernsey incorporated closed-end company,
which has been established as a successor vehicle to the Company. The
Company's investment manager will act as ADMF's investment manager.
ADMF will have the same investment policy, and executive team as the
Company and there will be no overall change compared before to the
day to day running of ADMF. It will be subject to the same investment
restrictions that apply to the Company by virtue of the admission of
its shares to the Official List under Chapter 15 of the Listing
Rules, but it will not be subject to the more onerous investment
restrictions which currently apply to the Company under section 842
of the Taxes Act.
Capital structure
ADMF's share capital will comprise of ordinary shares and
subscription shares.
ADMF Ordinary Shares
The rights and characteristics of the ADMF Ordinary Shares are
summarised below:
Dividends
The holders of ADMF Ordinary Shares shall be entitled to such
dividend as may be declared by ADMF from time to time.
Capital entitlement
On a winding up, in the event that there are ADMF Ordinary Shares and
ADMF Subscription Shares in issue (i) ADMF Ordinary Shares and ADMF
Subscription Shares shall rank pari passu for the return of their
paid up nominal capital; and (ii) any surplus shall be applied to the
ADMF Ordinary Shares and ADMF Subscription Shares in accordance with
the ADMF articles of incorporation if applicable and, if not
applicable, exclusively to the ADMF Ordinary Shares pari passu. In
the event that there are only ADMF Ordinary Shares in issue, such
shares shall rank pari passu for the nominal capital paid up thereon
and in respect of any surplus.
Voting rights
Holders of ADMF Ordinary Shares will be entitled to attend, speak and
vote at all general meetings of ADMF.
Further details of the rights attaching to the ADMF Ordinary Shares
are set out in Part 6 of the accompanying ADMF Prospectus.
ADMF Subscription Shares
The rights and characteristics of the ADMF Subscription Shares are
summarised below:
Dividends
The ADMF Subscription Shares will carry no entitlement to dividends
declared.
Capital entitlement
On a return of capital on liquidation the ADMF Subscription Shares
shall rank in accordance with article 5.3.3(x) of the ADMF articles
of incorporation (as set out in Part 6 of the accompanying ADMF
Prospectus) and paragraph 4.2.15 of Part 6 of the accompanying ADMF
Prospectus.
Voting rights
The ADMF Subscription Shares will not carry any voting rights at
general meetings of ADMF. However, ADMF will not be able to carry out
certain corporate actions unless it obtains the sanction of the
holders of the ADMF Subscription Shares by the passing of a special
resolution at a separate meeting of the ADMF Subscription
Shareholders. Separate approval of the ADMF Subscription Shareholders
must be obtained in respect of any proposals which would affect their
rights. This approval of the ADMF Subscription Shareholders by the
passing of a special resolution at separate class meetings is
required in relation to any proposal to modify, alter or abrogate the
rights attaching to the ADMF Subscription Shares.
Further details of the rights attaching to the ADMF Subscription
Shares are set out in Part 6 of the accompanying ADMF Prospectus.
Board composition
I will act as chairman of ADMF. Of the other existing Board members
of the Company Angus Bonsor and Terry Mahony have agreed to join the
board of ADMF and James Robinson has agreed to stand down. In
addition, Richard Hotchkis and John Hawkins, who are both based in
Guernsey, have agreed to join the board of ADMF. These appointments
satisfy the requirement for ADMF to have a majority of non-UK
resident directors in order for it to be tax resident offshore.
Further details of the members of the board of ADMF are set out in
Part 2 of the ADMF Prospectus.
I believe that the composition of the board of ADMF reflects an
appropriate range of skills and experience whilst also providing a
balance between the requirement for offshore directors to be
appointed and our wish to provide continuity. On my own behalf and on
behalf of my fellow Board members I would like to express our
gratitude to James Robinson who has very ably served the Company
since inception and to wish him well.
Management and other service providers
The Company's existing investment manager will be appointed to act as
investment manager of ADMF. The current investment management
agreement between the Company and the Investment Manager will be
terminated upon the Scheme becoming effective and will be replaced
with a new investment management agreement.
