TIDMECDC
RNS Number : 2345R
European Convergence Develop. CoPLC
10 September 2014
10 September 2014
EUROPEAN CONVERGENCE DEVELOPMENT COMPANY PLC
("ECDC" OR "THE COMPANY")
Recommended proposals relating to the cancellation of admission
to trading on aim
Amendment of the Existing Management Agreement
Recommended proposal to change the Investing Policy
and
Notice of Extraordinary General Meeting ("EGM") of the
Company
The Company announces that an EGM will be held at the offices of
Galileo Fund Services Limited, Millennium House, 46 Athol Street,
Douglas, Isle of Man, IM1 1JB on 2 October 2014 at 4.30pm.
The Board is proposing, subject to shareholder approval, that
the Company:
-- adopt a new investing policy to reflect the Company's plans
to make no new investments and to exit all existing properties as
soon as practicable;
-- amend the management agreement to align the Manager's fees
and notice period with the new investing policy; and
-- cancel the admission to trading on AIM of the Company's Ordinary Shares
A circular in which full details are set out (the "Circular"),
together with the notice of the EGM, is expected to be posted to
Shareholders today.
Capitalised terms and expressions used in this announcement
shall have the same meanings as those attributed to them in the
Circular.
This summary should be read in conjunction with the full text of
this announcement.
Certain extracts from the Circular are set out below.
For further information please contact:
European Convergence Development Company
plc +44 (0)1624 640200
Anderson Whamond
+44 (0)207 518
Charlemagne Capital 2100
Varda Lotan
Galileo Fund Services Limited +44 (0)1624 692600
Ian Dungate, Company Secretary
+44 (0)20 7886
Panmure Gordon (UK) Limited 2500
Hugh Morgan
+44 (0)20 7360
Smithfield Consultants 4900
Ged Brumby
Henry Wallers
Website: www.europeanconvergencedevelopment.com
Proposed Timetable of Principal Events
Latest time and date for receipt of Forms 4.30pm on Tuesday 30 September
of Proxy for the EGM 2014
EGM 4.30pm on Thursday 2 October
2014
Cancellation of Ordinary Shares from 7am on Friday 10 October
trading on AIM 2014
PART 1 - LETTER FROM THE INDEPENDENT NON-EXECUTIVE DIRECTOR
Dear Shareholder,
Proposals relating to the cancellation of admission of the
Company's Ordinary Shares to trading on AIM
1 Introduction
Further to the Company's 2014 annual general meeting held on 6
August 2014 and the subsequent adjournment of that meeting, the
Directors believe that it is in the best interests of the Company
and its Shareholders to call an Extraordinary General Meeting for
the purpose of (i) considering the cancellation of the Company's
Ordinary Shares to admission to trading on AIM; and (ii) the
adoption of a proposed New Investing Policy so that no investments
in new real estate projects or assets are made and to seek to exit
all existing Properties as soon as practicable.
The Circular explains the background to the proposal to seek the
cancellation of the Company's Ordinary Shares from trading on AIM
and sets out the reasons why the Directors consider the
Cancellation to be in the best interests of the Company and its
Shareholders as a whole and why they recommend that you should vote
in favour of the Cancellation at the EGM. Notice of the EGM, which
is to be held on Thursday 2 October 2014 at 4.30pm at Millennium
House, 46 Athol Street, Douglas, Isle of Man IM1 1JB, is set out at
the end of the Circular.
In addition to the Resolutions, the Circular sets out proposed
changes to the Existing Management Agreement including revisions to
the annual management fee and performance fee payable to the
Manager, and a reduction in the notice period.
2 Reasons for Proposing the Cancellation
2.1 Facilitation of Restructuring and Change of Investment Objective
As stated in the Chairman's report in the 2013 annual report,
the Directors believe that a delisting is an important first step
in the restructuring of the Company as outlined below. Both the
Directors and Manager believe that this restructuring is best
managed without the necessary public regulatory disclosure
requirements to which a Company admitted to trading on AIM is
subject. Following the Cancellation, it is the intention of the
Directors and the Manager to offer a greater level of detail in
respect of the individual Properties and the disposal strategy to
be employed by the Company.
The Directors and the Manager believe that it is in the best
interests of the Company as a whole to adopt a New Investing Policy
so that no investments in new real estate projects or assets will
be made. The proposed New Investing Policy will be to dispose of
all existing Properties as soon as practicable and as the property
markets will allow, whilst maximising the return to Shareholders.
Any further investment in existing Properties will be to further
the New Investing Policy. Shareholders will be notified of any
further investment made in existing Properties in accordance with
the proposed New Investing Policy by way of quarterly update
reports.
