Publication of a Circular - Notice of EGM

Axiom European Financial Debt Fd Ld

01 August 2023

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

1 August 2023

Axiom European Financial Debt Fund Limited

Publication of a Circular containing a Notice of an Extraordinary General Meeting

Axiom European Financial Debt Fund Limited ("AXI" or the "Company") has today published a circular (the "Circular") which will shortly be sent to Shareholders. Capitalised terms that are used but not defined in this announcement shall have the meanings ascribed to them in the Circular.

The Board and the Company's Investment Manager, Axiom Alternative Investments Sarl (the "Investment Manager" or "Axiom"), recognise the Company's strong historic performance and the potential for the Company's strategy to evolve and to provide attractive returns in the future. However, the Board is also aware that the persistent discount at which the Company's shares trade and the limited liquidity of the Company's shares have frustrated Shareholders.

While the Board and the Investment Manager understand that Shareholders are supportive of the Company's strategy, they also believe that a significant proportion no longer consider the closed-ended structure of the Company to be optimal, particularly given that a substantially similar strategy, managed by the Investment Manager, is available through an open-ended entity.

In light of the circumstances outlined above, the Board has carefully considered the future of the Company and its business, taking into account feedback from Shareholders. Consequently, the Board is now putting forward proposals for the liquidation of the Company including options for Shareholders to roll over their investment. These proposals include the opportunity for Rollover Eligible Shareholders to receive shares in Axiom Obligataire, a Compartment of an open-ended fund managed by Axiom with a substantially similar investment policy to the Company. The Board believes this will provide continuity for Rollover Eligible Shareholders who roll over their investment in the Company, while mitigating the issues in relation to which Shareholders have expressed their frustration. There will also be an option for a cash exit.

The Circular contains a notice convening an extraordinary general meeting (the "EGM") of the Company at which approval will be sought from shareholders for the proposals. The EGM is to be convened for 10.00 a.m. on 29 August 2023 and will be held at 1st Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey GY1 3JX.

A copy of the Circular will shortly be made available on the Company's website at https://axiom-ai.com/web/en/axiom-european-financial-debt-fund-limited-2/# and submitted to the National Storage Mechanism, where it will be available for inspection at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Expected Timetable

	2023
Publication and posting of this Circular, the Form of Proxy and the Form of Election	1 August
Latest time and date for receipt of Forms of Election or TTE Instructions	10.00 a.m. on 24 August
Latest time and date for receipt of Forms of Proxy	10.00 a.m. on 24 August
CREST disablement, closing of the Register and Record Date under the Scheme	6.00 p.m. on 24 August
Calculation Date of AXI FAV	As at close of business on 25 August
Extraordinary General Meeting	10.00 a.m. on 29 August
Effective Date for implementation of the Scheme and commencement of the liquidation of the Company	29 August or as soon as reasonably practicable thereafter
Cancellation of: (a) listing of the AXI Ordinary Shares on the premium segment of the Official List; and (b) trading of the AXI Ordinary Shares on the Main Market	As soon as reasonably practicable following the appointment of the Liquidators
Contract notes issued by CACEIS in respect of Obligataire Shares and Obligataire Institutional Shares issued pursuant to the Rollover Options	On or around 5.30 p.m. on 4 September or as soon as reasonably practicable thereafter
Cheques expected to be despatched and payments made by the Company in respect of the Cash Option	On or around 12 September or as soon as possible thereafter

Notes:

·           All references to times in this announcement are to London times unless otherwise stated.

·           The dates and times specified above may be subject to change. In the event of any such change, the Company will notify investors either by post, by electronic mail or by the publication of a notice through a regulatory information service provider to the London Stock Exchange.

Enquiries to:

Axiom Alternative Investments SARL	[phone]
David Benamou
Winterflood Securities Limited	[phone]
Neil Morgan

Extracts from the Circular

(References to pages or paragraphs and appendices below refer to the relevant pages, paragraphs or appendices of the Circular and references to 'this Circular' refer to the Circular).

2        Summary of the Proposals

Under the Proposals (if approved by Shareholders), the Company will be liquidated and all of the AXI Ordinary Shares will ultimately be cancelled.

Under the Scheme, Rollover Eligible Shareholders will be entitled to roll over their investment in the Company into New Shares in Axiom Obligataire.

The New Shares are new classes of accumulation shares in Axiom Obligataire. As such, the relevant net income and net capital gains attributable to the Obligataire Shares and/or Obligataire Institutional Shares will be re-invested for the benefit of the relevant share class. If Rollover Shareholders would prefer to receive periodic distributions from their shares in Axiom Obligataire, they will have the option once they have received their New Shares to convert, in accordance with the provisions of the Prospectus, all or part of their Obligataire Shares and/or Obligataire Institutional Shares into shares of an alternative share class of Axiom Obligataire in relation to which periodic distributions are made.

Shareholders will also have the option to receive instead (in full satisfaction of their rights in respect of the assets of the Company in the winding up of the Company) a cash distribution equal to the Cash Distribution Amount in respect of each AXI Ordinary Share with Cash Rights.

