US Special Opportunities Trust plc (the "Company")
The Company has today issued a circular to shareholders proposing tender offers
by Cenkos Securities plc for all of the issued ZDP Shares and for up to 50 per
cent. of the issued Income Shares, the extension of the life of the Company,
the adoption of new articles of association, a change to the Company's
investment objective and policy, authority to make further repurchases of
Income Shares and Capital Shares and a change to the Company's name and revised
management terms.
Introduction
On 29 February, the Company announced the resignation of Lord Lang of Monkton,
Ernest Fenton and William Vanderfelt from the Board and the appointment of
Duncan Abbot, Rory Macleod and Andrew Pegge in their stead as new Directors of
the Company. Stephen White has continued as a Director of the Company. On 6
March 2008, the Company announced that the new Board of the Company had met for
the first time and considered, with its advisers, the composition and valuation
of the Company's portfolio taking into account the impending requirement to
wind-up the Company on 31 May 2008. In essence, the Board concluded that,
taking into account the latest net asset values of the Income Shares and
Capital Shares (being 93.35p (taking account of the costs of the Proposals but
not including any stamp duty payable on the repurchase of Tender Shares by the
Company) and nil p respectively (taking account of the costs of the Proposals
but not including any stamp duty payable on the repurchase of Tender Shares by
the Company) as at 28 April 2008, the latest practicable date prior to
publication of the circular) it was in the interests of the Income Shareholders
and Capital Shareholders to extend the life of the Company in circumstances
where the ZDP Shares were entitled to be repaid their full final capital
entitlement.
On 28 March 2008, the Board announced provisional end of life proposals
following a detailed review of the Company's portfolio. Subsequent to that
announcement, the Board had further discussions with a number of both Income
Shareholders and Capital Shareholders resulting in changes to the proposals as
announced on 28 March 2008. On 4 April 2008, the Board announced the revisions
to the end of life proposals.
In summary, the details of the Proposals and the Management Proposals are
designed to:
* provide for the continuation of the Company for an additional three years
with a new investment objective and policy;
* provide for a Tender Offer for all of the issued ZDP Shares at the ZDP
Share Tender Price, being 182.608201p, equal to the final entitlement of
ZDP Shareholders on 31 May 2008 under the Articles of Association;
* provide for a Tender Offer for up to 50 per cent. of the issued Income
Shares at the Income Share Tender Price, being 100p, equal to the final
capital entitlement of Income Shareholders on 31 May 2008 under the
Articles of Association;
* provide for the adoption by the Company of New Articles of Association
which amongst other things amend the rights attached to Income Shares,
Capital Shares and ZDP Shares and remove the requirement for the Company to
propose a wind-up resolution on 31 May 2008 as well as updating the
Company's constitution to reflect recent changes in legislation;
* provide for a change of name of the Company to ``Global Special
Opportunities Trust PLC'' to reflect the constitution of the portfolio and
the proposed revised investment objective and policy of the Company;
* provide the Board with powers, following the Tender Offers, to buy back
Income Shares and/or Capital Shares; and
* provide for revised management terms the purpose of which is to remunerate
and incentivise the Investment Managers and the Investment Advisor
following the implementation of the Proposals.
This announcement sets out the background to and reasons for the Proposals and
the Management Proposals and why the Board is unanimously recommending that
shareholders vote in favour of the resolutions to be proposed at the ZDP Share
Class Meeting, the Income Share Class Meeting, the Capital Share Class Meeting
and the Resolution and Management Resolution to be proposed at the First
Extraordinary General Meeting to be held on 30 May 2008. In the event that any
of the resolutions is not passed at the Class Meetings or that the Resolution
is not passed at the First EGM, a resolution will instead be proposed at the
Second EGM to wind the Company up voluntarily. Weighted voting rights will
apply at the Second EGM, pursuant to Article 162 of the Articles of
Association, which will have the effect of ensuring that the Company will be
wound up in the event that the Proposals do not become unconditional. The
Management Resolution is conditional upon the passing of the Resolution.
Furthermore, in the event that the Proposals are approved by Shareholders but
either of the Tender Offers fails to become unconditional, new provisions have
been included in the proposed New Articles of Association requiring the Company
to be wound-up at a general meeting to be held on 30 June 2008.
Background to the Proposals and the Management Proposals
The Company was launched in April 2001 with a planned life until 31 May 2008,
on which date (or, as 31 May 2008 falls on a Saturday, the preceding business
day, being 30 May 2008) the Directors are required under the Articles of
Association to convene an extraordinary general meeting and propose a
resolution requiring the Company to be wound up voluntarily (unless the
Directors have previously been released from this obligation by the Company's
Shareholders). The limited life of the Company was designed to ensure that all
Shareholders could realise the net asset value (after liquidation costs) of
their Shares on 31 May 2008.