The Company is an "investing company" for the purposes of the
AIM Rules. Rule 8 of the AIM Rules requires an investing company to
state and to follow an investing policy and to seek the prior
consent of its shareholders at a general meeting for any material
change to such policy. The adoption of the New Investing Policy
represents a material change from its Existing Investing Policy,
and as such must be approved by the Shareholders in a general
meeting. Accordingly, Resolution numbered 1 in the notice seeks
Shareholder approval for this adoption of a New Investing Policy,
and this is being proposed as an ordinary resolution requiring a
majority of those present and entitled to vote or voting by proxy
in a general meeting to vote in favour for it to be passed.
2.2 Reduction in Operational Costs
The Directors do not consider that it is in the interests of
Shareholders that the Company continues to incur the costs
associated with maintaining the admission of the Company's Ordinary
Shares to trading on AIM.
In order to further reduce the costs and expenses of the Company
and to support the New Investing Policy, the Board and the Manager
have agreed that the following changes to the Existing Management
Agreement will come into effect immediately following the passing
of Resolution numbered 2, by way of amendment of the Existing
Management Agreement:
- The annual management fee payable to the Manager will be
reduced to a fixed fee of EUR250,000 per annum (currently the
Manager receives a fee quarterly in arrears at the rate of 2% of
the NAV valued as at the last Business Day of each March, June,
September and December quarter and in 2013 received approximately
EUR490,000). This fee will be subject to review after a period of
three years commencing on the date of the Cancellation.
- The Manager has agreed to a reduction in its notice period from 18 to 9 months
- Under the Existing Management Agreement, the Manager is
entitled to a performance fee equivalent to 15% of any excess of
Net Asset Value per Ordinary Share over the Benchmark Net Asset
Value per Ordinary Share multiplied by the time weighted average
number of shares in issue during that financial year. The Directors
believe that the Benchmark Net Asset Value per Ordinary Share is
unlikely to be exceeded. In consideration of the Manager agreeing
to the reduction in its management fee and effectively reducing its
notice period under the Existing Management Agreement and therefore
its entitlement to 18 months management fee at the existing NAV
level, and agreeing to less favourable termination arrangements,
and in order to align the Manager's interests with the achievement
of the objectives of the proposed New Investing Policy, the
Directors (other than Anderson Whamond who abstained by virtue of
his connection with the Manager) believe that it is appropriate to
agree to an adjustment of the basis on which the Manager is
entitled to receive a performance fee as follows: the Manager's
performance fee will be calculated at a rate of 15% of the cash
returned to Shareholders in excess of EUR16,996,539, during the
three years following the Cancellation. For the avoidance of doubt,
for these purposes, cash returned would include by way of dividend,
share buy backs or by way of liquidation. This performance fee
percentage will reduce to 12.5% in year four and 10% in year five
and beyond.
The amount of EUR16,996,539 has been determined by the Board,
following negotiation with the Manager, as an appropriate level
relative to the 31 December 2013 reported NAV, to incentivise the
Manager to seek an exit of all the existing Properties whilst
maximising the return to Shareholders, as well as a structure that
seeks to compensate the Manager in part for a reduced annual
management fee and notice period under the amendments to the
Existing Management Agreement. The amount of EUR16,996,539
represents a discount of approximately 34% relative to the 31
December 2013 reported NAV.
Under the AIM Rules, the Manager is deemed to be a related party
of the Company, and the amendment to the terms of the Existing
Management Agreement is deemed to be a related party transaction
for the purposes of Rule 13 of the AIM Rules.
The Directors (other than Anderson Whamond for the reason stated
above) consider, having consulted with the Company's Nominated
Adviser, Panmure Gordon (UK) Limited, that the amendment to the
terms of the Existing Management Agreement are fair and reasonable
insofar as its Shareholders are concerned.
Additionally the Board and the Manager will continue to work
together to further reduce ongoing operational costs where possible
and appropriate.
Following the Cancellation, the Company will seek to maintain
sufficient cash to cover approximately three year's estimated
operational costs (together with retention of sufficient monies for
its existing Properties). Anything over and above this amount that
is deemed by the Directors to be in excess of the Company's
requirements would be distributed to Shareholders.