The commercial terms of the new investment management agreement will
be substantially the same as those contained in the existing
investment management agreement, including the rights of the
respective parties to terminate the agreement and also the management
and performance fees payable to the Investment Manager save that the
relevant performance fee calculation period in respect of ADMF will
be (i) the period from Admission to 31 October 2010, and (ii)
thereafter each one year period ending on 31 October in each year and
for the purpose of calculating any performance fees payable by ADMF
to the Investment Manager the applicable high water mark will be the
higher of (i) 505.2p (being the current high water mark of the
Company) and (ii) the net asset value per Share of ADMF at the end of
the latest performance fee calculation period in respect of which a
performance fee was payable by ADMF. Subject to the implementation of
the Proposals, a performance fee may be payable by the Company in
respect of the period 1 June 2009 to the date on which the Company is
wound up although the Board do not currently expect to pay a
performance fee by reason of the Company's Net Asset Value being
below the current high water mark.
The current administration and secretarial agreement between the
Company and Cavendish Administration Limited will be terminated upon
the Scheme becoming effective. As a Guernsey resident fund ADMF is
required to appoint an administrator resident in the Channel Islands
and has agreed to appoint Legis Fund Services Limited as its
administrator. Under the terms of the new administration and
secretarial agreement, Legis Fund Services Limited will be able to
delegate its administrative duties to third parties approved by ADMF
and with the approval of ADMF will delegate certain of its
administrative duties to the Company's existing administrator. The
commercial terms of the new administration and secretarial agreement
will be substantially the same as those contained in the existing
agreement.
The Company's existing custodian (The Northern Trust Company) will be
appointed to act as custodian of ADMF. The commercial terms of the
new custodian agreement will be substantially the same as those
contained in the existing agreement. Capita Registrars (Guernsey)
Limited will be appointed as registrar and transfer agent to ADMF and
with the consent of ADMF will retain Capita Registrars Limited as the
Company's UK transfer agent to receive notices and documents of
transfer from ADMF Shareholders in the United Kingdom for onward
transmission to Capita Registrars (Guernsey) Limited. The existing
custodian and registrar agreements will remain in force for the
duration of the liquidation period (subject to such amendments as the
Liquidators may agree with the Custodian and the Registrar).
All the appointments referred to above are conditional on the
Proposals being approved and implemented. Further details of the
agreements between ADMF and their service providers are set out in
Part 6 of the ADMF Prospectus.
Application for listing
Applications will be made for the ADMF Ordinary Shares and ADMF
Subscription Shares to be issued in connection with the Scheme to be
admitted to the Official List and to trading on the London Stock
Exchange's main market for listed securities.
It is expected that dealings in the ADMF Ordinary Shares and ADMF
Subscription Shares will commence at 8.00 a.m. on 10 November 2009.
Further issues and reissue of treasury shares
The issue of further ADMF Ordinary Shares for cash (and/or the
reissue of ADMF Ordinary Shares held in treasury) will be subject to
pre-emption rights in favour of existing ADMF Ordinary Shareholders
which may be disapplied by ADMF Ordinary Shareholders by way of
special resolution.
These pre-emption rights will not apply to the allotment of ADMF
Ordinary Shares pursuant to the Scheme as those shares will not be
issued for cash.
Pursuant to a special resolution passed on 28 September 2009 the ADMF
Directors will have authority following Admission to issue further
ADMF Ordinary Shares (and/or reissue ADMF Ordinary Shares held in
treasury from time to time) for cash up to an amount representing 5
per cent. of the issued ADMF ordinary share capital immediately
following Admission on a non-pre-emptive basis. This authority shall
expire on the conclusion of the first annual general meeting of ADMF.
ADMF does not intend to issue any ADMF Subscription Shares otherwise
than pursuant to the Scheme.
With the exception of ADMF Ordinary Shares issued pursuant to the
Scheme, no ADMF Ordinary Shares will be issued at a price less than
the prevailing net asset value per ADMF Ordinary Share, unless they
are first offered pro-rata to existing holders of ADMF Ordinary
Shares.
It is the intention of the ADMF Board that any re-sale of treasury
shares would only take place at a narrower discount to the diluted
net asset value per share than that at which they were bought into
treasury, and in any event at a discount no greater than 5 per cent.
to the prevailing diluted net asset value per share.
Discount management and repurchase of shares
The ADMF Directors believe it is desirable that the ADMF Ordinary
Shares do not trade at a significant discount to the diluted net
asset value per share. In structuring ADMF, the ADMF Directors have
given consideration to the discount risk and how this may be managed.
