Proposed Winding Down
12 Febbraio 2010 - 6:52PM
UK Regulatory
TIDMGMNT
RNS Number : 1154H
Gottex Market Neutral Trust Limited
12 February 2010
Gottex Market Neutral Trust Limited
12 February 2010
Gottex Market Neutral Trust Limited (the "Company") has today released a
circular (the "Circular") to Shareholders containing details of the Winding Down
Proposals of the Company.
The Board of the Company announced on 23 December 2009 that, following a review
of a number of ways of delivering greater value to Shareholders, it had
concluded that a managed winding down of the Company and an orderly realisation
of its portfolio of investments was the most appropriate course of action for
the Company.
Details of the Winding Down Proposals are set out in the Circular together with
certain other related information.
To facilitate the Winding Down, Shareholders are being asked (pursuant to the
Ordinary Resolution) to approve changes to the Company's investment policy and
objective (as required under the Listing Rules), certain minor amendments to the
Company's existing Investment Management Agreement with the Investment Manager
and (pursuant to the Special Resolution) to approve certain amendments to the
Company's Articles and to release the Directors from their obligation to propose
further Continuation Votes.
Shareholders representing approximately 43.9 per cent. of the issued share
capital have indicated their intention to support the Winding Down Proposals and
vote in favour of both Resolutions.
Benefits of a managed Winding Down
The main benefits of a managed Winding Down are as follows:
· The net realisable value of the Company's Portfolio will be returned to
Shareholders. Of all the options considered the Board believes that the Winding
Down Proposals will maximise value to Shareholders in as cost efficient and in
as timely a manner as possible;
· cash will be returned to Shareholders as and when it becomes available,
in accordance with the liquidity profile of the Company's Portfolio;
· cash will be returned to Shareholders in a cost efficient manner
(although if the Special Resolution is not passed there may be adverse tax
consequences (for certain Shareholders) or cost implications - see "The Winding
Down Proposals" section below);
· the Board and the Investment Manager will continue to explore the
possibility of expediting the realisation of the Company's Portfolio;
· the Company will maintain its listing for as long as the Directors
believe it to be practicable; and
· the Company is expected to maintain its currency hedge until such time as
is deemed by the Board to be appropriate to cease such hedging. The Board's
intention is to maintain the currency hedging, if possible, until at least a
majority of the Company's assets have been realised. However, such currency
hedging is subject to the provider of such currency hedging facility not
withdrawing (or not renewing) that facility, which may occur for a number of
reasons, and to the Board continuing to believe that currency hedging is in the
best interests of Shareholders as a whole.
Background to the Winding Down Proposals
The Company was launched in March 2007 raising approximately GBP45 million of
initial capital. As Shareholders will be aware global capital markets have, for
much of the Company's life, proved challenging and against this difficult
backdrop the Company has been unable thus far to achieve it stated investment
objective despite the best efforts of the Investment Manager. The following
table shows the monthly NAV performance of the Shares over the period from
inception to 31 December 2009.
+------+--------+--------+--------+--------+-------+-------+--------+--------+--------+--------+--------+--------+---------+
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD1 |
+------+--------+--------+--------+--------+-------+-------+--------+--------+--------+--------+--------+--------+---------+
| 2009 | -0.22% | -0.20% | -0.90% | -0.19% | 2.04% | 1.92% | 1.66% | 1.63% | 1.99% | 1.08% | 0.20% | 0.90% | 10.29% |
+------+--------+--------+--------+--------+-------+-------+--------+--------+--------+--------+--------+--------+---------+
| 2008 | -0.10% | 0.50% | -0.66% | -0.66% | 1.47% | 0.68% | -1.68% | -0.64% | -4.28% | -9.04% | -5.06% | -3.15% | -20.85% |
+------+--------+--------+--------+--------+-------+-------+--------+--------+--------+--------+--------+--------+---------+
| 2007 | - | - | - | 0.97% | 1.12% | 0.32% | 0.10% | -2.33% | -0.23% | 2.18% | -0.45% | -0.05% | 1.57% |
+------+--------+--------+--------+--------+-------+-------+--------+--------+--------+--------+--------+--------+---------+
[1]The Company's assets were hedged from US$ to GBP during the period save for
the period 27 October 2008 to 4 November 2008 when such hedging was fully
suspended and 5 November to 26 April 2009 when only 45 per cent. of the
Company's assets were hedged to GBP. Full currency hedging recommenced on 27
April 2009. The impact on NAV performance on the Shares of wholly or partially
suspending currency hedging for that period was approximately 0.82 per cent.