It should be noted that the Cash Distribution Amount will reflect the costs of liquidating the non- cash assets required to be sold in order to fund the distribution. In addition, the NAV per share of the Company reflects the mid price of marketable securities (and of certain other investments) within the Company's portfolio. Consequently, as non-cash assets that are sold to fund the cash distribution are likely to be sold at the applicable bid price, the Cash Distribution Amount will almost certainly be less than the AXI FAV.

Shareholders who elect or are deemed to elect for one of the Rollover Options and who subsequently wish to redeem all or part of their investment in Axiom Obligataire should be able to do so on a daily basis in accordance with the provisions of the Prospectus of Axiom Obligataire at a price reflecting the NAV per share as of the relevant valuation day of Axiom Obligataire. Therefore, it may be in the interests of Rollover Eligible Shareholders to receive the Obligataire Option (or, subject to eligibility, the Obligataire Institutional Option), even if such Shareholders may ultimately wish to receive cash in respect of all or part of their investment.

Axiom Obligataire is a Compartment of Axiom Lux. Axiom Lux is an open-ended Luxembourg SICAV that is organised under Part I of the Luxembourg law of 17 December 2010 relating to undertakings for collective investment (as may be amended from time to time) and which qualifies as a UCITS with the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier. Axiom Obligataire is open-ended with daily liquidity.

The investment policy of Axiom Obligataire is substantially similar to the investment strategy of the Company.

Axiom Obligataire's strategy is focused broadly across the financial credit universe, with investments ranging from covered bonds to contingent convertible bonds. It focuses on subordinated bonds with an aim to achieve, over a minimum 3-year investment horizon, a return (net of management fees) similar to or greater than that of its benchmarks (ICE BofAML Euro Financial Index (40%), ICE BofAML Euro Corporate Index (40%) and ICE BofAML Contingent Capital Index (20%)).

Investors must have a securities account with CACEIS Bank, Luxembourg Branch in respect of which the relevant know-your-client requirements of CACEIS Bank, Luxembourg Branch have been satisfied in order to hold shares in Axiom Obligataire and the Rollover Options are therefore available only to Rollover Eligible Shareholders.

Further information on Axiom Obligataire, including details of its investment objective and investment strategy, is set out in Part IV of this Circular.

It is proposed that the Proposals be effected by way of a scheme of reconstruction (the "Scheme"). The Proposals require the approval of Shareholders. If the Proposals are approved, and upon completion of the Scheme:

·      Shareholders who are Rollover Eligible Shareholders will, unless they submit a valid Form of Election or submit a valid TTE Instruction in CREST, be deemed to have elected for the Obligataire Option. Under the Obligataire Option, Shareholders will receive one Obligataire Share for every one thousand AXI Ordinary Shares held at the Record Date, with fractions of an Obligataire Share being issued (rounded down to four decimal places);

·      Shareholders who are Obligataire Institutional Eligible Shareholders and who validly elect for the Obligataire Institutional Option will receive one Obligataire Institutional Share for every one thousand AXI Ordinary Shares held at the Record Date, with fractions of an Obligataire Institutional Share being issued (rounded down to four decimal places); and

·      Shareholders who validly elect, or are deemed to validly elect, for the Cash Option will receive a cash distribution in the winding up of the Company equal to the Cash Distribution Amount in respect of each AXI Ordinary Share with Cash Rights.

The Obligataire Option is the default option for Rollover Eligible Shareholders and a Rollover Eligible Shareholder wishing to receive the Obligataire Option does not need to submit a Form of Election or submit a TTE Instruction in CREST. A Rollover Eligible Shareholder who does not submit a Form of Election or submit a TTE Instruction in CREST will be deemed to have elected for the Obligataire Option.

Any Shareholder who is not a Rollover Eligible Shareholder will be deemed to have elected for the Cash Option.

The Company will liquidate sufficient assets to fund the cash distributions to Shareholders who are not Rollover Eligible Shareholders and other Shareholders who have elected to receive the Cash Option, plus an amount sufficient to meet the liabilities of the Company under the Liquidation, including the Winding Up Costs.

Under the terms of the Scheme, the remaining assets, comprising the entire remaining business of the Company, will be transferred to Axiom Obligataire and will accordingly continue to be managed by Axiom but under the investment strategy of Axiom Obligataire, as to which see Section 3 below.

The purpose of this Circular is to explain the background to, and reasons for, the Proposals and to convene the Extraordinary General Meeting to take place on 29 August 2023 at which Shareholders' approval for the Proposals will be sought. Notice of the Extraordinary General Meeting is set out in Part VII of this Circular. The Board recommends that you vote in favour of the Proposals at the Extraordinary General Meeting.

3             Background to the Company, Axiom Lux, Axiom Obligataire and the Investment Manager

The Company

The Company was incorporated as a closed-ended investment company limited by shares in Guernsey under the Companies Law on 7 October 2015. The Company was admitted to trading on the Specialist Fund Segment (then the Specialist Fund Market) on 5 November 2015, before its listing was transferred from the Specialist Fund Segment to the Premium Segment of the Official List on 15 October 2018.

