Notice of AGM


 

TIDMAURR 
 
RNS Number : 1289V 
Aurora Russia Limited 
28 October 2010 
 

28 October 2010 
 
                Aurora Russia Limited ("Aurora" or the "Company") 
 
              Changes to the Manager's incentivisation arrangements 
 
 
Aurora Russia Limited, the AIM-quoted investment vehicle established to make 
equity or equity related investments in small and mid-sized private companies in 
Russia, announces that it has today sent out a notice of Annual General Meeting 
("AGM") to its shareholders (the "Notice") to be held on 3 December 2010. 
 
The Notice contains, inter alia, proposed changes to the composition of the 
Board and to the structure of the Manager's incentivisation arrangements which 
will be implemented subject to the passing of the continuation resolution at the 
AGM (the "Continuation Resolution"). 
 
Composition of the Board 
The Company continues to review its compliance with best corporate governance 
practice, part of which is to review the composition of the Board of Directors. 
The Directors believe that it is right to strengthen the Board where possible. 
The Directors also believe that it is appropriate to reduce the number of 
representatives of the Manager on the Board from two to one. 
Earlier this year, the Directors appointed Alexandr Dumnov to the Board to 
strengthen its understanding of the Russian economic and business environment. 
In addition, the Directors are committed to appointing two new Independent 
Directors with the appropriate skills to represent Shareholders as soon as 
practicable. 
John McRoberts has agreed that, if all directors standing for re-election at the 
Annual General Meeting are elected as directors and the Continuation Resolution 
described in is passed, he will retire as a director immediately after the AGM. 
If one person standing for re-election is not elected, or if the Continuation 
Resolution is not passed, then John McRoberts will not retire as a director at 
the meeting. If John McRoberts retires as a director, he will continue to 
provide his skill and expertise to the Company from within the Manager. 
Following John's retirement, James Cook will remain as the sole representative 
of the Manager on the Board. 
 
Proposed amendments to the Management Agreement 
 
 
The current management agreement (the "Management Agreement") provides that the 
Company shall pay to the Manager a semi-annual management fee of an amount equal 
to 1% of the net asset value of the Company as at each valuation date of 31 
March and 30 September in each calendar year, payable in advance following such 
valuation date. 
Additionally, under the current option deed (the "Option Deed") the Manager has 
an option to acquire new shares ("Option Shares") representing 20% of the share 
capital of the Company (on a fully diluted basis, i.e. post the issuance of the 
Option Shares), such option to be exercised at a price of GBP1.00 per share in 
respect of 18,750,000 Option Shares and at a price of GBP0.40 per share in 
respect of 9,375,000 Option Shares (related to the additional Ordinary Shares 
issued in the December 2009 placing), provided the relevant performance 
condition has been satisfied. 
The Directors believe that if the Continuation Resolution is passed, the Manager 
remains best placed to continue to act as Manager of the Company and to improve 
the performance of the Company's portfolio investments, subject to a reduction 
in the management fees payable to the Manager.  However, the Directors also 
consider that the Manager should be properly incentivised to maximise the value 
of the Company's shares, by being incentivised to sell the Company's investments 
over a sensible period, which would not necessarily be the case if the existing 
option arrangements remain in place. 
Following extensive consultation with the Company's major institutional 
shareholders, it is proposed to put in place a new management incentivisation 
arrangement as set out below: 
New Manager incentivisation arrangement 
Accordingly, if the Continuation Resolution is passed, the Directors and the 
Manager intend to enter into an amended management agreement (the "Amended 
Management Agreement") and to terminate the Option Deed.  The Amended Management 
Agreement would amend the management fees and performance fees payable to the 
Manager as follows: 
(a)        reducing the semi-annual management fee from 1% to 0.75% of the net 
asset value of the Company; 
(b)        replacing the existing performance fee arrangements comprising the 
issue of the Option Shares with performance fees calculated as follows: 
* 2.5% of the value of any disposals realised by the Company would be payable to 
the Manager, calculated on the value of assets of the Company realised up to 
GBP45 million, i.e. GBP0.40 per share (the "2.5% Tranche"); 
* 7.5% of the value of any  disposals realised by the Company would be payable 
to the Manager, calculated on the value of assets of the Company realised 
between GBP45 million and GBP99 million, i.e. GBP0.40 per share to GBP0.88 per 
share (NAV) (the "7.5% Tranche"); and 
* 20% of the value of any disposals realised by the Company would be payable to 
the Manager, calculated on the value of assets of the Company realised over 
GBP99 million, i.e. over GBP0.88 per share (the "20% Tranche"), 
such performance fees to decline by 20% per annum from December 2011 (for the 
2.5% Tranche) and by 20% per annum from December 2012 (for the 7.5% Tranche and 
the 20% Tranche). 
Should the discount of the share price to NAV be less than 20% for a period of 
six months and the Directors wish to make additional investments, then in 
respect of those additional investments the Manager will receive a performance 
fee of 20% of the value of any amounts realised on the disposal of such 
investments in excess of the amounts so invested. 
The Directors consider that this combination of a reduced management fee and 
more achievable performance fee will allow and encourage the Manager to achieve 
better returns for Shareholders. 
Entry into the Amended Management Agreement and termination of the Option Deed 
is classified as a related party transaction under the AIM Rules for Companies 
and the Manager is the related party for the purposes of the Transaction.  The 
Independent Directors, having consulted with the Company's nominated adviser, 
Investec, consider that entry into the Amended Management Agreement and 
termination of the Option Deed is fair and reasonable so far as the Shareholders 
are concerned.  In providing advice to the Independent Directors, Investec has 
taken into account the Independent Directors' commercial assessments. 
 
 
Enquiries: 
 
Aurora Russia Limited 
John McRoberts                      +44 (0) 207 839 7112 
 
Investec Investment Banking 
 
Martin Smith                           +44 (0) 207 597 5970 
Patrick Robb 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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