Publication of Circular

RNS Number : 9522Z

Africa Opportunity Fund Limited

12 February 2014

 



For Immediate Release

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN OR THE UNITED STATES OF AMERICA OR TO US PERSONS.

This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any securities except on the basis of information in the prospectus to be published by the Company in due course in connection with the admission of the existing ordinary shares and C shares to trading on the Specialist Fund Market of the London Stock Exchange (the "Prospectus"). Copies of the Prospectus will, following publication, be available from the offices of Lawrence Graham LLP.

12 February 2014

Africa Opportunity Fund Limited (the "Company")

Publication of Circular

The Board has today published a circular to convene an Extraordinary General Meeting relating to, inter alia, the continuation of the Company, the proposed issue of up to US$100 million of C Shares, and the Company's admission to the Specialist Fund Market of the London Stock Exchange (the "Circular"). The Circular will be posted to Shareholders and will be available made on the Company's website (www.africaopportunityfund.com) shortly.

1.       Introduction

As previously announced, the Company is proposing to raise up to US$100 million by way of a placing of C Shares at a placing price of US$1.00 per C Share in conjunction with the admission to trading of the Ordinary Shares being moved from AIM to the Specialist Fund Market of the London Stock Exchange.  Resolutions will be proposed at the EGM to, inter alia, increase the authorised share capital of the Company and adopt the New Memorandum and New Articles to incorporate a new class of C Shares together with the rights relating to such shares.

The Company does not have a fixed life but, as stated in the Admission Document published in 2007, the Directors consider it desirable that Shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Board is also taking the opportunity to propose the continuation of the Company for a further 5 years. Immediately following the conclusion of the Extraordinary General Meeting, certain changes to the constitution of the Board will, conditionally on the passing of the Resolutions, also take effect (as set out below).

The Company and the Investment Manager have also entered into the Amended and Restated Investment Management Agreement which, conditionally upon completion of the Placing, amends the management fee payable to the Investment Manager. Further details of the Amended and Restated Investment Management Agreement are set out below.

It is currently anticipated that, subject to the Resolutions being passed, a prospectus containing details of the Placing and Admission will be published in early March 2014.

2.       Investment rationale

The Directors and the Investment Manager consider that Africa offers an attractive investment environment and the Placing will be undertaken in order to raise further funds for the purpose of achieving the investment objectives of the Company. The Company targets industries rather than countries to exploit valuation discrepancies which can arise among African countries. The Directors and the Investment Manager believe also that Africa's status as a continent containing a large number of reforming countries provides investment opportunities in those countries.

According to the October 2013 issue of the 2014 World Economic Outlook published by the International Monetary Fund, fourteen out of the world's twenty fastest growing economies in 2014 are located in Africa. As the economies of African countries develop and change due to various factors, including rising annual GDP growth rates, an emerging middle class and political reforms, opportunities to invest emerge. By balancing the size and type of investment, the Directors and the Investment Manager believe that attractive returns may be made across asset classes. Whilst the African capital markets can be volatile, by seeking diversity of investment across industries and countries, it is believed that such risks can be mitigated by the Investment Manager.

3.       Terms of the Placing

The Company is proposing to raise up to US$100 million by way of a placing of C Shares at a placing price of US$1.00 per C Share.  C Shares are a mechanism designed to overcome the potential disadvantages for both existing Shareholders and new investors which would arise out of a conventional fixed price mechanism where further new Ordinary Shares would be issued for cash. In particular:

·                       the assets representing the net proceeds of the Placing will be accounted for as a separate pool of assets until Conversion. By accounting for the net proceeds of the Placing separately, existing Shareholders will not be exposed to a portfolio containing substantial amounts of un-invested cash nor the costs of investing it;

·                       the C Shares will not convert into Ordinary Shares until at least 85 per cent. of the net proceeds of the Placing (or such other percentage of the Directors and the Investment Manager shall agree) have been invested in accordance with the Company's investment policy (or, if earlier, six months after the date of their issue); and

·                       the NAV of the Ordinary Shares will not be diluted by the expenses associated with the Placing which will be borne by the subscribers for the C Shares.