The rights of the Shares to a return of capital on a winding-up of the Company
on 31 May 2008 can be summarised as follows:-
(i) first, the Income Shareholders are entitled to an amount equal to the
Company's revenue reserves;
(ii) second, the ZDP Shareholders are entitled to a final capital entitlement
of 182.608201p on 31 May 2008;
(iii) third, the Income Shareholders are entitled to an amount per Income Share
equal to 85p as increased from 30 April 2001 up to 31 May 2008 so as to give a
final capital entitlement of 100p on 31 May 2008; and
(iv) lastly, the Capital Shareholders are entitled to any surplus assets of the
Company.
The Board considered the following factors in formulating the Proposals with
its advisers. A material percentage of the Company's portfolio faces
significant liquidity constraints; several investments have no liquidity and
are tradeable only on a matched bargain basis. If the Investment Managers, the
Investment Advisor or a liquidator were required to realise illiquid
investments for the purposes of an impending liquidation this may mean that the
proceeds to the Company would be less than if the Investment Managers and/or
the Investment Advisor had more time within which to realise those investments.
Similarly the Board is also concerned that current market conditions may not
offer the best backdrop against which to make realisations of some of the
investments.
The Proposals
In structuring the Proposals, the Board has sought to provide a mechanism to
continue the Company, whilst also recognising that ZDP Shareholders should be
entitled to realise their investment in the Company and Income Shareholders may
wish to realise part or all of their investment in the Company for cash equal
to their respective final capital entitlements on or around 31 May 2008. For
this reason, the Board is proposing the ZDP Share Tender Offer for all of the
issued ZDP Shares and, with a view to maintaining a viable portfolio size, the
Income Share Tender Offer for up to 50 per cent of the issued Income Shares. No
tender offer is being offered to the Capital Shareholders because, as at the
date of the circular, the Net Asset Value per Capital Share is nil and certain
significant Income Shareholders have indicated to the Board that they would not
support any proposals affording Capital Shareholders an opportunity to tender
their Capital Shares at this time.
The Board has been in extensive discussions with its advisers as well as with
representatives of significant holders of the Income Shares and the Capital
Shares. The Proposals include provisions whereby the Company's life will be
extended for 3 years, half of the issued Income Shares may be tendered for
repurchase at �1 per Income Share, the final capital entitlement of the Income
Shares will be increased to 120.82p per Income Share on 31 May 2011 and the
ongoing investment policy of the Company will be amended so that it is invested
in accordance with the provisions referred to below.
In formulating these Proposals the Board has sought to strike a fair balance
between the interests of each class of Share taking into account their current
financial position as well as their expectations and risk in the future.
Whilst there is no guarantee that the Income Shareholders or the Capital
Shareholders will receive more money under the Proposals, the Directors believe
that the Proposals are fair and reasonable as far as each of those classes of
Share is concerned.
Consequences of the Proposals
For all Shareholders
The Proposals will enable all ZDP Shareholders to receive an amount in cash
equal to their final capital entitlement per share of 182.608201p subject to
them duly accepting the ZDP Share Tender Offer. Income Shareholders will be
entitled to tender up to a Basic Entitlement per Income Shareholder equal to 50
per cent of their holding. Capital Shareholders will not be entitled to tender
Capital Shares but may benefit from the continuation of the Company.
For ZDP Shareholders
ZDP Shareholders are being invited to tender all of their ZDP Shares to Cenkos
who will, as principal, purchase the ZDP Shares tendered at the ZDP Share
Tender Price and, following the completion of those purchases, sell them to the
Company at the ZDP Share Tender Price by way of an on-market transaction.
Further details of the ZDP Share Tender Offer are set out below. ZDP
Shareholders should note that, in the event that Proposals are approved by
Shareholders, the ZDP Shares will be delisted by no later than 31 July 2008. In
addition, under the New Articles of Association
i. ZDP Shareholders will have no further entitlement to assets of the Company
in excess of their final capital entitlement per ZDP Share as at 30 May
2008, namely 182.608201p per ZDP Share;
ii. the class voting rights currently attached to the ZDP Shares will be
significantly reduced;
iii. there can be no guarantee that Cenkos and/or the Company will be able to
take steps to repurchase any ZDP Shares and accordingly ZDP Shareholders
may have to wait until 2011 before receiving any return of capital on a
liquidation of the Company; and
iv. the Company will be able to effect a reduction of capital of issued ZDP
Shares without the consent of ZDP Shareholders.