These returns are net of fees and expenses. The NAV performance of the Company
is based upon actual NAVs to 31 December 2009.
Source: Investment Manager
The information in this table has not been subject to audit.
The following table shows the NAV performance of the Shares over the 12 month
period ended 31 December 2009 and over the period from inception to 31 December
2009 and the corresponding level of volatility as compared with a widely used
sterling hedge fund index and traditional sterling equity and government bond
indices:
+--------------+---------+----------+---------+------------+
| |Company | HFRX | FTSE | Bank |
| | (GBP)1 | Global | UK | of |
| | | Hedge | Index | America |
| | |Fund GBP |Series: | Merrill |
| | | Index2 | FTSE | Lynch |
| | | | 100 | UK |
| | | | TR | Gilts |
| | | | Index2 | All |
| | | | |Maturities |
| | | | | Index2 |
+--------------+---------+----------+---------+------------+
| Annualised | | | | |
| returns: | | | | |
+--------------+---------+----------+---------+------------+
| 31 December | 10.29% | 13.4% | 27.3% | -1.1% |
| 2008 - 31 | | | | |
| December | | | | |
| 2009 (1 | | | | |
| year) | | | | |
+--------------+---------+----------+---------+------------+
| Since | -4.27% | -3.7% | -1.7% | 6.3% |
| inception | | | | |
+--------------+---------+----------+---------+------------+
| Annualised | | | | |
| volatility: | | | | |
+--------------+---------+----------+---------+------------+
| 31 December | 3.62% | 3.4% | 18.1% | 7.4% |
| 2008 - 31 | | | | |
| December | | | | |
| 2009 (1 | | | | |
| year) | | | | |
+--------------+---------+----------+---------+------------+
| Since | 8.03% | 9.6% | 19.0% | 6.9% |
| inception | | | | |
+--------------+---------+----------+---------+------------+
[1] The Company's assets were hedged from US$ to GBP during the period save
for the period 27 October 2008 to 4 November 2008 when such hedging was fully
suspended and 5 November to 26 April 2009 when only 45 per cent. of the
Company's assets were hedged to GBP. Full currency hedging recommenced on 27
April 2009. The impact on NAV performance on the Shares of wholly or partially
suspending currency hedging for that period was approximately 0.82 per cent.
2 The indices and statistics shown above are for illustrative purposes only and
do not represent forecasts of returns or volatility. The indices above have
been selected because they are well known and easily recognisable by investors.
The information in this table has not been subject to audit. Past performance
is not indicative of future results, which may vary.
The Company's returns are net of fees and expenses. The NAV performance of the
Company is based upon final NAVs to 31 December 2009.
Source: Investment Manager, Hedge Fund Research Inc., Bloomberg.
The information in this table has not been subject to audit.
At the same time, the Company's Shares have not been immune to the negative
sentiment which has generally prevailed against listed funds of hedge funds and
have traded at a substantial discount to their Net Asset Value. The average
discount to Net Asset Value at which the Company's shares traded over the 12
month period to 31 December 2009 was 23.10 per cent.. The Board believes that,
in part, the discount to Net Asset Value at which the Shares have traded has
been exacerbated as a consequence of the Company's relatively small size
compared to its peers, the relative illiquidity of the Shares as a consequence
of a concentrated Shareholder base and the relative size of its operating
expenses.