The conversion ratio will be calculated such that the C Shares in issue will convert into a number of Ordinary Shares calculated by reference to the net assets then attributable to the C Shares compared to the net assets at the same time attributable to the Ordinary Shares then in issue (subject, at the discretion of the Board, to a discount of up to 5 per cent.). The Board will only exercise its discretion to attribute a discount to the net assets attributable to the Ordinary Shares prior to the issue of the C Shares and only if it believes such a discount is, in the context of the Placing and Admission, in the best interests of the Company.

Following Conversion, the investments which were attributable to the C Shares will be merged with the Company's existing portfolio of investments. The new Ordinary Shares arising on Conversion of the C Shares will rank pari passu with the Ordinary Shares by reference to a record date falling on or after the conversion of the C Shares into Ordinary Shares.

This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. This announcement does not constitute a prospectus or prospectus equivalent document. Any decision to acquire C Shares under the Placing must be made only on the basis of the information contained in, and incorporated by reference into, the prospectus of the Company to be published in due course.

4.       The Specialist Fund Market

Subject to the Resolutions being passed, it is the Board's intention to make an application to the London Stock Exchange for all of the existing issued Ordinary Shares to be admitted to trading on the Specialist Fund Market and for the current admission to AIM to be cancelled.  In addition, subject to Shareholders passing the Resolutions and the completion of the Placing, it is the Board's intention to make an application to the London Stock Exchange for all of the C Shares to be issued pursuant to the Placing to also be admitted to trading on the Specialist Fund Market.  It is currently expected that Admission will become effective and that dealings will commence before 31 March 2014.

The Board believes that moving the admission to trading of the Ordinary Shares from AIM to the Specialist Fund Market will have the following benefits for the Company and Shareholders:

·                       the Placing: C Shares are not eligible for admission to AIM.  The Company will however be able to issue C Shares pursuant to the Placing if the C Shares are admitted to trading on the Specialist Fund Market;

·                       liquidity: the issue of C Shares pursuant to the Placing in conjunction with the Ordinary Shares being moved from AIM to the Specialist Fund Market may increase liquidity in the Ordinary Shares which may affect: (i) an investor's ability to realise some or all of his investment; (ii) the price at which such investor can effect such realisation; and/or (iii) the price at which the Ordinary Shares trade in the secondary market; and

·                       on-going annual costs: it is currently the expectation that the Company's on-going annual costs per Ordinary Share would decrease following Admission.

Admission of the Ordinary Shares to the Specialist Fund Market does not require the approval of Shareholders and is not conditional on the successful completion of the Placing. Accordingly, should the Placing not complete, it remains the intention of the Board to continue with the admission of the Ordinary Shares to trading on the Specialist Fund Market.

5.       Continuation of the Company

The Company does not have a fixed life but, as stated in the Admission Document, the Directors consider it desirable that Shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Board is also taking the opportunity to propose, as an ordinary resolution, that the Company continue in existence.

In addition to the investment rationale set out at paragraph 2 above, the Directors believe that Shareholders should vote in favour of the continuation of the Company for the following reasons:

·                       the Company has performed strongly since inception;

·                       despite the recent period of economic turmoil the Net Asset Value has grown year-on-year since 2009 and, in aggregate, has grown by 41.3 per cent. in the period since launch in 2007 to 31 December 2013;

·                       US$ NAV total returns earned by the Company in each of the years from 2008 to 2013 has been:

Year	2008	2009	2010	2011	2012	2013
US$ NAV total return (%)	-43.0	48.0	26.9	1.9	4.3	27.7

(audited save for the 2013 US$ NAV total returns which are unaudited.)

·                       the Board remains confident in the Company's ability to generate capital growth and income through value arbitrage and special situations investments in the continent of Africa.