Whilst the Company may consider further repurchases of unlisted ZDP shares from
time to time, there can be no guarantee that the Company will effect such
repurchases and so ZDP Shareholders that fail to tender their ZDP Shares under
the ZDP Share Tender Offer should be prepared to hold their unlisted ZDP Shares
until the liquidation of the Company.
For Income Shareholders
Income Shareholders (other than certain Overseas Shareholders) are being
invited to tender up to 50 per cent. of their Income Shares (with tenders in
excess of an Income Shareholder's Basic Entitlement not being satisfied) to
Cenkos who will, as principal, purchase the Income Shares tendered at the
Income Share Tender Price and, following the completion of those purchases,
sell them to the Company at the Income Share Tender Price by way of an
on-market transaction. Further details of the Income Share Tender Offer are set
out below.
If the Proposals are approved by Shareholders, the entitlement of Income
Shareholders on 31 May 2011 will be increased to 120.82p per Income Share. This
equates to the payment in full of their entitlement to 100p on 31 May 2008 (as
envisaged in the Company's original prospectus) and an annualised accrual rate
of approximately 6.5 per cent from 31 May 2008 to 31 May 2011.
For Capital Shareholders
Capital Shareholders are entitled to receive any capital remaining on 31 May
2008 after the prior ranking entitlements of creditors (if any), the ZDP
Shareholders and the Income Shareholders.
If the Proposals are approved by Shareholders, the Capital Shareholders will be
entitled to all the surplus assets of the Company on 31 May 2011 following the
repayment of creditors, any remaining ZDP Shares and the Income Shares.
The ZDP Share Tender Offer
There is no maximum number of ZDP Shares which may be purchased under the ZDP
Share Tender Offer.
ZDP Shareholders are being invited to tender all of their ZDP Shares to Cenkos
who will, as principal, purchase the ZDP Shares tendered at the ZDP Share
Tender Price and, following the completion of those purchases, sell them to the
Company at the ZDP Share Tender Price by way of an on-market transaction. All
ZDP Shares which the Company acquires from Cenkos following the ZDP Share
Tender Offer will be cancelled on acquisition. All transactions will be carried
out on the London Stock Exchange.
For the purposes of the ZDP Share Tender Offer, the ZDP Share Tender Price will
be 182.608201p, equal to the final entitlement of ZDP Shareholders on 31 May
2008 under the Articles of Association.
Options for ZDP Shareholders
ZDP Shareholders are strongly recommended to seek financial advice from an
appropriately qualified independent adviser authorised pursuant to the
Financial Services and Markets Act 2000.
ZDP Shareholders are entitled to tender all of their ZDP Shares under the ZDP
Share Tender Offer. ZDP Shareholders are not technically obliged to tender any
shares under the ZDP Share Tender Offer. However, ZDP Shareholders should note
that, in the event that the Proposals are approved by Shareholders, the ZDP
Shares will be delisted by no later than 31 July 2008. In addition, under the
New Articles of Association
(i) ZDP Shareholders will have no further entitlement to assets of the Company
in excess of their final capital entitlement per ZDP Share as at 30 May 2008,
namely 182.608201p per ZDP Share;
(ii) the class voting rights currently attached to the ZDP Shares will be
significantly reduced;
(iii) there can be no guarantee that Cenkos and/or the Company will take steps
to repurchase any ZDP Shares and accordingly ZDP Shareholders may have to wait
until 2011 before receiving any return of capital on a liquidation of the
Company; and
(iv) the Company will be able to effect a reduction of capital of issued ZDP
Shares without the consent of ZDP Shareholders.
Whilst the Company may consider further repurchases of unlisted ZDP Shares from
time to time, there can be no guarantee that the Company will effect such
repurchases and so ZDP Shareholders that fail to tender their ZDP Shares under
the ZDP Share Tender Offer should be prepared to hold their unlisted ZDP Shares
until the liquidation of the Company.
The Income Share Tender Offer
The key points of the Income Share Tender Offer are as follows:
* the Income Share Tender Offer is for up to 50 per cent. of the Company's
issued Income Share capital;
* Income Shareholders (other than certain Overseas Shareholders) may tender
up to 50 per cent. of their Income Shares (with tenders in excess of an
Income Shareholder's Basic Entitlement not being satisfied); and
* the Income Share Tender Price will be 100p, equal to the final entitlement
of Income Shareholders on 31 May 2008 under the Articles of Association.
Options for Income Shareholders
Income Shareholders can choose:
* to continue in full their investment in the Company;
* or save for certain Overseas Shareholders, to tender up to 50 per cent of
their Income Shares for purchase and to receive cash in consideration of
such purchase at an amount equal to �1 per Income Share.
