ARR Aurora Investment Trust Plc

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN,  INTO OR FROM THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction in which the same would be unlawful. Neither this announcement nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.

This announcement contains inside information for the purposes of Article 7 of Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for arranging for the release of this announcement on behalf of Aurora Investment Trust plc is Frostrow Capital LLP, the Company Secretary.

AURORA INVESTMENT TRUST PLC

Proposed combination with Artemis Alpha Trust plc

LEI: 2138007OUWIZFMAGO575

2 September 2024

Introduction

The Board of Aurora Investment Trust plc ("Aurora" or the "Company") is pleased to announce that it has agreed heads of terms with the Board of Artemis Alpha Trust plc ("Artemis Alpha") in respect of a proposed combination of the assets of Artemis Alpha with the assets of Aurora (the "Proposals"). The combination, if approved by each company's respective shareholders, will be effected by way of a scheme of reconstruction and winding up of Artemis Alpha under section 110 of the Insolvency Act 1986 (the "Scheme") and the associated transfer of part of the cash, assets and undertaking of Artemis Alpha to Aurora in exchange for the issue of new ordinary shares in Aurora (the "New Aurora Shares") to shareholders in Artemis Alpha ("Artemis Alpha Shareholders") (altogether the "Proposals").

Following the implementation of the Proposals, the enlarged Aurora will continue to be managed, on the same basis as it is currently, by Phoenix Asset Management Partners Limited ("Phoenix"). Aurora's investment objective and policy will not, therefore, be amended in connection with the Proposals. The Aurora Board will also remain unchanged.

The Proposals will be subject to approval by existing shareholders of Aurora ("Aurora Shareholders") and Artemis Alpha Shareholders, in addition to regulatory and tax approvals.

Highlights of the Proposals

§ Scale and enhanced profile: If no Artemis Alpha Shareholders elect, or are deemed to elect, for the Cash Option, the enlarged Aurora would, on the basis of the Aurora NAV and Artemis Alpha NAV as at 29 August 2024, have net assets of approximately £353 million, equating to an increase of approximately 64 per cent.

§ Enhanced liquidity: The scale of the enlarged Aurora is expected to improve secondary market liquidity for Aurora Shareholders and Artemis Alpha Shareholders.

§ Lower ongoing charges: The enlarged Aurora is expected to benefit from a lower ongoing charges ratio as a result of Aurora's fixed costs being spread over a larger asset base.

§ Manager contribution to costs: Phoenix is willing to make a material cost contribution in respect of the Proposals, set out in further detail below, which is expected to substantially offset the fixed direct transaction costs for Aurora Shareholders.

§ Aurora and Artemis Alpha Shareholder support: Major Aurora Shareholders, representing approximately 31.6 per cent. of Aurora's issued share capital as at 29 August 2024, have expressed support for the Proposals. Likewise, Artemis Alpha Shareholders, representing approximately 31.5 per cent. of Artemis Alpha's issued share capital (excluding Artemis Alpha shares held in treasury) as at 29 August 2024, have expressed support for the Proposals.

§ Overlapping portfolios: Aurora and Artemis Alpha have a number of stocks in common which, as at 29 August 2024, represented approximately 62.5 per cent. and 36.1 per cent. of the respective investment portfolios.

§ Change of name: Conditional on the Scheme becoming effective, Aurora intends to change its name to Aurora UK Alpha plc.

Summary of the Scheme

The Proposals will be effected by way of a scheme of reconstruction of Artemis Alpha under section 110 of the Insolvency Act 1986, resulting in the voluntary winding up of Artemis Alpha and the transfer of part of Artemis Alpha's cash, assets and undertaking to Aurora on a formula asset value ("FAV") to FAV basis.

Under the Scheme, Artemis Alpha Shareholders will be deemed to have elected to receive New Aurora Shares in respect of their holding in Artemis Alpha unless they elect to receive cash in respect of some or all of the Artemis Alpha shares they own (the "Cash Option").

The Cash Option is limited to 25 per cent. of the Artemis Alpha shares in issue (excluding treasury shares). Should total elections for the Cash Option exceed this 25 per cent. threshold, excess elections for the Cash Option will be scaled back into New Aurora Shares on a pro rata basis.

For every Artemis Alpha share validly elected for the Cash Option, Artemis Alpha Shareholders will receive cash equal to Artemis Alpha's Residual NAV multiplied by the percentage of Artemis Alpha Shares accepted for the Cash Option (the "Cash Exit Percentage") less: (i) a discount of 2 per cent. of such amount; and (ii) an illiquidity discount of 20 per cent. of the value of the unquoted part of Artemis Alpha's portfolio that transfers to Aurora pursuant to the Scheme as at the Scheme calculation date (the "Calculation Date") multiplied by the Cash Exit Percentage, then divided by the aggregate number of Artemis Alpha shares validly elected for the Cash Option.