If the continuation resolution is not passed at the EGM neither the Placing nor the admission of the Ordinary Shares and/or the C Shares to the Specialist Fund Market will proceed and the Directors shall formulate proposals to be put to Shareholders to reorganise or reconstruct the Company or to wind up the Company.  If the continuation resolution is passed at the EGM but the Placing does not complete, the C Shares will not be issued but it remains the intention of the Board to continue with the admission of the Ordinary Shares to trading on the Specialist Fund Market. 

If the continuation resolution is passed at the EGM, the Company will continue its operations as contemplated in the Circular and a continuation resolution will be put to Shareholders at an extraordinary general meeting in 2019 and every five years thereafter.  At the same time as the continuation vote in 2019, the Company will provide Shareholders with an opportunity to realise all or part of their shareholding in the Company. This realisation opportunity would be conditional on completion of the Placing.

6.       Corporate governance changes

The Board has undertaken a comprehensive analysis of the Company's corporate governance structure in the light of developments in international standards and practices since the Company was established in 2007. The review of the Company's corporate governance has led to the New Articles including the following corporate governance changes:

·                       an annual general meeting to be held each year to receive and adopt the Company's financial statements. The annual general meeting will be held within six months of the end of each financial year and the first such annual general meeting will be held before 30 June 2015;

·                       each Director, except any non-independent Director, will in future offer himself or herself for re-election at the annual general meeting on a rotating basis whereby each Director will seek re-election at least every three years, commencing at the 2015 annual general meeting;

·                       a non-independent Director will in future offer himself for re-election annually at the annual general meeting, commencing at the 2015 annual general meeting with Mr Knapp who is not independent by virtue of his position as a principal of the Investment Manager;

·                       the appointment of new Directors will be subject to re-election at the next following annual general meeting after their appointment; and

·                       the threshold at which Shareholders can require that the Board convene an extraordinary general meeting shall be reduced from 25 per cent. to 10 per cent. of the Shares.

In addition to the above corporate governance changes to the Articles, it is proposed that the composition of the Board will change. It is intended that: (i) Messrs Daniels and Gradel will resign as Directors; and (ii) Mr Knapp will resign as Chair, to be succeeded by Mrs Belo-Osagie. These changes to the Board will, conditionally on the passing of the Resolutions, become effective immediately following the conclusion of the Extraordinary General Meeting. The foregoing changes are conditional on the passing of the Resolutions but are not conditional upon the completion of the Placing or Admission.

In addition, Mr. Vikram Mansharamani and Mr. Peter Mombaur will be appointed, conditional upon admission of the Ordinary Shares to the Specialist Fund Market, as new non-executive Directors.

Vikram Mansharamani, non-executive director (aged 40)

Dr. Mansharamani is a lecturer at Yale University, where he teaches classes on business ethics and financial markets and a Senior Fellow at the Mossavar-Rahmani Center For Business & Government at the Harvard Kennedy School.  Previously, Dr. Mansharamani was a managing director at SDK Capital LLC and also held positions at Great Hill Equity Partners, Merrill Lynch & Co. and Booz Allen & Hamilton. Dr. Mansharamani is currently the President of Kelan Advisers LLC and Chairman of the Board of Directors of the Torit School, Inc. Dr. Mansharamani holds a PhD from the MIT Sloan School of Management, a MSc in security studies from the Massachusetts Institute of Technology and a BA degree in Ethics, Politics and Economics from Yale University.

Peter Benedikt Mombaur, non-executive director (aged 46)

Mr. Mombaur is co-Managing Director of Tana Africa, an African-focused investment company which aims to create long-term value by investing into fast-moving consumer goods, agriculture, retail and education in the African region. Mr. Mombaur's career began when he joined Germany utility company RWE Group in 1995 before moving to McKinsey & Company in 1998 to work on business development projects in both Europe and Africa. Mr. Mombaur has diplomas in Economics and Mechanical Engineering from Universitaet Bayreuth and RWTH Aechen respectively and a degree in Law from Fern-Universitaet Hagen. Mr. Mombaur is co-founder of the African Leadership Academy, Johannesburg and co-founder and chairman of Terra Education.