On 6 November 2009 the Board announced that it had received an indicative
non-binding cash offer of 75p per Share (which represented a 13 per cent.
discount to the then most recently announced unaudited estimated NAV of 86.18p
per Share), but had concluded that such indicative offer did not fully reflect
the value inherent in the Company or the value which could be realised on a
realisation of the Portfolio. In reaching that view, the Board, in conjunction
with the Company's financial adviser, J.P. Morgan Cazenove, had conducted a
review of the net present value of the Portfolio. That indicative non-binding
cash offer was withdrawn shortly before that announcement. Since that time the
estimated NAV has increased to 87.54p per Share as at 29 January 2010 whilst the
Share price as at the close of business on that date was 77.25p (representing a
discount of 11.8 per cent.).
Following the Board's rejection of the non-binding indicative offer referred to
above, and after consultation with major Shareholders, the Board has concluded
that it is not appropriate for the Company to continue in its present format as
the Board believes there is insufficient Shareholder support for the Company
pursuing its current investment objective with its existing investment policy
and that a managed and orderly realisation of the Company's investments in a
timely and cost-efficient manner is, in the absence of financially more
compelling alternatives, the best way to realise Shareholder value and return
cash to Shareholders whilst maintaining a listing for the Shares for as long as
the Directors believe to be practicable.
The Company is no longer in an offer period having received confirmation from
all interested parties that they do not intend to proceed with a proposal
subject to the Takeover Code.
The Winding Down Proposals
If the Ordinary Resolution is passed, the Company's investment objective and
investment policy will be amended to reflect the objective of realising the
Portfolio. The new investment objective and policy of the Company will be to
realise the Company's existing investments in an orderly and timely manner, with
a view to distributing cash to Shareholders (in accordance with their rights to
distributions on a winding up as set out in the Articles) at appropriate times
as sufficient investments are realised. The Company will not make any new
investments (other than cash and near cash equivalent securities).
No Liquidator will initially be appointed and the Portfolio will continue to be
managed by the Investment Manager (under the control and supervision of the
existing Board) but with a view to realising the Company's investments in an
orderly, timely and cost-efficient manner. It is currently expected that the
Company's currency hedging programme will be maintained through a significant
part of the Winding Down period. However, the provider of such currency hedging
may determine to withdraw (or not renew) that facility for a number of reasons
including (but not limited to) the level of the Company's assets and/or their
liquidity. In addition, in order to maintain the currency hedging, the Company
expects to maintain at least 10-15 per cent. of the Portfolio in cash in order
to meet possible currency hedging margin calls. If the currency hedging is
terminated, returns thereafter to Shareholders would be subject to fluctuations
in exchange rates between US$ and GBP. It is currently anticipated that the
realisation schedule for the Company's investments would be as set out in the
Circular.
The Ordinary Resolution also approves certain minor amendments to the Company's
Investment Management Agreement with the Investment Manager to reflect the
duties and obligations associated with managing a run-off Portfolio pursuant to
the revised investment objective and policy as opposed to the active management
of an investment portfolio. Such amendments do not involve any additional
obligations or liabilities on the part of the Company. In particular, no change
will be made to the current management fees (payable at an annual rate of 0.75
per cent. of NAV).
The Ordinary Resolution is not conditional upon the passing of the Special
Resolution.
The Special Resolution (which is conditional on the passing of the Ordinary
Resolution) will be proposed which will, amongst other things, (i) amend the
Company's Articles to facilitate the return of cash to Shareholders through a
compulsory redemption mechanism and remove the obligation to put forward further
Continuation Votes (as these will be otiose in the context of the Winding Down
Proposals) and (ii) provide for weighted voting rights on a subsequent winding
up resolution to provide greater certainty that such winding up will occur.
Shareholders holding approximately 43.9 per cent. of the Company's issued share
capital have executed non-binding letters of intent indicating their intention
to vote in favour of both Resolutions.