Conditionally upon Admission, and at their sole discretion, the ADMF
Directors have been granted authority to buy back up to 14.99 per
cent. of the ADMF Ordinary Shares in issue following Admission.
ADMF's authority to make purchases of its own issued ADMF Ordinary
Shares will expire at the conclusion of the annual general meeting of
ADMF to be held in 2010 or, if earlier, eighteen months from the date
of passing of the relevant ADMF Shareholders' resolution, namely 28
March 2011. A renewal of the authority to make purchases of ADMF
Ordinary Shares will be sought from shareholders at each annual
general meeting of ADMF. The timing of any purchases will be decided
by the ADMF Board. Any ADMF Ordinary Shares bought back by ADMF will
either be held in treasury (and may be reissued) or cancelled.
The ADMF Directors intend that purchases will only be made, pursuant
to this authority, through the market, for cash, at prices below the
prevailing diluted net asset value per share where the ADMF Directors
believe such purchases will result in an increase in the diluted net
asset value per share of the remaining ADMF Ordinary Shares and to
assist in narrowing any discount to the diluted net asset value per
share at which such ADMF Ordinary Shares may trade. Such purchases
will only be made in accordance with the Companies Law and the
Listing Rules. The Listing Rules currently provide that the maximum
price to be paid per share is the higher of (i) 105 per cent. of the
average of the market closing value of the shares from the London
Stock Exchange for the five Business Days immediately preceding the
date of the relevant purchase; (ii) the price of the last independent
trade; and (iii) the highest current independent bid on the trading
venues where the purchase is carried out.
In addition, under the articles of association of ADMF, ADMF will
have the right to repurchase ADMF Subscription Shares in the market,
by tender or by private treaty but such purchases will be limited to
a maximum price per ADMF Subscription Share which, in the case of
purchases through the market, will not exceed 5 per cent. above the
average of the middle market closing quotations (from the London
Stock Exchange) for the ten consecutive London Stock Exchange dealing
days ending on the dealing day immediately preceding the date on
which the purchase is made; and if such purchases are by tender, such
tender will be available to all holders of ADMF Subscription Shares
alike. All ADMF Subscription Shares purchased will be cancelled and
will not be available for re-issue or resale.
Life of ADMF
ADMF will not have a fixed life and will be intended as a long-term
investment vehicle. However, the ADMF Directors consider it desirable
that ADMF Shareholders will have the opportunity to review the future
of ADMF at appropriate intervals. At ADMF's annual general meeting
first following the fifth anniversary of Admission, and at every
fifth annual general meeting thereafter, the ADMF Directors undertake
to propose an ordinary resolution that ADMF continue in existence. If
the resolution is not passed then within 4 months of the vote to
continue failing the ADMF Directors shall formulate and put to ADMF
Shareholders proposals relating to the future of ADMF having had
regard to, inter alia, prevailing market conditions and applicable
regulations and legislation.
Draft Alternative Investment Fund Managers Directive
As noted in the section entitled "Risks associated with ADMF", a
draft European Directive on Alternative Investment Fund Managers has
recently been published which may impact on ADMF's investment policy.
When the impact of the Directive becomes known, the ADMF Directors
will consider all options available to them with the objective of
enabling ADMF's assets to be managed directly or indirectly in the
manner currently intended.
Accounting periods
The annual accounts of ADMF will be made up to 31 October in each
year starting in 2010, with copies of the annual report and accounts
expected to be sent to ADMF Shareholders in February 2011.
It is intended that the annual general meetings of ADMF will be held
in March or April of each year, the first to be held in March or
April 2011. ADMF Shareholders will also receive an unaudited half
yearly report covering the first six months of each financial year to
30 April. The half yearly report is expected to be sent to ADMF
Shareholders in July of each year. The first half yearly report will
be for the period ending 30 April 2010. ADMF's accounts will be
prepared in sterling in accordance with the same accounting policies
and standards as the Company's accounts and under International
Financial Reporting Standards.
6. REGULATORY AND CORPORATE GOVERNANCE IMPACT
ADMF will be subject to the Listing Rules (in the same way that the
Company is at present) and in addition will be required to make
certain annual, quarterly and other filings with the Guernsey
Financial Services Commission. The City Code will apply to ADMF in
the same way as it applies to the Company. ADMF will also comply with
the Combined Code and the AIC Code of Corporate Governance in the
same way as the Company does currently.