7.       Amended and Restated Investment Management Agreement

The Company and the Investment Manager have entered into the Amended and Restated Investment Management Agreement which, conditionally upon completion of the Placing, amends the management fee payable to the Investment Manager. The opportunity has also been taken to make certain non-material consequential amendments to the Amended and Restated Investment Management Agreement which will take effect on admission of the Ordinary Shares to the Specialist Fund Market. Under the Amended and Restated Investment Management Agreement, conditionally upon completion of the Placing, the Investment Manager will receive a management fee equal to the aggregate of: (i) two per cent. of the Net Asset Value per annum up to US$50 million; and (ii) one per cent. of the Net Asset Value per annum in excess of US$50 million, payable in US$ quarterly in advance. The annual carried interest payable to the Investment Manager's management team will continue unchanged.

8.       Extraordinary General Meeting

The Resolutions will be proposed at the EGM to be held at Rond Point Robert Schuman 9, B-1040, Brussels, Belgium at 11.00 (Greenwich Mean Time)/12.00 noon (Central European Time) on 28 February 2014. At the EGM three resolutions will be proposed:

Resolution 1 will be proposed as a ordinary resolution. If the resolution is passed, the Company will continue its operations as contemplated in the Circular and a similar resolution will be put to Shareholders at an extraordinary general meeting in 2019 and every five years thereafter.

Resolutions 2 and 3 will be proposed as an ordinary and special resolution respectively and are conditional upon Resolution 1 being passed at the EGM. If Resolution 2 is passed at the EGM, the Company's authorised share capital will be increased to allow for the issue and conversion of the C Shares. If Resolution 3 is passed at the EGM, the New Memorandum and New Articles will be adopted to incorporate new C Share rights and certain corporate governance changes.

A copy of the New Memorandum and New Articles with the proposed amendments will shortly be available on the Company's website: www.africaopportunityfund.com and at the offices of Lawrence Graham LLP, 4 More London Riverside, London SE1 2AU during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of the Circular until the end of the Extraordinary General Meeting and at the meeting venue itself for at least 15 minutes prior to the Extraordinary General Meeting until the end of the Extraordinary General Meeting.

9.       Recommendation  

The Board unanimously recommends that Shareholders vote in favour of the Resolutions to be passed at the Extraordinary General Meeting. The Directors intend to vote in favour of the Resolutions in respect of their holdings of Ordinary Shares amounting to approximately 10.8 million Ordinary Shares in aggregate (representing approximately 25.5 per cent. of the issued share capital of the Company as at 11 February 2014 (being the latest practicable date prior to the publication of the Circular)).  The Board has also received indications from other Shareholders holding approximately 16.2 million Ordinary Shares in aggregate (representing approximately 38.2 per cent. of the issued share capital of the Company as at 11 February 2014 (being the latest practicable date prior to the publication of the Circular)) that they intend to vote in favour of the Resolutions.

Shareholders should note that, notwithstanding the passing of the Resolutions, there can be no guarantee that the Placing and Admission will take place.

Defined terms used in this announcement shall have the meanings ascribed to them in the 'Definitions' section below.

EXPECTED TIMETABLE

Latest time and date for receipt of Forms of Proxy	11.00 a.m. (Greenwich Mean Time)/12.00 noon (Central European Time) on 26 February 2014
Record date for Extraordinary General Meeting	5.00 p.m. (Greenwich Mean Time)/6.00 p.m. (Central European Time) on 26 February 2014
Time and date of Extraordinary General Meeting	11.00 a.m. (Greenwich Mean Time)/12.00 noon (Central European Time) on 28 February 2014
Announcement of results of Extraordinary General Meeting	28 February 2014
Admission and dealings in the Ordinary Shares and the C Shares commence on the Specialist Fund Market expected to be before	31 March 2014

The times and dates set out in the expected timetable and mentioned throughout this announcement may, in certain circumstances, be adjusted by the Company, in which event details of the new times and dates will be notified, as required, to the UKLA and the London Stock Exchange and, where appropriate, Shareholders and a further announcement will be made through a Regulatory Information Service.

