RNS Number : 6107H
Aberdeen Emerging Markets Inv Co Ld
13 March 2018
ABERDEEN EMERGING MARKETS INVESTMENT COMPANY LIMITED ("AEMC" or the "Company")
Legal Entity Identifier (LEI): 213800RIA1NX8DP4P938
Tender Offer for up to 10 per cent. of the issued Share Capital of the Company
Publication of Circular
Further to the Company's announcement of its annual results on 19 February 2018, a circular containing both: (i) the Notice of Annual General Meeting to be held at 12.00 noon on 12 April 2018; and (ii) seeking Shareholder approval of a Tender Offer for up to 10 per cent. of the issued Share Capital of the Company, together with a Notice of Extraordinary General Meeting to be held at 12.15 p.m. on 12 April 2018 (the 'Circular') will also today be posted to Shareholders.
The Chairman's Letter and the expected timetable of principal events, as contained in the Circular, is set out below.
A copy of the Circular will be available shortly through the National Storage Mechanism.
On 19 February 2018, the Company announced its results for the financial year ended 31 October 2017. This Circular includes the notice of the Company's Annual General Meeting, at which it will be proposed, alongside various other business described in this Circular, that the Company adopt the financial statements contained in the 2017 Annual Report. Additionally, the Company is required under its Articles to propose a continuation resolution every five years, and this will be put to Shareholders at the AGM.
In the announcement of its results, the Board also announced a proposal to make a Tender Offer for up to 10 per cent. of the Shares in issue.
Accordingly, this Circular includes the notice of the Annual General Meeting, including the Continuation Resolution, details of the Tender Offer and the notice of the Extraordinary General Meeting to be convened to approve the arrangements for the Tender Offer.
As stated in the annual results announcement, the Board is pleased with the progress made by the Company with regard to revised management arrangements, the diligent implementation of the investment process and the improved performance that has resulted. In the three years to 31 October 2017 the Company has:
· outperformed its benchmark index, with a NAV total return of 44.2 per cent. compared to the 42.3 per cent. return from the benchmark index;
· outperformed its Direct Peer Group of global emerging market investment companies with the NAV total return of 44.2 per cent. being comfortably ahead of the Direct Peer Group average of 33.7 per cent.; and
· delivered a share price total return in excess of any of its Direct Peer Group (share price total return of 45.1 per cent. compared to the Direct Peer Group average of 28.0 per cent.).
(All numbers quoted are in sterling terms and sourced from Bloomberg.)
The Board believes that strong corporate earnings growth and a marked improvement in sentiment towards the emerging markets sector has supported recent significant gains and, with emerging market equities trading at reasonable valuations, the Company's prospects remain encouraging.
The Shares ended the year trading at a discount of 10.4 per cent. to the NAV per Share, compared to a 11.9 per cent. discount at the beginning of the year. As at 12 March 2018, being the latest practicable date prior to publication of this Circular, the Shares were trading at a 12.3 per cent. discount to the NAV per Share. Although the discount is not out of line with most of the Direct Peer Group, the Board is cognisant of the discount at which the Shares trade, despite the improving trend in performance. Accordingly, the Board has taken a number of measures with the objective of fully utilising the benefits of the closed-ended structure whilst also seeking to ensure that the Company is made appealing and accessible to as wide an audience of investors as possible. The measures adopted are listed below and are described in more detail in the 2017 Annual Report:
· the introduction of a dividend policy;
· the use of gearing through the introduction of a £25 million credit facility;
· a reduction in the rate of the base management fee;
· the removal of performance fee arrangements;
· the use of share buyback powers in accordance with the Company's stated discount management policy; and
· participation in the Savings Scheme and the Investment Manager's promotional programme.
1.2 Continuation Resolution
Under the Articles, the Board is required to propose the Continuation Resolution at the forthcoming Annual General Meeting. If the Continuation Resolution is passed by Shareholders, the Company will continue to operate in accordance with its investment objective and strategy for a further five years. There will then be a further continuation vote at the Company's annual general meeting in 2023 and, if that is passed, at every fifth annual general meeting thereafter.
If the Continuation Resolution is not passed then, within four months of the vote failing, the Board is required to formulate proposals relating to the future of the Company and put those to the Shareholders. In doing so, the Board will have regard to, among other things, prevailing market conditions and applicable law and regulations.