7. ALLOCATION OF THE COMPANY'S NET ASSETS ON LIQUIDATION
On the winding-up of the Company, but before any assets are
transferred to ADMF, the liquidators shall retain a fund of an amount
they consider sufficient to provide for all liabilities (including
tax, contingent, unknown and unascertained liabilities) of the
Company. The retention in respect of unknown and unascertained
liabilities is expected to be GBP200,000 and the Directors, having made
enquiries, are satisfied that this is a reasonable amount to be
retained for unknown and unascertained liabilities. ADMF has also
executed an indemnity, conditional on the Scheme being approved in
favour of the Liquidators agreeing to indemnify them in respect of
such liabilities, subject to a maximum of GBP200,000. The remaining
assets of the Company will be transferred to ADMF pursuant to the
Transfer Agreement. To the extent that any part of the Liquidation
Fund is not required, any assets remaining in the Liquidation Fund
will be transferred to ADMF by the Liquidators as provided for in the
Scheme.
8. INTERIM DIVIDEND
There may be a requirement to pay an interim dividend to satisfy
section 842 of the Taxes Act for the period from 1 June 2009 to
commencement of the liquidation. If such a dividend is required,
further details of any such dividend will be announced if and when
appropriate. Subscription Shareholders who elect to convert their
Subscription Shares into Ordinary Shares will have no entitlement to
any interim dividend which is declared by the Company prior to the
date of issue of the new Ordinary Shares on conversion.
9. COSTS OF IMPLEMENTATION OF THE PROPOSALS
The costs and expenses relating to the Proposals to be paid by the
Company, including legal and other professional costs, the costs of
printing this document, any tax charge on the crystallisation of
unrealised gains on the Company's investment in non-distributing
funds and the costs relating to the liquidation of the Company are
estimated to amount to approximately GBP1.6 million excluding VAT (the
Company has provided for this amount in full). A further GBP0.9 million
excluding VAT is estimated to be payable in connection with the
launch of ADMF and the listing of ADMF Shares on the London Stock
Exchange (including UK stamp duty payable on assets transferred to
ADMF estimated to amount to GBP0.5 million (based on the value of the
Company's assets held at 30 September 2009 which are subject to UK
stamp duty)). This amount will be payable by ADMF and will be
provided for upon its launch but if the Scheme does not proceed
approximately GBP0.6 million of such costs will be borne by the
Company.
10. DEALINGS IN SHARES ON THE LONDON STOCK EXCHANGE
The last day for trading in the Shares on the London Stock Exchange
for normal settlement (in order to enable settlement prior to the
Record Date) will be 3 November 2009. As from 4 November 2009,
dealings should be for cash settlement only and will be registered in
the normal way if the transfer, accompanied by all requisite
documents of title, is received by the Registrar by 5.00 p.m. on 6
November 2009. Transfers received after that time will be returned to
the persons lodging them. The Record Date, being the date for
determining which Shareholders are entitled to participate in the
Scheme is the close of business on 6 November 2009.
The register of Shareholders will close and the Shares will be
disabled in CREST at 5.00 p.m. on 6 November 2009. Further details
regarding dealings in the Shares on the London Stock Exchange are set
out in paragraph 5 of Part 2 of this document.
11. OVERSEAS SHAREHOLDERS
Unless the ADMF Directors are satisfied that any Overseas Ordinary
Shareholders can be issued ADMF Ordinary Shares pursuant to the
Scheme without breaching any relevant securities laws or regulations,
such Overseas Ordinary Shareholders will have their entitlement to
ADMF Ordinary Shares sold in the market on their behalf immediately
following the implementation of the Scheme and the net proceeds of
such sale will be remitted to them.
Unless the ADMF Directors are satisfied that any Overseas
Subscription Shareholders can be issued ADMF Subscription Shares
pursuant to the Scheme without breaching any relevant securities laws
or regulations, such Overseas Subscription Shareholders will have
their entitlement to ADMF Subscription Shares sold in the market on
their behalf immediately following the implementation of the Scheme
and the net proceeds of such sale will be remitted to them.