All references to times in this announcement are to Greenwich Mean Time unless otherwise stated.

CONTACT DETAILS

Africa Opportunity Fund Limited

Francis Daniels                                                                                            Tel: [phone]

Edmond de Rothschild Securities (UK) Limited, Broker & Financial
Adviser

Andrew Davies (Sales)                                                                                  Tel: [phone]

William Marle                                                                                              Tel: [phone]

Hiroshi Funaki                                                                                             Tel: [phone]
[e-mail]

Grant Thornton UK LLP, Nominated Adviser

                                 
Philip Secrett                                                                                               Tel: [phone]

David Hignell                                                                                                Tel: [phone]

[e-mail]

DEFINITIONS

"Admission"	admission of the Ordinary Shares and/or the C Shares to be issued pursuant to the Placing to trading on the Specialist Fund Market (as appropriate)
"Admission Document"	the AIM admission document of the Company dated 18 July 2007
"AIM"	the AIM market of the London Stock Exchange
"Amended and Restated Investment Management Agreement"	the amended and restated investment management agreement dated 12 February 2014 between the Investment Manager, the Company and Africa Opportunity Fund (GP) Limited (in its capacity as the general partner of Africa Opportunity Fund LP), as more particularly described in paragraph 7 of this announcement
"Articles"	the existing articles of association of the Company
"Board" or "Directors"	the board of directors of the Company
"Clearstream"	the system of paperless settlement of trades and the holdings of shares without share certificates administered by Clearstream Banking S.A.
"C Shares"	C shares of US$0.10 each in the capital of the Company which will convert into Ordinary Shares on Conversion
"Company"	Africa Opportunity Fund Limited
"Conversion"	the conversion of C Shares into new Ordinary Shares in accordance with the terms set out in the New Articles
"Euroclear"	the system of paperless settlement of trades and the holding of shares without share certificates administered by Euroclear Bank SA
"Extraordinary General Meeting" or "EGM"	the extraordinary general meeting of the Company convened for 11.00 a.m. (Greenwich Mean Time)/12.00 noon. (Central European Time) on 28 February 2014 at Rond Point Robert Schuman 9, B-1040, Brussels, Belgium
"Form of Proxy"	the proxy form for use in connection with the EGM, and which accompanies the Circular
"Investment Manager"	Africa Opportunity Partners Limited
"NAV"	net asset value
"New Articles"	the amended and restated articles of association of the Company to be adopted at the EGM
"New Memorandum "	the amended and restated memorandum of association of the Company to be adopted at the EGM
"Ordinary Shares"	ordinary shares of US$0.01 each in the capital of the Company
"Placing"	the proposed placing of up to 100 million C Shares at US$1.00 per share described in this announcement
"Resolutions"	resolutions 1 to 3 to be proposed at the EGM
"Shareholder"	a holder of Ordinary Shares and "Shareholders" shall be construed accordingly
"Specialist Fund Market"	the Specialist Fund Market of the London Stock Exchange
"US$"	US dollars

This announcement has been prepared by the Company for information purposes only and does not constitute an offer to sell, or the solicitation of an offer to acquire or subscribe for, the C Shares in any jurisdiction. Any offer and/or sale of C Shares will not be registered under the applicable securities laws of the United States, Australia, Canada, South Africa or Japan. Subject to certain exceptions, the C Shares may not be offered or sold within the United States, Australia, Canada, South Africa or Japan or to any national, resident or citizen of the United States, Australia, Canada, South Africa or Japan. This announcement does not constitute any form of financial opinion or recommendation on the part of the Company or any of its affiliates or advisers and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities in any jurisdiction.

Neither the U.S. Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of the securities referred to in this announcement or passed upon the adequacy or accuracy of this announcement. Any representation to the contrary is a criminal offence in the United States.

 

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