Income Shareholders should bear in mind that the net asset value per Income
Share as at 28 April 2008 (being the latest practicable date prior to
publication of the circular) is 93.35p (taking account of the costs of the
Proposals but not including any stamp duty payable on the repurchase of the
Tender Shares by the Company). Similarly, Income Shareholders may need to wait
until 2011 before a further opportunity arises for realising their investment
in the Company otherwise than through a disposal in the market.
Income Shareholders should be aware that a number of the material holders of
the Income Shares have indicated to the Company that they intend to tender
their full 50 per cent entitlement as part of the Income Share Tender Offer.
Income Shareholders are strongly recommended to seek financial advice from an
appropriately qualified independent adviser authorised pursuant to the
Financial Services and Markets Act 2000.
Conditions of the Tender Offers
The Tender Offers are being made by Cenkos who will, as principal, purchase the
Tender Shares tendered by means of on-market purchases and immediately upon
completion of those purchases sell them to the Company by means of an on-market
transaction.
The Company has entered into a Repurchase Agreement dated 2 May 2008 with
Cenkos. Under this agreement, Cenkos is legally bound to sell to the Company by
way of market purchase any ZDP Shares and Income Shares acquired by it under
the Tender Offers at the respective price per Share paid by Cenkos for the
Shares under the Tender Offers.
Each Tender Offer is subject to certain conditions, and may be suspended or
terminated in certain circumstances. Shareholders should note that completion
of each Tender Offer is conditional, amongst other things, on the approval of
ZDP Shareholders, Income Shareholders and Capital Shareholders by extraordinary
resolution at separate Class Meetings and by Shareholders by special resolution
at the First EGM. It is anticipated that settlement of the consideration for
Tender Shares purchased under the Tender Offers will occur approximately five
business days after all of the conditions of each Tender Offer having been
satisfied or waived.
None of the Directors or Cenkos is able to make any recommendation to
Shareholders as to whether or not they should tender ZDP Shares and/or Income
Shares in the Tender Offers. Whether Shareholders decide to tender their ZDP
Shares and/or Income Shares will depend, among other things, on their view of
the Company's prospects and their own individual circumstances, including their
tax position. Shareholders who are in any doubt as to the action they should
take should consult an appropriate independent professional adviser.
Funding for the Repurchase Agreement
Pursuant to the Companies Act 1985, a company may, with the appropriate
authority from its shareholders, purchase its own shares. The Company is
seeking authority from Shareholders to repurchase ZDP Shares and Income Shares
so that the Tender Offers can be implemented. By an order of the Court dated 23
May 2001, the Company's share premium account was cancelled so creating a
distributable reserve of �62,705,000 out of which ZDP Shares and Income Shares
may be purchased. In addition, the liquidation of some of the Company's
existing investments will create sufficient cash to permit a purchase of all of
the Company's issued ZDP Shares and up to 50 per cent. of the Company's issued
Income Shares pursuant to the Tender Offers.
As at 25 April 2008 (the latest practicable date prior to the publication of
the circular), approximately 53.7 per cent. of the Company's assets were held
in cash or readily realisable securities. The Investment Managers have also
been instructed by the Board to realise, and to procure that the Investment
Advisor realises, some of the Company's investments for cash through sales or
redemptions of those investments in order to fund acceptances of the Tender
Offers.
Investment Objective and Investment Policy
Investment Objective
The Company's investment objective has been to seek to provide its Shareholders
with capital growth and high income through investing in equities and
convertibles issued by US smaller companies and UK high yield securities,
primarily comprising the shares of split capital and high income investment
trusts.
Under the Proposals, it is proposed that the investment objective will be
changed. The new objective will be for the portfolio to be managed to provide
the Shareholders with capital growth, for the Income Shareholders to be repaid
their final adjusted capital entitlement on 31 May 2011 of 120.82p per Income
Share and for the portfolio to be managed so as to provide the Capital
Shareholders with a cash return on or shortly after 31 May 2011. The Directors
will seek to distribute substantially all of the net revenue to Income
Shareholders by way of dividend although this is not expected to be a material
amount.
Existing Investment Policy
The original investment policy of the Company envisaged that approximately 60
per cent. of the initial assets would be invested in a US growth portfolio
comprising investments in public and private US smaller companies. It was
intended that the balance of the portfolio would be invested in an income
portfolio invested in a diversified portfolio of securities of split capital
and high income investment trusts and companies, reverse convertible bonds and
fixed interest securities. In light of the proposed revised investment
objective, it is proposed to amend the investment policy so that there will no
longer be an income generating portfolio of any significant size and instead
the Company's assets will be invested in a portfolio designed to achieve
capital growth. Due to the material change being proposed in the Company's
investment objective and policy, Shareholders are being asked to approve such
changes as part of the Resolution being proposed at the First Extraordinary
General Meeting.