Artemis Alpha's Residual NAV will be calculated as the gross assets of Artemis Alpha as at the Calculation Date, plus the portion of the Phoenix Contribution (as defined below) attributable to Artemis Alpha, minus: (a) the value of the Liquidation Pool (which shall comprise: (i) a provision sufficient to meet any outstanding known liabilities of Artemis Alpha; (ii) a provision sufficient to meet any contingent or unknown liabilities of Artemis Alpha following its entry into liquidation, not expected to exceed £100,000; and (iii) the value of any of Artemis Alpha's unquoted investments that the parties agree will not transfer to Aurora pursuant to the Scheme); and (b) the value of any dividends or other distributions which are declared prior to the Calculation Date but not paid to Artemis Alpha Shareholders nor accounted for in its NAV as at the Calculation Date.

The Proposals will be conditional upon, amongst other things, the approval by Aurora Shareholders of the issue of the New Aurora Shares at a general meeting of Aurora, and the approval of Artemis Alpha Shareholders of the Scheme at the requisite Artemis Alpha general meetings.

Artemis Alpha Shareholders will not qualify for any Aurora dividend with a record date before the date on which the Scheme becomes effective.

Cost contribution

Phoenix has demonstrated its conviction in the combined fund by agreeing to contribute £750,000 towards the costs of the Proposals (the "Phoenix Contribution"). The Phoenix Contribution will be allocated first to pay Aurora's fixed direct costs in connection with the Proposals up to a cap of £500,000, with the balance of the Phoenix Contribution allocated to pay Artemis Alpha's fixed direct costs in connection with the Proposals. The Phoenix Contribution will be reflected in the relevant FAV of each company and it is expected that the Phoenix Contribution will constitute a waiver of Phoenix's future entitlement to a performance fee.

Investment manager

Separate to the Proposals, Kartik Kumar, the lead manager on Artemis Alpha, has accepted an offer from Phoenix to join its investment management team later in the year.

Lucy Walker, Chair of Aurora, commented:

"The Aurora Board is delighted to welcome Artemis Alpha Shareholders who will enter into an investment trust with a similar philosophy and portfolio, and the enlarged trust will benefit all shareholders through lower fees and better liquidity."

For further information please contact:

Enquiries:

City Code

In accordance with customary practice for schemes of reconstruction, The Panel on Takeover and Mergers has confirmed that the City Code on Takeovers and Mergers is not expected to apply to the combination of Aurora and Artemis Alpha.

Important Information

The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material contained in this announcement is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, any proposals referred to herein are subject to revision and amendment. 

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of such jurisdictions.

The New Aurora Shares have not been, and will not be, registered under the US Securities Act of 1933 (as amended) (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered or sold in the United States or to, or for the account or benefit of, US persons absent registration or an exemption from registration under the Securities Act. Moreover, the New Aurora Shares have not been, nor will they be, registered under the applicable securities laws of Australia, Canada, Japan, New Zealand, the Republic of South Africa, or any member state of the EEA (other than any member state of the EEA where the shares are lawfully marketed). Further, Aurora is not, and will not be, registered under the US Investment Company Act of 1940, as amended. 

The value of shares and the income from them is not guaranteed and can fall as well as rise due to, inter alia, stock market and currency movements. When you sell your investment you may get back less than you originally invested. Figures refer to past performance and past performance should not be considered a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations.

This announcement contains statements about the Company that are or may be deemed to be forward looking statements. Without limitation, any statements preceded or followed by or that includes the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance of the negative thereof, may be forward looking statements. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding financial position, strategy, plans, proposed acquisitions and objectives of Aurora or the enlarged Aurora, are forward looking statements.

These forward looking statements are not guarantees of future performance. Such forward looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statement. Due to such uncertainties and risks, readers should not rely on such forward looking statements, which speak only as of the date of this announcement, except as required by applicable law. Subject to their respective legal and regulatory obligations, both Aurora and Phoenix expressly disclaim any obligations or undertaking to update or revise any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based unless required to do so by law or any appropriate regulatory authority, including FSMA, the Listing Rules, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules, the Prospectus Regulation and MAR.

None of Aurora, Phoenix or any of their respective affiliates, accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to any of them, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. Each of Aurora, Phoenix and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.