1.3 Tender Offer
In the run up to announcing the Tender Offer, the Board undertook a consultation exercise, covering Shareholders which own over 80 per cent. of the issued Shares. As a result of this exercise, the Board understands that, whilst the large majority of Shareholders by total number of Shares held are supportive both of the measures taken to make an investment in the Shares more appealing and of the continuation of the Company, there is potentially some appetite for the liquidity that can be provided by a tender offer.
Accordingly, Shareholders are also being asked to approve the Tender Offer for up to 10 per cent. of the Shares in issue at a price reflecting a discount of 3.5 per cent. to NAV (calculated after taking account of the accrued expenses of the Tender Offer). The Board believes that the Tender Offer strikes a fair balance between those Shareholders who wish to realise part of their investment in the Company at a value close to the NAV per Share and those who wish to maintain their investment in the Company. Assuming it is fully subscribed, the costs of the Tender Offer are anticipated to be more than offset by the small uplift in NAV for continuing Shareholders once the relevant Shares have been purchased by the Company.
The Tender Resolution to be proposed at the EGM is conditional upon the passing of the Continuation Resolution at the AGM.
Tenders of Eligible Shares by an Eligible Shareholder in excess of their 10 per cent. Basic Entitlement will be satisfied (on a pro rata basis) to the extent that other Eligible Shareholders tender less than the aggregate of their Basic Entitlements.
Set out below are:
· further details and the terms of the Tender Offer, including an explanation of how Eligible Shareholders may tender their Eligible Shares should they wish to do so;
· further details of the business to be conducted at the AGM;
· notice of the Annual General Meeting at which the Company will seek Shareholders' approval for, among other things, the Continuation Resolution; and
· notice of the Extraordinary General Meeting at which the Company will seek Shareholders' approval for the Tender Offer.
This letter is not a recommendation for Shareholders to tender their Shares pursuant to the Tender Offer. Whether Shareholders choose to tender their Shares will depend on, among other things, their view of the Company's prospects and their own individual circumstances, including their tax position, in relation to which they should seek their own independent advice.
2. TENDER OFFER
The Board proposes to make available a Tender Offer by Stockdale for up to 10 per cent. of the Shares in issue (excluding treasury shares) on the Record Date to enable those Shareholders (other than Excluded Shareholders) who wish to realise a portion of their holding of Eligible Shares, to do so. The Tender Price will be calculated as described in paragraph 3 of Part IV of this Circular and will reflect a 3.5 per cent. discount to the Net Asset Value per Share as at the Calculation Date. The Tender Price has been set at this level, in consultation with Shareholders, to allow Shareholders who wish to realise a portion of their holding of Eligible Shares to do so at a price close to NAV whilst providing for a small uplift to NAV per Share for continuing Shareholders.
The Company intends to fund the Tender Offer through its available cash, and other liquid funds and through the realisation of a portion of its investment portfolio. The Record Date for the Tender Offer is the close of business on 20 February 2018. Under the terms of the Tender Offer, Shareholders (other than Excluded Shareholders) will be entitled to tender up to their Basic Entitlement, being 10 per cent. of the Eligible Shares they held as at the Record Date rounded down to the nearest whole number of Shares. Shareholders will also be able to tender additional Eligible Shares, but any such excess
tenders will only be satisfied on a pro rata basis, to the extent that other Shareholders tender less than their Basic Entitlement. Tender applications will be rounded down to the nearest whole number of Shares.
The results of the Tender Offer are expected to be announced on 16 April 2018.
2.2 Conditions of the Tender Offer
The Tender Offer is subject to (i) the Continuation Resolution being passed at the AGM, (ii) the Tender Resolution being passed at the EGM, and (iii) certain other conditions set out in paragraph 2 of Part IV of this Circular. In addition, the Tender Offer may be suspended or terminated in certain circumstances as set out in paragraph 6 of Part IV of this Circular.
The Tender Offer is also conditional upon Stockdale having received payment from the Company in respect of the aggregate Tender Consideration in accordance with the Repurchase Agreement.
2.3 Further details of the Tender Offer
Eligible Shareholders are invited to tender for sale some or all of their Eligible Shares (subject to the overall limits of the Tender Offer) to Stockdale who, as principal, will purchase the Eligible Shares validly tendered (subject to the overall limits of the Tender Offer) at the Tender Price and, following the completion of all those purchases, sell the relevant Tendered Shares on to the Company at the Tender Price by way of an on-market transaction, in accordance with the terms of the Repurchase Agreement. All transactions will be carried out on the London Stock Exchange.