12. TAXATION - ISA, SIPP AND SSAS INVESTORS
A summary of the tax consequences of the Proposals for Shareholders
is set out in Part 2 of this document. ADMF Shares will be eligible
for inclusion within the stocks and shares component of an ISA. ADMF
Shares will also qualify as an investment that may be held in a SIPP
or SSAS. Accordingly, where existing Shares are held in an ISA, SIPP
or SSAS, ADMF Shares received by Shareholders pursuant to the Scheme
in respect of those Shares can be retained (subject to the specific
terms applicable to the relevant ISA, SIPP or SSAS) within the ISA,
SIPP or SSAS.
13. FURTHER INFORMATION
The Proposals are described in more detail in Part 2 of this document
and the terms of the Scheme are set out in Part 3 of this document.
A copy of the ADMF Prospectus is enclosed with this Circular.
Shareholders should read the entirety of this Circular and the ADMF
Prospectus and in particular the sections headed "Risk Factors" on
pages 7 to 14 of this Circular and pages 7 to 15 of the ADMF
Prospectus respectively. Implementation of the Scheme is conditional,
inter alia, on the passing of all the Resolutions to be proposed at
the Meetings. In the event that any of the Resolutions are not passed
or certain other conditions in paragraph 11 of Part 3 of this
document are not satisfied the Scheme will not be implemented.
14. SHAREHOLDER MEETINGS
Set out at the end of this document are notices of the following
meetings:
(a) the Ordinary Shareholders' Meeting;
(b) the First General Meeting; and
(c) the Second General Meeting.
All the above meetings will be held on 29 October 2009 commencing at
12.15 p.m., save for the Second General Meeting, which will be at
12.00 p.m. on 9 November 2009. All meetings will be held at 4 More
London Riverside, London SE1 2AU.
Ordinary Shareholders' Meeting
At the Ordinary Shareholders' Meeting a special resolution will be
proposed to sanction any variation, modification, alteration or
abrogation of the special rights and privileges attaching to the
Ordinary Shares to be effected by the approval and implementation of
the Proposals. The resolution will require the approval of at least
75 per cent. of the votes cast in respect of it.
The quorum for passing the special resolution at the Ordinary
Shareholders' Meeting is two or more holders of Ordinary Shares
present in person or by proxy or in the case of a holder of Ordinary
Shares which is a corporation by its duly authorised representative
and holding or representing in aggregate at least one-third of the
nominal amount paid up on the issued Ordinary Shares. If a quorum is
not present, it is intended to adjourn the Ordinary Shareholders'
Meeting to 11.50 a.m. on 9 November 2009. At such adjourned meeting
one or more holders of Ordinary Shares present in person or by proxy
or in the case of a holder of Ordinary Shares which is a corporation
by its duly authorised representative, whatever the nominal amount
paid up on the issued shares held by them, shall form a quorum.
First General Meeting
The First General Meeting will be held at 4 More London Riverside,
London SE1 2AU on 29 October 2009. A special resolution will be
proposed at that Meeting to amend the Company's Articles of
Association for the purposes of the Scheme, to sanction the
Liquidators' powers for the purposes of the Scheme, to approve the
Scheme and to authorise its implementation by the Liquidators. The
resolution will require the approval of at least 75 per cent. of the
votes cast in respect of it. Only Ordinary Shareholders (and not
Subscription Shareholders) will be entitled to attend and vote at the
meeting. The Scheme will not become effective until the resolutions
to be proposed at the Second General Meeting have also been passed.
Second General Meeting
The Second General Meeting will be held at 4 More London Riverside,
London SE1 2AU on
9 November 2009. The first resolution to be considered at the Second
General Meeting (which will be proposed as a special resolution) will
be a resolution to wind up the Company voluntarily and appoint the
Liquidators.
The second resolution (also a special resolution) will authorise the
Liquidators to exercise certain powers for which the express sanction
of Ordinary Shareholders is required under the Insolvency Act 1986,
such as paying classes of creditors in full.
Each resolution to be proposed at the Second General Meeting will
require the approval of at least 75 per cent. of the votes cast in
respect of it. Only Ordinary Shareholders (and not Subscription
Shareholders) will be entitled to attend and vote at the meeting.
15. ACTION TO BE TAKEN
Before taking any action, you are recommended to read the further
information set out in this document and in the accompanying ADMF
Prospectus.
If you are in any doubt as to the action you should take, please
consult your independent professional adviser immediately.