The attention of Shareholders is drawn to the risk factors relating to the
Company. Risk factors are included in relation to the Income Portfolio although
the Income Portfolio is expected to be a small proportion of the gross assets
of the Company. In addition, Income Shareholders are reminded that in assessing
whether to tender their Income Shares pursuant to the Income Share Tender Offer
the net asset value per Income Share on 28 April 2008 (being the latest
practicable date prior to publication of the circular) was 93.35p (taking
account of the costs of the Proposals but not including any stamp duty payable
on the repurchase of Tender Shares by the Company) and that there can be no
guarantee that the Company will meet its revised investment objective as set
out above.
Investment Policy
The revised investment policy is proposed to be as follows:
Asset allocation
The investment policy of the Company will be to achieve the investment
objective through investment in equity and equity-related instruments which
will be predominantly securities domiciled, listed, quoted or traded in North
America (some of these securities may however have an underlying business that
is not in North America) but with the ability to invest up to 25 per cent of
the gross assets of the Company (at the time of investment) opportunistically
in listed or unlisted equity or debt securities issued by issuers situated
anywhere in the world. The portfolio will be managed on the basis that the
Company is fully invested in equity and equity-related instruments to the
extent practicable for the remainder of its life (subject to the recommendation
of the Investment Managers and the Investment Advisor who may wish to increase
the cash holding due to market conditions). Liquidity will be managed so that
the costs of realizing the portfolio (including market impact costs) are
reduced to the extent practicable as the proposed new end of the life of the
Company approaches. It is expected that liquidation of investments, so that a
mixture of liquid securities and cash are handed to the liquidator, will take
place in the last three months of the proposed new life of the Company. Up to
40 per cent of the gross assets of the Company (measured at the time of
investment) may be invested in unquoted securities. ``Unquoted securities'' for
these purposes means those investments which are not listed or quoted or traded
on a recognised stock exchange or another exchange available and used by
professional investors.
The Company may invest in bonds, warrants, contracts for difference, other
forms of derivative investment (for the purpose of efficient portfolio
management), bank debt or other debt securities although this will not amount
to more than 20 per cent of the gross assets of the Company at the time of
investment.
Risk Diversification
The revised investment policy would provide the Company with a global mandate
albeit with a particular emphasis on North America. The Company will be managed
with a view to maintaining an adequate spread of investment risk in terms of
the concentration and in terms of size of its investments. Except in the case
of cash deposits awaiting investment or pending any winding-up of the Company,
the Company will not lend to any one company or group, or invest in the
securities of any one company or group, more than 20 per cent of the value of
its gross assets (at the time the loan or investment is made).
The Company will not invest more than 10 per cent. in aggregate of the value of
its gross assets at the time of a new investment, in other investment companies
or investments trusts which are listed on the Official List (except to the
extent that those investment companies or investment trusts have stated
policies to invest no more than 15 per cent. of their gross assets in other
investment companies or investment trusts which are listed on the Official
List).
Borrowings
The Company may use gearing and the Directors reserve the right to borrow up to
a maximum of 25 per cent of the gross assets (at the time of drawdown).
Change of Company's name
In light of the proposed change to the Company's investment policy, it is
proposed to change the Company's name to better reflect the revised policy. A
special resolution is being proposed at the First EGM to change the Company's
name to ``Global Special Opportunities Trust PLC''.
Revised Management Arrangements
The Company's Investment Managers are Premier Asset Management (Guernsey)
Limited and Premier Fund Managers Limited. RENN Capital Group, Inc. acts as
Investment Advisor for the Growth Portfolio.
Under the current management agreements between the Company and the Investment
Managers, the Investment Managers are entitled to a fixed management fee equal
to 0.0417 per cent. per month of the gross assets less current liabilities of
the Income Portfolio plus 0.125 per cent. per month of the gross assets less
current liabilities of the Growth Portfolio. In addition Premier Fund Managers
Limited is entitled to an annual performance fee equal to 10 per cent. of the
amount by which the gross assets less current liabilities of the Company as a
whole exceed either the initial gross assets increased by a per annum compound
rate of 5.5 per cent or, if a performance fee has previously been paid, the
gross assets less current liabilities by reference to which that fee was paid,
increased at an annual compound rate of 5.5 per cent of their fees the Managers
have contracted to pay to the Investment Advisor, 60 per cent of the fixed fee
attributable to the Growth Portfolio as well as 60 per cent of the performance
fee. The management contracts are terminable by one year's written notice
although they would terminate automatically if the Company were to enter
liquidation pursuant to the winding-up resolution which will be proposed in the
event that the Proposals are not approved.