The Tender Offer is subject to certain conditions, and may be terminated in certain circumstances as set out in paragraph 6 of Part IV of this Circular. Further details of the calculation of the Tender Price are set out in paragraph 3 of Part IV of this Circular. Shareholders' attention is drawn to the letter from Stockdale set out in Part II of this Circular and, for Shareholders who hold their Shares in certificated form, to the Tender Form and for Savings Scheme Participants, to the Savings Scheme Tender Form, whichever is applicable, which together constitute the terms and conditions of the Tender Offer.
Details of how to tender Eligible Shares can be found in paragraph 4 of Part IV of this Circular. Shareholders should note that, once tendered, Shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.
2.4 City Code
Under Rule 9 of the City Code, any person who acquires an interest (as defined in the City Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.
Under Rule 37.1 of the City Code, when a company redeems its own voting shares, a resulting increase in the percentage of shares carrying voting rights in which a person or a group of persons acting in concert is interested will be treated as an acquisition for the purposes of Rule 9.
However, a person not acting, or presumed not to be acting, in concert with any one or more of the directors will not normally incur an obligation to make a mandatory offer under Rule 9 if, as a result of the redemption of shares by a company, they come to exceed the percentage limits set out in Rule 9.
Consequently, Shareholders should be aware that following implementation of the Tender Offer it is possible that certain Shareholder(s) will be interested in Shares carrying 30 per cent. or more of the voting rights in the Company without their having to make a mandatory offer under Rule 9 of the City Code to acquire the Shares of all other Shareholders.
Shareholders are not obliged to tender their Shares and, if they do not wish to participate in the Tender Offer, Shareholders should not complete or return their Tender Form or send a TTE Instruction.
Shareholders who are in any doubt as to the contents of this Circular or as to the action to be taken should immediately consult their stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial Services and Markets Act 2000 or other appropriately qualified adviser.
Shareholders' attention is also drawn to the Risk Factors set out on page 4 of this Circular.
3. ANNUAL GENERAL MEETING
Notice of the Annual General Meeting of the Company, to be held at 11 New Street, St Peter Port, Guernsey, GY1 2PF at 12.00 noon on 12 April 2018, is set out on pages 36 and 37 of this Circular.
Resolutions 1 to 8, which cover the adoption of the financial statements for the year ended 31 October 2017, the approval of the directors' remuneration report, the approval of the Company's policy to declare four dividends per year, the election of Mark Barker as a director of the Company, the re-election of William Collins and John Hawkins as directors of the Company, the reappointment of KPMG Channel Islands Limited as auditors of the Company and the authorisation of the Company to determine the auditors' remuneration, will be proposed as Ordinary Resolutions.
Resolution 9, the Continuation Resolution, will also be proposed as an Ordinary Resolution. Shareholders are given the opportunity to vote on the future of the Company every five years and, as referred to above, in light of this resolution the Board consulted with Shareholders in the autumn of 2017.
Resolution 10, which is the renewal of the Company's annual general authority to make ad hoc market repurchases of Shares of up to 14.99 per cent. of the Shares in issue, will be proposed as an Ordinary Resolution. This general authority does not relate to, or form part of, the Tender Offer and the Tender Offer is not conditional upon the passing of Resolution 10 at the AGM. The Board monitors the discount to the NAV per Share at which the Shares trade and considers it desirable that in normal market conditions the Shares should trade at a price which on average represents a discount of less than 10 per cent. to the NAV per Share. To assist the Board in acting to deal with any material increase in this discount, it seeks this authority annually from Shareholders to buy back Shares. Shares may be repurchased by the Company when, in the Board's opinion, the Shares are trading at a discount to their NAV that is higher than desirable and Shares are available to purchase in the market. In exercising this discretion, the Board will consider factors such as market conditions and the discounts to the NAV per share at which the shares of comparable companies are trading. The Board is of the view that it is a fundamental premise that Share repurchases enhance the NAV per Share for the remaining Shareholders, although they may also assist in addressing the imbalance between the supply and demand for the Shares and thereby reduce the scale and volatility of the discount at which the Shares trade in relation to the NAV per Share. During the year ended 31 October 2017, the discount to NAV per Share averaged 13.45 per cent. and the Company repurchased 551,450 Shares, representing 1.1 per cent. of the Shares in issue at the start of the year.