Whilst the Board considers it unlikely, if the Special Resolution (which is
conditional upon 75 per cent. or more of those Shares voted at the EGM being
voted in favour, as opposed to the simple majority required for the Ordinary
Resolution) is not passed, the Winding Down will still take place and cash will
still be returned to Shareholders. However, as the New Articles would not have
been adopted this could not be by way of compulsory redemption and instead (and
absent a subsequent special resolution of Shareholders) is likely to be by way
of dividends and/or purchases of own Shares. For certain Shareholders (in
particular UK resident individuals) dividends received would be subject to
income tax as opposed to payments received by way of compulsory redemptions
which (subject to certain uncertainties relating to the UK offshore funds
legislation) are likely to be subject to capital gains tax (see "United Kingdom
Taxation" below). Purchases of own Shares would be likely to be made by way of
on-market tender offers (in order to afford all Shareholders an equal
opportunity) which would be likely to require the production of Shareholder
documentation on each such buyback and could involve the Company in considerable
expense.
Listing
A Winding Down is expected to permit the Company to retain the listing of its
Shares on the London Stock Exchange during a significant part of the Winding
Down period.
The Board believes that maintaining the Company's listing is in the best
interests of Shareholders for the following reasons:
· having listed Shares allows them to continue to remain eligible for
inclusion in ISAs and SIPPs;
· continuing as a listed vehicle preserves the UK tax status of the Shares
for certain UK tax purposes;
· the listing will allow for the continuation of a daily market price in
the Shares, as required by certain Shareholders;
· maintaining the listing prevents certain Shareholders from breaching
their own investment restrictions, for example where they are required to hold
listed securities or instruments with daily liquidity; and
· maintaining the listing allows continued trading, which will give
Shareholders the optionality to exit prior to the conclusion of the Winding
Down.
The Board intends to maintain the Company's listing for as long as the Directors
believe it to be practicable during the Winding Down period. The Board may be
required to seek a suspension or cancellation of such listing by reason of the
Company no longer complying with the Listing Rules (for instance by reason of
the number of Shares in public hands no longer meeting the minimum required or
the Company's then investments no longer representing a spread of investments
consistent with the object of spreading investment risk). However, the
cost-efficiency of retaining the Company's listing will continue to be monitored
and reviewed by the Board on an ongoing basis and, in accordance with feedback
from the Company's major Shareholders as to their desire to continue holding
listed shares and given the expenses involved in maintaining such listing, the
Board may propose a cancellation of the listing before it ceases to comply with
Listing Rules although any such proposal will be subject to the approval of
Shareholders by way of special resolution.
Currency Hedging
If possible, the Board intends to maintain the currency hedging arrangements
until at least a majority of the Company's assets have been returned to
Shareholders. However, such currency hedging is subject to the provider of such
currency hedging facility not withdrawing (or not renewing) that facility, which
may occur for a number of reasons. In addition, as the Company has not had a
credit facility since 31 March 2009, it maintains a cash position of between
10-15 per cent. in order to meet possible currency hedging margin calls under
the currency hedging facility, which it will need to continue doing whilst such
hedging is maintained. The Board anticipates that at some point during the
Winding Down process, the Company's Portfolio will no longer retain sufficient
liquidity and/or be of a sufficient size for the Investment Manager to be able
to maintain a full currency hedging programme or it may determine that the
benefits of returning cash retained to meet possible currency hedging margin
calls outweigh the benefits of continued currency hedging. As the currency
hedging programme currently manages the US Dollar/Sterling exchange rate
exposure in the Company's Portfolio, its removal means that Shareholders will be
exposed to subsequent fluctuations in that exchange rate. For the sake of
clarity, the remaining invested assets of the Company are denominated in US
Dollars so that, from the point of removal of the currency hedge onwards,
Shareholders will be exposed not only to the investment performance of those
assets but also to fluctuations in the US Dollar/Sterling exchange rate. There
may also be some residual exposure due to receivables/payables denominated in US
Dollars.
Consequences of the Winding Down Proposals not being approved by Shareholders
If the Ordinary Resolution is passed the Winding Down will take place. In the
event that the Ordinary Resolution relating to the Winding Down is not passed,
the Company will continue in its current state and with its existing investment
objective and policy and the Articles will require the Directors to put a
Continuation Vote to Shareholders at the Company's next annual general meeting
expected to be held in May 2010.