The Company has been in discussions with the Investment Managers and the
Investment Advisor with a view to agreeing new remuneration and termination
terms with them in the event that the Company continues in existence. The Board
has been keen to ensure that they were appropriately incentivised to meet the
Company's proposed new investment objective. In particular, it should be noted
that there would be little prospect of a performance fee being paid to them
under the current arrangements.
On 2 May 2008 the Company entered into side letters to each of the Income
Portfolio Management Agreement, the Growth Portfolio Management Agreement and
the Investment Advisory Agreement, conditional upon the passing of the
Resolution and the ordinary resolution at the First EGM, pursuant to which the
management fee, performance fee and termination provisions under such
agreements will be revised to the following effect:
(i) Premier Fund Managers Limited shall be paid a monthly fee (which coupled
with the fee in (ii) below shall be referred to as the ``Base Fee'') of 0.0625
per cent. of the gross assets less the current liabilities of the Income
Portfolio payable in arrears on the last business day of each month in each
year, with effect from 1 June 2008. It is not expected that the Company will
have significant assets in the Income Portfolio;
(ii) Premier Asset Management (Guernsey) Limited shall be entitled to receive
from the Company a monthly fee of 0.0625 per cent. of the gross assets less the
current liabilities of the Growth Portfolio payable in arrears on the last
business day of each month in each year, with effect from 1 June 2008;
(iii) Premier Asset Management (Guernsey) Limited shall be entitled to a
performance fee (a
``Performance Fee'') which shall be payable in respect of financial years
ending on or after 31 May 2009 equal to 15 per cent. of the amount by which the
net asset value per Income Share (assuming and deeming, for the purposes of
this calculation only, that the Income Shares do not have a capped final
capital entitlement) exceeds either: (a) �1.00 as increased from 1 June 2008 at
an annual rate of 8 per cent per annum (if no Performance Fee has been paid
prior to the date of such calculation); or (b) the net asset value per Income
Share (assuming and deeming, for the purposes of this calculation only, that
the Income Shares do not have a capped final capital entitlement) by reference
to which the Performance Fee was last paid and prior to payment of such fee (if
a Performance Fee has previously been paid) as increased at an annual rate of 8
per cent per annum. Any performance fee to be paid by the Company in any
performance period will be capped at 4.99 per cent of net assets. Any
unrewarded out performance (as a result of the cap) will be carried forward.
Such carried forward unrewarded out performance will only be payable in future
periods to the extent that it does not result in a performance fee payment
exceeding 4.99 per cent of net assets in any performance period;
(iv) Premier Asset Management (Guernsey) Limited will pay or procure payment of
60 per cent of the Base Fee attributable to the growth portfolio and 70 per
cent. of the Performance Fee to RENN Capital Group, Inc. under the terms of the
revised Investment Advisory Agreement;
(v) Premier Fund Managers Limited will be paid a fee of �30,000 (plus any
applicable VAT) on 1 June 2008 for its services in respect of the Proposals;
and
(vi) the management agreements will be terminable on 12 months' notice, such
notice not to expire prior to 31 May 2010 provided always that they will
terminate automatically upon a winding-up at the Company on 31 May 2011.
The Investment Managers are related parties to the Company under the Listing
Rules. Consequently the revised management terms contained in the side letters
referred to above (the ``Side Letters'') are subject to approval by
Shareholders. Accordingly, at the First EGM an ordinary resolution will be
proposed to approve the Side Letters. As required by the Listing Rules, each of
the Investment Managers will not vote on the relevant resolution and each
Investment Manager has undertaken to take all reasonable steps to ensure that
its associates will not vote on the relevant resolution at the First EGM.
Interim dividend
In addition to the two interim dividends which have already been declared, your
Board intends to declare and pay a third interim dividend prior to completion
of the Proposals. A further announcement relating to this dividend will be made
in due course.
Amendments to the Articles of Association
In order to implement the Proposals, the approval of Shareholders is required
and certain amendments must be made to the Articles of Association. Two such
amendments are the alteration of the winding-up date of the Company from 31 May
2008 to 31 May 2011 and the increased payment to Income Shareholders on the
revised winding-up date. The Resolution to be proposed at the First EGM
contains provisions whereby New Articles of Association would be adopted by the
Company containing the proposed amendments.
A copy of the full terms of the proposed New Articles of Association is
available for inspection at the Company's registered office from today until
the close of the First EGM and at the First EGM for at least 15 minutes prior
to and during the meeting.
Share Repurchases
The Resolution to be proposed at the First EGM also seeks the approval of
Shareholders to permit the Board, following completion of the Tender Offers, to
effect repurchases of up to 14.99 per cent of each of the issued Income Shares
and Capital Shares.