3 Effect of the Cancellation
The principal effects of the Cancellation would be that:
3.1 there would no longer be a formal market mechanism enabling
Shareholders to trade their Ordinary Shares on AIM or any other
recognised market or trading exchange;
3.2 the Company would not be obliged to announce material
events, administrative changes or material transactions nor to
announce interim or final results, however the Company has
confirmed in section 5 below that it will make certain information
available on its website and publish annual report and accounts as
well as quarterly update reports;
3.3 the Company would no longer be required to comply with any
of the additional specific corporate governance requirements for
companies admitted to trading on AIM;
3.4 the Company would no longer be subject to the AIM Rules (or
to have a nominated adviser) and Shareholders would no longer be
required to vote on certain matters as provided in the AIM
Rules.
It is possible that the Cancellation could have taxation
consequences for Shareholders. Shareholders who are in any doubt
about their tax position should consult their own professional
independent adviser.
4 Cancellation of Admission to Trading on AIM
In accordance with Rule 41 of the AIM Rules, the Company has
notified the intended Cancellation, giving at least 20 business
days' notice. Under the AIM Rules, it is also a requirement that
the Cancellation Resolution must be approved by not less than 75
per cent of those present and entitled to vote or voting by proxy
in a general meeting. Accordingly, the resolution numbered 2 in the
Notice seeks Shareholder approval for the cancellation. Subject to
the Cancellation Resolution being passed by the requisite majority
at the EGM, and following a further five business days (which must
pass following approval by the Shareholders in accordance with the
AIM Rules), it is expected that trading on AIM in the Ordinary
Shares will cease at the close of business on 9 October 2014 with
the Cancellation becoming effective at 7.00am on 10 October
2014.
5 Governance following Cancellation
The Directors' intention is that the Company should remain a
public limited company but without having its shares admitted to
trading on a public market or a multilateral trading facility.
Notwithstanding the Cancellation, the Company will continue to
publish annual reports and accounts and hold Annual General
Meetings and other General Meetings in accordance with the
applicable statutory requirements and the Company's articles of
association, and also publish quarterly update reports which will
include detail of any further investments into existing Properties.
The Directors also intend to retain the Company's website to
provide information on the business, though shareholders should be
aware that there will be no obligation on the Company to update the
website as required under AIM Rules. The Company is not, and will
not be, required to comply with The UK Corporate Governance Code
(the "Code"). Nevertheless, the Directors recognise the value of
the Code and intend to operate the Company such that it seeks to
comply with the Code, so far as it is possible and appropriate
given the Company's size, nature of business and number of
shareholders.
Shareholders should note that, even if the Cancellation is
approved and becomes effective, the Company will remain subject to
the provisions of the City Code on Takeovers and Mergers (the "City
Code") for a period of 10 years. The City Code provides an orderly
framework within which takeovers and mergers are conducted and
operates principally to ensure that shareholders are treated fairly
and not denied an opportunity to decide on the merits of a takeover
and that shareholders of the same class are afforded equivalent
treatment. The City Code will however cease to apply to the Company
10 years after the Cancellation becomes effective. However, the
regulatory regime imposed through the AIM Rules, which applies
solely to companies with shares admitted to trading on AIM, will no
longer apply. Upon Cancellation becoming effective, Panmure Gordon
(UK) Limited will therefore cease to be nominated adviser and
broker to the Company.
6 Trading facility following Cancellation
Following the Cancellation, although the Ordinary Shares will
remain transferable, they will no longer be tradable on AIM.
Consequently, it is likely to be more difficult for a Shareholder
to purchase or sell any Ordinary Shares following the Cancellation.
With this in mind, the Directors have initiated discussions with an
off market broker, in order to facilitate a matched bargain
arrangements to enable Shareholders to trade the Ordinary Shares
following the Cancellation. Under this proposed facility, it is
intended that Shareholders or persons wishing to acquire Ordinary
Shares would be able to leave an indication with the broker that
they are prepared to buy or sell at an agreed price. In the event
that the matched bargain settlement facility provider is able to
match that order with an opposite sell or buy instruction, the
broker will contact both parties and then effect the bargain.
Shareholders who do not have their own broker may need to register
with the broker as a new client. This can take some time to process
and therefore shareholders who consider they are likely to use this
facility are encouraged to commence it at the earliest opportunity.
Once a facility has been arranged, details will be made available
to shareholders on the Company's website. Shareholders should note
that there is no guarantee that they will be able to sell their
shares using this facility.
7 Regulatory status of the Manager
The Manager is authorised by the Isle of Man Financial
Supervision Commission. Charlemagne Capital (UK) Limited, a member
of the CCL group of companies is a company authorised and regulated
by the Financial Conduct Authority.
8 Independence of the Board and the Nominated Adviser
The Company confirms that the Board as a whole, and the
Nominated Adviser, are independent from the Manager. Furthermore,
the Company confirms that the Board as a whole, and the Nominated
Adviser, are independent of any substantial shareholders (as
defined in the AIM Rules), or investments (and any associated
investment manager) comprising over 20 per cent. of the gross
assets of the Company.