If that Continuation Vote is not passed, the Directors would then be required to
put forward redemption proposals or, alternatively (and before putting forward
redemption proposals) a proposal that the Company be placed into immediate
voluntary liquidation. Any such redemption proposals are currently expected to
be on terms that would return cash to Shareholders on a less advantageous
timetable than is currently expected pursuant to the Winding Down. If the
Company were to be placed into voluntary liquidation, both its listing and
currency hedge would be lost with immediate effect. A retention pool of cash
would also be held back by a liquidator until the end of the liquidation
process.
If that Continuation Vote is passed, the Company will continue as at present
but, in the Board's view, the Company's Share price performance will be likely
to continue to suffer as a result of its relatively small size, the relative
liquidity of its Shares and the relative size of its operating expenses and it
is likely that the discount to NAV at which the Shares currently trade would be
likely to increase, perhaps substantially.
Adoption of New Articles
In connection with the Winding Down Proposals, the Company is proposing to adopt
New Articles which are substantially similar to the Company's existing Articles,
save for (i) permitting compulsory redemptions of Shares, (ii) removing the
obligations to put forward future Continuation Votes, (iii) providing for a
winding up resolution to be put forward where the Realisation Threshold is met
or exceeded and for weighted voting rights on such winding up resolution such
that any Shareholder voting in favour will collectively have such number of
votes (on a poll) as is necessary to pass that resolution and (iv) updating to
reflect the New Law as enacted on 1 July 2008.
Amendments to Investment Management Agreement
In connection with the Winding Down Proposals, it is proposed that the Company
makes certain minor amendments to its existing Investment Management Agreement
with the Investment Manager to reflect the revised duties associated with the
new investment objective and policy and the Winding Down. Such changes will not
involve any additional obligations or duties on the part of the Company. In
particular, no change will be made to the current management fees (payable by
the Company at an annual rate of 0.75 per cent. of Net Asset Value).
Compulsory Redemption Mechanism
Under the Winding Down Proposals, subject to the passing of the Special
Resolution, the return of cash to Shareholders is expected to be effected
through the compulsory redemption of Shares. Shareholders are being requested to
approve an amendment to the Company's Articles in order to permit the Directors
to compulsorily redeem proportions of the Company's then outstanding issued
share capital on an ongoing basis in their absolute discretion as a means of
returning cash to Shareholders.
If the Directors exercise their discretion to compulsorily redeem any given
percentage of Shares on any relevant occasion, the Company will make an
announcement in advance of the Redemption Date (a "Redemption Announcement").
The Redemption Announcement will include the following details:
· the Redemption Date (on which redemptions will become effective);
· the percentage of the Company's then issued share capital to be redeemed
by the Company on that Redemption Date (the "Relevant Percentage") and the time
and date by reference to which shareholdings will be calculated and ownership
determined for the purposes of redeeming Shares (the "Redemption Record Date");
· the Net Asset Value Date for the calculation of the Relevant Percentage;
· the anticipated costs to be incurred in connection with such redemption;
and
· any additional information that the Board deems necessary to advise
Shareholders in connection with such redemption.
Redemptions of Shares will become effective on each Redemption Date, being a
date chosen in the Directors' absolute discretion, as determined by the
Directors to be in the best interests of Shareholders as a whole. In determining
the timing of any Redemption Date, the Directors will take into account the
amount of cash available for payment of redemption proceeds and the costs
associated with such redemption. The Shares to be redeemed will be the Relevant
Percentage of those registered in the names of Shareholders on the Redemption
Record Date. Shareholders will receive the proceeds of redemption at a value
equal to the prevailing Net Asset Value per Share as at the relevant Redemption
Date, less the costs of redemption.
The costs incurred in relation to a redemption will include any realisation
costs and early redemption penalties or discounts in respect of the Company's
underlying investments, Registrar's fees and advisers' fees incurred in
connection with the redemption. The actual percentage of the Net Asset Value per
Share attributable to costs will depend, among other things, on the proportion
of the Shares remaining in issue.