If the Resolution is passed, it will empower the Company to make market
purchases on the London Stock Exchange at a price per Income Share and per
Capital Share respectively of not more than the higher of:
(a) five per cent above the average of the middle market quotations for the
respective shares during the five business days preceding any such purchase;
and
(b) the higher of:
(i) the price of the last independent trade in the respective shares; and
(ii) the highest current independent bid relating thereto.
The authority to make market purchases will only be utilised if the Board
believes that purchases of either Income Shares or Capital Shares will be in
the best interests of the Company and Shareholders as a whole. In considering
whether to exercise the authority to make market purchases, the Board will take
into account both the longer term investment opportunities available to the
Company and any discount at which the Shares are trading in the market relative
to their net asset value.
The authority to make market purchases, if granted, will expire on 30 May 2009
or, if earlier, at the conclusion of the annual general meeting of the Company
in 2009. Shares purchased by the Company pursuant to the authority to make
market purchases will be cancelled.
Taxation consequences of the Proposals
The Directors have been advised that the Proposals should not affect the
eligibility of the Company for approved investment trust status.
A UK resident or ordinarily resident Shareholder who sells ZDP Shares and/or
Income Shares under the Tender Offers in the market to a market participant
acting as principal should be treated, for the purposes of UK taxation, as
though the Shareholder had sold them in the normal way to a third party.
The above information on the taxation consequences of the disposal of ZDP
Shares and/or Income Shares is based on the law and practice currently in force
in the United Kingdom. It may not be applicable to certain Shareholders
including dealers in securities and Shareholders who are not beneficial owners.
If any Shareholder is in doubt as to his taxation position, he is strongly
recommended to consult a professional adviser without delay.
Expenses
The costs and expenses incurred in relation to the Proposals including
financial advice and other professional advice but excluding stamp duty payable
by the Company on the acquisition of its ZDP Shares and Income Shares pursuant
to the Tender Offers, are estimated to amount to �420,000 exclusive of VAT.
Those costs and expenses will be apportioned 50 per cent to capital and 50 per
cent to income. In addition, stamp duty at the rate of 0.5 per cent will be
payable by the Company on the purchase of Shares purchased by Cenkos under the
Tender Offers. Stamp duty costs will be charged to capital.
Delisting of ZDP Shares
The Board believes that there is no benefit in maintaining a listing of the ZDP
Shares following the ZDP Share Tender Offer. Accordingly the Company will make
arrangements for the listing of the ZDP Shares on the Official List to be
cancelled with effect from 31 July 2008.
Similarly the Board believes that, following the Tender Offers and the
implementation of the new investment policy and objective, there is no benefit
in maintaining the arrangements whereby the Income Shares and Capital Shares
trade as a Unit. Accordingly the Company will make arrangements so that the
Income Shares and Capital Shares no longer trade as a Unit. A further
announcement confirming these arrangements will be made in due course.
Under Section 832 of the Companies Act 2006, an investment company may make
distributions by way of dividend out of its accumulated, realised revenue
profits if it complies with the conditions set out in that section. One of the
conditions provides that the Company's shares must be listed. In the event that
some ZDP Shares remain in issue and, on the assumption that the reference in
Section 832 to the Company's shares refers to all of its share classes, the
Company would be precluded from paying dividends in reliance on Section 832.
This may make it more difficult for the Company to pay dividends in the future
although it is not anticipated that future dividends will be significant.
Action to be taken by Shareholders
The Proposals are subject to Shareholder approval at the ZDP Share Class
Meeting, the Income Share Class Meeting, the Capital Share Class Meeting and at
the First EGM.
The Resolution seeks the approval of Shareholders for the Proposals being:-
(i) the authority to repurchase all of the ZDP Shares at the ZDP Share Tender
Price so as to implement the ZDP Share Tender Offer and any further repurchases
prior to the delisting of the ZDP Shares;
(ii) the authority to repurchase up to 50 per cent of the Income Shares at the
Income Share Tender Price so as to implement the Income Share Tender Offer;
(iii) following completion of the Tender Offers, the authority to repurchase up
to 14.99 per cent of the Income Shares and the Capital Shares then in issue;
(iv) the adoption of New Articles of Association of the Company;
(v) the approval of the revised investment objective and policy of the Company;
and
(vi) the change of the Company's name.
In addition and conditional upon the passing of the Resolution, Shareholders
are being asked to approve by ordinary resolution the Management Proposals.
Under the Articles of the Company, two Shareholders entitled to attend and to
vote on the business to be transacted, each being a member or a proxy for a
member or a duly authorised representative of a corporation which is a member
shall constitute a quorum for each of the First EGM and the Second EGM. The
quorum requirement for each Class Meeting is not less than two persons holding
or representing by proxy at least one-third of the nominal amount paid up on
the issued shares of the class.