Shareholders will find enclosed with this document:
(a) a yellow form of proxy for use at the Ordinary Shareholders'
Meeting;
(b) a pink form of proxy for use at the First General Meeting; and
(c) white form of proxy for use at the Second General Meeting.
Whether or not you propose to attend any or all of the relevant
Meetings, in light of the quorum requirements for each Meeting,
please complete the relevant forms of proxy as soon as practicable
and return them by post or by hand (during normal business hours
only) to Capita Registrars, at Capita Registrars, Proxy Department,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as
possible and in any event so as to be received not later than 48
hours prior to the time of the relevant meeting. The completion and
return of a form of proxy will not prevent an Ordinary Shareholder
from attending the relevant Meeting(s) and voting in person if he or
she wishes to do so.
16. CONSEQUENCES OF THE SCHEME NOT PROCEEDING
If the Scheme is not implemented, the Company will continue as an
investment trust in its current form and a continuation vote will be
put to Shareholders at the annual general meeting of the Company to
be held in 2013.
17. RECOMMENDATION
The Board, which has been advised by Arbuthnot Securities, considers
the Proposals to be in the best interests of Shareholders as a whole
and accordingly recommends that you vote in favour of the
Resolutions. In providing advice to the Directors, Arbuthnot
Securities has taken into account the Directors' own commercial
assessment of the Proposals.
The Directors intend to vote in favour of the Resolutions to be
proposed at the Meetings in respect of their own beneficial holdings
of Ordinary Shares amounting in aggregate to 39,000 Ordinary Shares
representing approximately 0.06 per cent. of the Ordinary Shares in
issue.
Yours faithfully
Peter O'Connor
Chairman"
Expected Timetable (all references to time are to London time)
Record date for interim dividend on Ordinary 23 October
Shares*
Latest time and date for receipt of forms of 12.15 p.m. on 27
proxy for the Ordinary Shareholder Meeting October
Latest time and date for receipt of forms of 12.20 p.m. on 27
proxy for the First General Meeting October
Ordinary Shareholders' Meeting** 12.15 p.m. on 29
October
First General Meeting*** 12.20 p.m. on 29
October
Latest time and date for receipt of notices of 1.00 p.m. on 2
exercise of conversion rights November
Ordinary Shares arising on the conversion of 8.00 a.m. on 6
Subscription Shares allotted and admitted to November
the Official List and to trading on the London
Stock Exchange's main market
Payment date for interim dividend (if any)* 6 November
Record date for entitlements under the the close of business
Proposals and closing of Registers on 6 November
Latest time and date for receipt of forms of 12.00 p.m. on 7
proxy for the Second General Meeting November
Dealings in Ordinary Shares and Subscription 7.30 a.m. on 9
Shares suspended**** November
Second General Meeting 12.00 p.m. on 9
November
Effective date for implementation of the Scheme 9 November
and
commencement of the Company's liquidation
ADMF Ordinary Shares and ADMF Subscription 8.00 a.m. on 10
Shares allotted and admitted to the Official November
List and dealings therein commence on the main
market of the London Stock Exchange
ADMF Ordinary Shares and ADMF Subscription 10 November
Shares issued in uncertificated form under the
Scheme credited to the CREST accounts of
Shareholders entitled thereto
Latest date for despatch of definitive 24 November
certificates in respect of ADMF Ordinary Shares
and ADMF Subscription Shares issued in
certificated form pursuant to the Scheme to the
persons entitled thereto
* if an interim dividend is required to be paid prior to the
Effective Date in order to satisfy the requirements of section
842 of the Taxes Act
** or so soon thereafter as the 2009 annual general meeting shall
have been concluded or adjourned
*** or so soon thereafter as the Ordinary Shareholders' Meeting
shall have been concluded or adjourned
**** if the Scheme becomes effective, it is expected that the listing
of the Ordinary Shares and Subscription Shares will be cancelled
not earlier than 10 November 2010
Capitalised terms used in this announcement will have the same
meaning as in the Circular to be sent to Shareholders today unless
the context requires otherwise.
Copies of the Circular and the Prospectus will be available to view
and download at www.pro-asset.com and will be available on request
from the Company Secretary. Copies are also being been filed with the
UK Listing Authority's Document Viewing Facility, which is situated
at:
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Enquiries:
Cavendish Administration Limited 020 7490 4355
Arbuthnot Securities Limited 020 7012
2000
Alastair Moreton
Hannah Pearce
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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