Resolution 11 is the customary annual authority to allot a number of Shares equivalent to up to five per cent. of the Share capital without further authority from Shareholders and will be proposed as an Ordinary Resolution.
Resolution 12 is the customary annual authority to disapply pre-emption rights and will be proposed
as a Special Resolution.
4. EXTRAORDINARY GENERAL MEETING
The Tender Offer is subject to Shareholder approval of both the Continuation Resolution to be proposed at the AGM and of the Tender Resolution to be proposed at the EGM. The EGM Notice convening the Extraordinary General Meeting, to be held at 12.15 p.m. on 12 April 2018 (or as soon thereafter as the AGM shall have concluded or been adjourned) at 11 New Street, St Peter Port, Guernsey, GY1 2PF, is set out on page 39 this Circular. The EGM Notice includes the full text of the Tender Resolution, which will be proposed as an Ordinary Resolution.
The authority conferred by the Tender Resolution, if such is approved by the Shareholders at the EGM, will be in addition to the share buyback authority conferred by Resolution 10, if such is approved at the AGM.
5. QUORUM FOR AGM AND EGM
The quorum for the Annual General Meeting and for the Extraordinary General Meeting is two or more Shareholders present in person or by proxy. If the Annual General Meeting or the Extraordinary General Meeting needs to be adjourned because it is not quorate, it will be adjourned to the same time and place on the fifteenth calendar day following the adjourned AGM or EGM (or, if that day is not a business day, to the next business day), whereupon those Shareholders then present, in person or by proxy, shall form the quorum. In the event of any such adjournment the Company will announce the adjournment via an RIS but no notification will be sent directly to Shareholders.
6. REPURCHASE AGREEMENT WITH STOCKDALE
On the date of this Circular, the Company and Stockdale entered into the Repurchase Agreement, which imposes a binding obligation on Stockdale to sell the Tendered Shares to the Company and on the Company to buyback such Tendered Shares at the Tender Price.
All purchases of Shares by the Company shall be effected on the London Stock Exchange in on-market transactions.
Stockdale warrants to the Company that it is a member of the London Stock Exchange and the Company shall be entitled to terminate the Repurchase Agreement if such membership expires, is suspended, revoked or withdrawn at any time prior to the completion of the Tender Offer.
7. COSTS AND EXPENSES ASSOCIATED WITH THE TENDER OFFER
The fixed costs and expenses payable by the Company are estimated to amount to approximately £260,000. This includes estimated portfolio realisation costs and commission payable to Stockdale. All costs and expenses in relation to the Tender Offer will be borne by the Company.
Shareholders who sell Eligible Shares in the Tender Offer may, depending on their individual circumstances and subject to the availability of any exemption or relief, incur a liability to taxation. The attention of Shareholders is drawn to Part V of this Circular, which sets out a general guide and is not exhaustive. Shareholders should seek advice in relation to their own specific circumstances. Shareholders who are in any doubt as to their tax position should seek advice from an appropriately qualified professional.
9. EXCLUDED SHAREHOLDERS AND OVERSEAS SHAREHOLDERS
The Tender Offer is not being made to Excluded Shareholders. Shareholders who are resident in, or citizens of, a Restricted Territory are excluded from the Tender Offer to avoid breaching local laws relating to the implementation of the Tender Offer. Accordingly, copies of this Circular, the Tender Form, the Savings Scheme Tender Form and any related documents are not being and must not be mailed or otherwise distributed in or into any of the Restricted Territories.
Shareholders who are not Excluded Shareholders but who have a registered or mailing addresses outside the United Kingdom or who are citizens or nationals of, or resident in, a jurisdiction other than the United Kingdom should read paragraph 9 of Part IV of this Circular and the relevant provisions of the Tender Form.
10. ACTION TO BE TAKEN BY SHAREHOLDERS
10.1 Forms of Proxy
Whether or not they wish to tender Eligible Shares and regardless of whether they intend to be present at the AGM or EGM, Shareholders (other than Savings Scheme Participants) are requested to complete and return the accompanying Forms of Proxy in accordance with the instructions printed thereon, so as to be received by Link Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and in any event not later than 12 noon on 10 April 2018 in respect of the Form of Proxy for the AGM and 12.15 p.m. on 10 April 2018 in respect of the Form of Proxy for the EGM.