The resolutions to be proposed at the Class Meetings and the Resolution to be
proposed at the First EGM require not less than 75 per cent. of Shareholders
voting to vote in favour to be passed. The ordinary resolution to be proposed
at the First EGM requires more than 50 per cent of Shareholders voting to vote
in favour to be passed.
In the event that the Second EGM is convened, the resolution to be proposed at
the Second EGM requires not less than 75 per cent of Shareholders voting to
vote in favour to be passed although the weighted voting rights attached to the
shares voting in favour at this meeting mean that it would be passed.
Due to the nature of the Proposals and the attendant resolutions, the following
entitlements to voting apply in relation to the Class Meetings, the First EGM
and Second EGM:-
First EGM
At this meeting each of the ZDP Shareholders, Income Shareholders and Capital
Shareholders is entitled to vote on the special resolution and the ordinary
resolutions which are being proposed save that the Investment Managers and
their associates shall not vote any Shares they own in respect of the ordinary
resolution. On a poll each ZDP Shareholder and Income Shareholder present in
person or by proxy or by a duly authorised representative shall have one vote
per ZDP Share or Income Share respectively. Each Capital Shareholder so present
shall have such number of votes in respect of every Capital Share held by him
as will result in all of the Capital Shares having the same number of votes as
are attached to all of the issued Income Shares.
Class Meetings
Income Shareholders will have the same entitlement to vote at the Income Share
Class Meeting as for the First EGM. On a poll, each Capital Shareholder shall
have one vote per Capital Share at the Capital Share Class Meeting.
ZDP Shareholders will have the same entitlement to vote at their Class Meeting
as the First EGM save that weighted voting rights will apply to their Class
Meeting. As the Proposals enable the holders of the ZDP Shares to receive an
amount in cash not less than that to which the Directors estimate that such
holders would be entitled on a winding up of the Company in accordance with the
current Articles of Association on 31 May 2008, and as the Proposals are
recommended by the Directors and considered by Cenkos, to be fair and
reasonable, the provisions of Article 6.2.3 apply; these provide that the ZDP
Shareholders present in person or by proxy or (if incorporations) by duly
authorised representatives at the Class Meeting for ZDP Shareholders shall be
entitled to vote and those who vote in favour of the resolution shall
collectively have such total number of votes on a poll as is one more than the
number of votes which are required to be cast on such poll for the resolution
to be carried. Accordingly, it is extremely likely that the extraordinary
resolution be proposed at the Class Meeting for ZDP Shareholders will be
carried.
Second EGM
Income, Capital and ZDP Shareholders are all entitled to vote at this EGM in
the same way as for the First EGM. However, weighted voting rights apply under
the Articles so that the resolution proposed at the meeting will be carried
regardless of how Shareholders vote.
Recommendation and voting intentions
The Board, which has received financial advice from Cenkos, considers that the
Proposals and the Management Proposals are in the best interests of
Shareholders as a whole. Accordingly, the Board unanimously recommends
Shareholders to vote in favour of the resolutions to be proposed at the Class
Meetings and the First EGM. In providing its advice to the Board, Cenkos has
relied upon the Directors' commercial assessment of the Proposals.
The Board considers the Management Proposals to be fair and reasonable so far
as the Shareholders are concerned and have been so advised by Cenkos as an
independent financial adviser. In giving that advice, Cenkos has taken into
account the Board's commercial assessments of the Management Proposals.
The Directors intend to vote in favour of the resolutions to be proposed at the
Class Meetings and the resolutions to be proposed at the First EGM in respect
of their entire beneficial shareholdings of 5,925,000 Income Shares (in
aggregate representing approximately 11.93 per cent. of the total number of
issued Income Shares in the Company) and 4,164,000 Capital Shares (in aggregate
representing approximately 8.33 per cent. of the total number of issued Capital
Shares in the Company). The Directors do not own any ZDP Shares.
Neither the Board nor Cenkos make any recommendation to Shareholders as to
whether or not they should tender their ZDP Shares and/or Income Shares in the
Tender Offers. Whether or not Shareholders decide to tender their ZDP Shares
and/or Income Shares is exclusively a decision for Shareholders.
In accordance with LR 9.6.3, copies of the above document have today been sent
to the Document Viewing Facility, The Financial Services Authority, 25 The
North Colonnade, London E14 5HS.
Enquiries:
Cenkos Securities plc- William Rogers/Dion Di Miceli 0207 3971920/1921
Duncan Abbot, Chairman Tel: 07702 776320
END
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