Anderson Whamond, as a non-executive director of the Manager,
and a shareholder of CCL, the parent of the Manager, and with an
indirect family interest in shares of CCL, is not independent of
the Manager.
9 Extraordinary General Meeting and Resolution
The Extraordinary General Meeting has been convened for the
purpose of seeking Shareholder approval for the Proposals.
Shareholders will find at the end of the Circular a Notice
convening the EGM and a Form of Proxy for use at the EGM. The EGM
is convened for 4.30pm on Thursday 2 October 2014 and will be held
at Millennium House, 46 Athol Street, Douglas, Isle of Man IM1
1JB,.
At the EGM, the following resolutions will be proposed:
-- An ordinary resolution to adopt the New Investing Policy of the Company.
-- A special resolution to cancel the admission of the Company's
Ordinary Shares to trading on AIM in accordance with the AIM
Rules.
10 Action to be Taken
A Form of Proxy is attached for use at the EGM. Whether or not
you intend to be present at the EGM in person, you are requested to
complete the attached Form of Proxy and return for the attention of
Ian Dungate c/o Galileo Fund Services Limited, Millennium House, 46
Athol Street, Douglas, Isle of Man IM1 1JB (Fax No: +44 (0)1624
692601) by no later than 4.30pm on Tuesday 30 September 2014
The completion and return of a Form of Proxy will not preclude
you from attending the EGM and voting in person if you so wish.
11 Recommendation
The Directors, other than Anderson Whamond, unanimously consider
the Proposals to be in the best interests of the Company and its
shareholders as a whole and those Directors recommend that
Shareholders vote in favour of the resolutions to be proposed at
the EGM.
Anderson Whamond is not independent of the Manager and therefore
has not taken any part in the Board's consideration of the
Proposals.
Yours faithfully,
Don McCrickard
Director
for and on behalf of
European Convergence Development Company plc
PART 2 - NEW INVESTING POLICY
Investing Policy
Investing strategy - asset allocation - geographic focus and
sector focus
The Board will seek to realise the Company's Properties in an
orderly manner, such realisations to be effected at such times, on
such terms and in such manner as the Board (in its absolute
discretion) may determine.
Assets or companies in which the Company can invest
The Company will not make any investments in new properties.
However, this will not preclude the Board (in its absolute
discretion) from making any investment in existing Properties in
the following circumstances:
-- where the Board, as advised by the Manager, believes such
investment is to protect or enhance the value and saleability of
such Property;
-- where the Company is contractually committed to make such investment;
-- authorising the expenditure of such capital as is necessary
to: (i) acquire any joint venture party's interests in any of the
Company's existing investments; or (ii) carry out any construction
necessary to maximise value and saleability of any existing
Property; and
-- entering into any contract or other arrangement with any
third party to realise all or any part of its existing
Properties.
These above restrictions will not preclude the Company making
investments in short dated cash or near cash equivalent securities,
which form part of its cash management practices.
Strategy by which the investing policy will be achieved
The Board and the Manager will investigate a number of
approaches to realisation of its Properties, which will include,
but not be limited to, sales of individual assets or groups of
assets or a sale of the entire portfolio (or a combination of such
methodologies).
The Board and the Manager may decide to appoint independent
advisers to assist in the execution of the New Investing Policy,
including, but not limited to, property valuers and property
agents.
Whether investments will be active or passive investments
The Manager assumes a proactive approach to every Property
project in the Company's Property portfolio.
Holding period for investments
The New Investing Policy includes an orderly realisation of the
Company's Properties with a view to maximising returns for
Shareholders. Accordingly, the Board will seek to realise the
Company's Properties and exercise all legal rights of the Company
in such manner and on such timescale as the Directors see fit, with
a view to ensuring that returns to shareholders are maximised.
Spread of investments and maximum exposure limits
The Company does not have a prescribed policy in relation to the
spread of investments or maximum exposure limits.
The realisation of the Company's Properties over time, may
result in the Company having a reduction in the diversification of
investments. However, the realisation of the Company's Properties
over time will also result in the reduction of the Company's
overall investment in real estate assets.
Policy in relation to gearing and cross holdings
Given that the New Investing Policy is to seek to exit the
Company's Properties as soon as practicable, it is not expected
that the Company will secure additional debt financing other than
where the Company believes it is required to protect or enhance the
value and saleability of such Property.
Investing restrictions
Other than the requirement for the Manager to manage any
potential conflicts of interest, and the requirement to invest in
accordance with its New Investing Policy, there are no other
investing restrictions.