The completion of Forms of Proxy will not prevent a Shareholder from attending the AGM or the EGM and voting in person should they wish to do so.
10.2 Tender Offer
Shareholders who wish to continue with their existing investment in the Company should not tender their Eligible Shares through CREST or return a Tender Form.
Shares held in uncertificated form (i.e. in CREST)
Eligible Shareholders who hold their Eligible Shares in uncertificated form (that is in CREST) and who wish to participate in the Tender Offer do not need to complete a Tender Form. Such Shareholders should take the appropriate action in CREST to tender their Eligible Shares and should arrange for the relevant Eligible Shares to be transferred to escrow by no later than 1.00 p.m. on 9 April 2018, as described in Part IV of this Circular.
Shares held in certificated form
Eligible Shareholders who hold their Eligible Shares in certificated form (other than Savings Scheme Participants) and who wish to participate in the Tender Offer should complete the Tender Form in accordance with the instructions set out therein and return the completed Tender Form by post or by hand (during normal business hours only) to the Receiving Agent, Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 9 April 2018. They should also return the valid share certificate(s) and/or other documents of title in respect of the Eligible Shares tendered. A reply-paid envelope (for use within the United Kingdom only) is enclosed for your convenience.
11. ACTION TO BE TAKEN BY SAVINGS SCHEME PARTICIPANTS
11.1 Forms of Direction
Whether or not they wish to tender Eligible Shares and regardless of whether they intend to be present at the AGM or the EGM, Savings Scheme Participants are requested to complete and return the accompanying Forms of Direction in accordance with the instructions printed thereon, so as to be received by Link Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and in any event not later than 12.00 (noon). on 5 April 2018 in respect of the Form of Direction for the AGM and 12.15 p.m. on 5 April 2018 in respect of the Form of Direction for the EGM.
The completion of Forms of Direction will not prevent a Shareholder from attending the AGM or the EGM and voting in person should they wish to do so.
11.2 Savings Scheme Tender Forms
Savings Scheme Participants who wish to continue with their existing investment in the Company should not return a Savings Scheme Tender Form.
Savings Scheme Participants who wish to participate in the Tender Offer should complete the Savings Scheme Tender Form in accordance with the instructions set out therein and return it to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU so as to be received as soon as possible and in any event by no later than 1.00 p.m. on 26 March 2018. A reply paid envelope (for use within the United Kingdom only) is enclosed with the Savings Scheme Tender Form for your convenience.
12. DOCUMENTS AVAILABLE FOR INSPECTION
A copy of this Circular, the Company's memorandum of incorporation, the Articles, and the 2017 Annual Report, will be available for inspection at the registered office of the Company during normal business hours on any Business Day from the date of this Circular until the conclusion of the Extraordinary General Meeting and at the place of the AGM and EGM for at least 15 minutes prior to, and during, the relevant meeting.
A copy of this Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. This Circular will also be available on the Company's website: www.aberdeenemergingmarkets.co.uk.
With respect to the AGM, the Board considers that the proposals are in the best interests of the Company and of the Shareholders. Accordingly, the Board recommends that Shareholders vote in favour of the Resolutions to be proposed at the AGM, including the Continuation Resolution, as the Directors intend to do in respect of their own beneficial holdings.
With respect to the EGM, the Board considers that the Tender Offer is in the best interests of the Company and of Shareholders. Accordingly, the Board recommends that Shareholders vote in favour of the Tender Resolution to be proposed at the EGM as the Directors intend to do in respect of their own beneficial holdings.
The Directors' beneficial holdings, in aggregate, amount to 47,000 Shares, representing 0.09 per cent. of the issued Shares as at the latest practicable date prior to the issue of this Circular.
The Board makes no recommendation to Shareholders as to whether they should tender their Eligible Shares in the Tender Offer. The Directors will not tender any of their own Shares. Whether Shareholders decide to tender their Eligible Shares will depend on their view of the Company's prospects and their own individual circumstances including their own tax position.
EXPECTED TIMETABLE OF EVENTS
All times are UK times. Times and dates are subject to change.
Aberdeen Fund Managers Limited (Investment Manager to the Company)
William Hemmings / Jonathon McManus Tel: +44 (0)20 7618 1444
Stockdale Securities Limited (Financial adviser and broker to the Company)
Robert Finlay / Rose Ramsden Tel: +44 (0)20 7601 6115
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