In the case of Shares held in uncertificated form (that is, in CREST)
redemptions will take effect automatically on each Redemption Date. Shares held
in CREST under the existing ISIN will be disabled and a new ISIN will on the
next Business Day be applied to the remaining Shares that have not been
compulsorily redeemed. It is expected that the proceeds of the redemption will
be paid through CREST within five Business Days of the relevant Redemption Date.
In the case of Shares held in certificated form (that is, not in CREST),
redemptions will take effect automatically on each Redemption Date. Because the
Shares will be compulsorily redeemed, certificated Shareholders do not need to
return their Share certificates to the Company in order to claim their
redemption monies. Shareholders' existing Share certificates will be cancelled
and new Share certificates will be issued to each such Shareholder for the
balance of their shareholding after each Redemption Date. Cheques will
automatically be issued to certificated Shareholders upon the cancellation of
each tranche of their Shares.
Shareholders will be paid their redemption proceeds in Sterling. It is currently
expected that the proceeds of redemption will be paid through CREST or by cheque
(at the recipient's risk) within 30 days of the relevant Redemption Date. All
Shares that are redeemed will be cancelled with effect from the relevant
Redemption Date. Accordingly, once redeemed, Shares will be incapable of
transfer.
It is expected that compulsory redemptions will be effected on a periodic basis.
The Directors would consider whether to propose a resolution to place the
Company into a voluntary liquidation once a significant proportion of the
Company's assets have been realised and cash returned to Shareholders. Any
decision to propose to place the Company into voluntary liquidation and the
proportion of assets required to have been realised to trigger that decision
(which may be less than the Realisation Threshold), will be made in the light of
prevailing market conditions and Shareholders' views.
Continuation Vote
The current Articles incorporate a discount management provision whereby, in the
event that the Shares trade at a discount of 5 per cent. or more over any 12
month period, the Directors are required at the following annual general meeting
to put forward a resolution on which the holders of Shares will be asked to vote
as to whether the Company should continue. If such a resolution is not passed,
the Directors are required to formulate proposals to be put to Shareholders
offering to redeem their Shares at an amount equivalent to that which they would
have received on a return of capital on the NAV Calculation Date immediately
preceding such redemption (less the costs of all such redemptions).
The Company's discount control mechanism for the 12 month period ended 31
December 2009 was triggered on 8th January 2010 with an average discount
(calculated in accordance with the relevant provisions of the Articles) of 30.7
per cent.. Accordingly, in the absence of the passing of the Special Resolution
amending the Articles, the Company will be required to put forward a
Continuation Vote at its annual general meeting in 2010 (expected to be held in
May 2010).
Under the Winding Down Proposals, the New Articles, which Shareholders are being
requested to approve by the Special Resolution, will not contain provisions for
future Continuation Votes and the Special Resolution will, if passed, release
the Directors from their obligation to propose the Continuation Vote currently
required to be proposed at the Company's next annual general meeting under the
current Articles. Accordingly, unless the Articles are amended, a Continuation
Vote will be proposed at the Company's next annual general meeting. However,
assuming the Ordinary Resolution is passed but not the Special Resolution, if
that Continuation Vote was not passed it is the Board's current expectation that
any redemption proposals required to be put forward would have a payment
schedule that mirrored that for a return of cash pursuant to the Winding Down.
Expected Timetable
+------------------------------+--------------+
| | 2010 |
+------------------------------+--------------+
| Latest time and date for | 10 a.m. on 9 |
| receipt of Forms of Proxy | March |
| for the Extraordinary | |
| General Meeting | |
+------------------------------+--------------+
| Extraordinary General | 10 a.m. on |
| Meeting | 11 March |
+------------------------------+--------------+
Unless otherwise stated, all defined terms used in this announcement are as
defined in the Circular.
Enquiries
+-------------------------------+---------------+
| William Simmonds | 020 7588 2828 |
| J.P. Morgan Cazenove Limited | |
+-------------------------------+---------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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