Nature of returns that the Company will seek to deliver to
Shareholders
Under the New Investing Policy, the Board will seek to return
any surplus funds to Shareholders when appropriate. The net
proceeds of all Property realisations will be returned to
Shareholders, at the Board's discretion, having regard to:
-- the requirement to invest further funds in the Company's
existing Property projects only to protect or enhance the value and
saleability of such Property, and/or where the Company is
contractually committed to make such investment;
-- the Company's operational cost requirements and running costs
(including the fees payable under the amendments to the Existing
Management Agreement);
-- the cost and tax efficiency of individual transactions and/or distributions; and
-- Isle of Man Companies Act 2006.
It is expected that surplus capital will be returned to
Shareholders over time in a manner which may involve dividends,
share buy-backs, voluntary tender offers, dividends and/or capital
reductions. The decision to make any such returns, the method
through which such returns are effected, as well as the quantum and
timing of any such returns will be at the sole discretion of the
Board.
Other matters
Cash management
Pending future returns of value to Shareholders, all of the
Company's funds (whether in the form of cash or otherwise) will be
kept under the control of the Board or as it may direct.
Management of liabilities
The Company will endeavour, at the direction of the Board (in
its absolute discretion), to manage all actual or potential
material liabilities, risks or exposures of the Company (including,
without limitation, any existing contractual commitments, disputes
(potential or actual) and litigation (threatened or actual)) in a
manner consistent with the orderly realisation of the Company's
Properties.
Conflict policy
The Directors, the Manager and any member of the Charlemagne
Group and any of their shareholders, officers, employees, agents
and affiliates ("Interested Parties") may be involved in other
financial, investment or other professional activities which may on
occasion cause conflicts of interest with the Company. The Manager
(or any other Interested Party) may, for example, make investments
on its own behalf or for other clients. Situations may arise in
which the Manager's own account activities or those of its
affiliates or those made on behalf of other clients may
disadvantage the Company.
PART 3 - CURRENT INVESTING POLICY
The Company's current investing policy is as follows:
INVESTING POLICY
European Convergence Development Company plc is an Isle of Man
company established to take advantage of opportunities that exist
in the property markets of South-East Europe. The principal target
countries are Bulgaria, Romania and Turkey, with the ability to
invest in Croatia and Slovakia.
The Company may invest in commercial, retail, residential and
industrial property, with a view to taking advantage of the
potential for capital appreciation. The Company primarily seeks to
invest in early stage developments; however it may also invest in
partially completed assets and may also continue to hold and
operate completed developments for a substantial period
post-completion at the sole discretion of the Board. The Board must
believe that it is in the long term benefit of the investors to
hold completed developments.
A proportion of the Company's portfolio may be held in cash or
cash-equivalent investments from time to time.
The Company will establish a subsidiary structure which will
primarily invest equity and debt financing of development projects
with the use of local special purpose vehicles ("SPVs"). The
Company intends that its SPV investments will be in the form of
partnerships with local or international property developers.
Pending investment, cash held will be invested in bank deposits
or fixed income securities issued by governments or banks but not
corporate bonds.
It may be advantageous for the Company to borrow at the level of
its SPV subsidiaries. The Company may negotiate suitable borrowing
facilities with one or more lenders. The Directors do not intend
the Company or its SPVs to borrow in respect of any property more
than 75 per cent of its value on completion.
The Company expects to invest in early stage projects with a
construction period of 2 to 4 years. Whilst the Company intends to
exit from such assets post-completion, depending on prevailing
market conditions, it may be in the best interests of the Company
to hold the operating asset post completion until market conditions
are such that the Company can obtain a suitable price for the
asset.
The Company may reinvest the proceeds of sale of any properties
or return the capital or profits to Shareholders depending on
market conditions prevailing at the relevant time. Shareholders
will be given the opportunity to vote on the continued life of the
Company at the Company's annual general meeting to be held in 2016.
If the resolution to curtail the life of the Company is not passed,
a similar resolution will be proposed at every fifth annual general
meeting thereafter.
It is anticipated that the Company's investment portfolio will
be between 6 to 12 investments. Upon completion of the investment
programme, it is anticipated that, at that time, no single
investment will represent more than 50 per cent of the Company's
total capital. In exceptional circumstances the Company may make an
investment which represents in excess of 50 per cent of the
Company's total capital. In such circumstances the anticipated
investment portfolio may be correspondingly reduced below the
number of investments described above.
This information is provided by RNS
The company news service from the London Stock Exchange
END
NOESSUFIUFLSESU
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