AXI's investment strategy is based upon five categories of investments, including liquid and illiquid relative value, restructuring and special situations and midcap origination, and its investment objective is to generate income and capital gain. As of 31 May 2023, this strategy has had a return of 5.00% per annum since its inception on 5 November 2015.

Axiom Obligataire

Axiom Obligataire is a Compartment of Axiom Lux. Axiom Obligataire is open-ended with daily liquidity and is actively managed by Axiom Alternative Investments Sarl, and by the same management team as the Company. Axiom Obligataire invests across the whole financial credit universe, from covered bonds to contingent convertible bonds, and with a focus on subordinated bonds.

Axiom Obligataire and the Company both focus on the same investment universe. In addition, Axiom Obligataire also focuses on liquid securities.

Axiom Lux

Axiom Lux is an umbrella investment company with variable capital (société d'investissement à capital variable) in the form of a société anonyme (public company limited by shares) qualifying as a UCITS in accordance with Part I of the Luxembourg law of 17 December 2010 on undertakings for collective investments, as amended from time to time. As an umbrella structure, Axiom Lux may operate separate Compartments, each being distinguished from others by their specific investment policy or any other specific feature. Within each Compartment, different classes of shares with characteristics detailed in the Prospectus of Axiom Lux, may be issued. Axiom Lux constitutes a single legal entity, but the assets of each Compartment are segregated from those of the other Compartments. This means that the assets of each Compartment are invested for the shareholders of the corresponding Compartment and that the assets of a specific Compartment are solely accountable for the liabilities, commitments and obligations of that Compartment.

Further information about Axiom Obligataire is contained in Part IV of this Circular and in the Prospectus. A copy of the Prospectus and the key information documents for Axiom Obligataire are available on the website of the Investment Manager at https://www.axiom-ai.com. A paper copy of the Prospectus and the key information document can be provided on request and free of charge.

The Investment Manager

The investment manager of the Company is Axiom Alternative Investments Sarl. Axiom is a private limited liability company (société à responsabilité limitée), incorporated in France on 6 November 2006 and registered with the Registre de Commerce et des Sociétés de Paris under registration number 492 625 470. The Investment Manager is an independent French asset manager authorised by the AMF under registration number GP-06000039.

Axiom Alternative Investments Sarl is also the management company of Axiom Lux, having been appointed pursuant to a management company services agreement dated 27 March 2015, to serve Axiom Lux as a designated management company in accordance with the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment (as amended from time to time).

4             Benefits of the Proposals

The Directors consider that the Proposals are in the best interests of Shareholders for the following reasons:

·      Rollover Eligible Shareholders will be provided with the opportunity of continuity of exposure to debt instruments issued by European financial institutions. Axiom Obligataire has an investment policy that is substantially similar to AXI's investment policy, with the fund emphasising different aspects of the wider strategy relating to European regulatory capital instruments. The Directors and the Investment Manager therefore believe the Proposals represent an attractive basis for Shareholders to take advantage of future opportunities in the sector.

·      In the current market context, Axiom Obligataire has attractive yields. As of 30 June 2023, Axiom Obligataire's yield to call in GBP is 10.93%. For further information on Axiom Obligataire's performance, yield and other key metrics, please refer to the monthly factsheets which are available on the Investment Manager's website and on request.

·      Axiom Obligataire is a UCITS and an open-ended investment vehicle with daily liquidity. This will mean that shareholders in Axiom Obligataire should be able to realise some or all of their investment on a daily basis in accordance with the provisions of the Prospectus at a price reflecting the NAV per share as of the relevant valuation day of Axiom Obligataire. This structure will also ensure shareholders in Axiom Obligataire are no longer exposed to the discount issues and low liquidity that has been problematic for them as Shareholders of the Company.

·      The Obligataire Option and the Obligataire Institutional Option avoid imposing a capital gains tax event on Eligible Shareholders.^[1]

·      The Scheme also allows Shareholders to elect for the Cash Option. Shareholders who elect for the Cash Option will receive a cash distribution in the winding up of the Company equal to the Cash Distribution Amount in respect of each AXI Ordinary Share with Cash Rights.

In light of the benefits outlined above, the Board believes that the Proposals represent an attractive opportunity for the Company's Rollover Eligible Shareholders to benefit from continued exposure to European regulatory capital instruments, via a strategy overseen by its current, highly successful management team, while mitigating the issues that have historically caused frustration for Shareholders. The Proposals also provide an opportunity for Shareholders who wish to do so to receive a cash distribution in the winding up of the Company equal to the Cash Distribution Amount in respect of each AXI Ordinary Share with Cash Rights.

5             Shareholders' entitlements

Obligataire Option

Obligataire Shares will be issued to Rollover Eligible Shareholders who receive the Obligataire Option. Shareholders will receive one Obligataire Share for every one thousand AXI Ordinary Shares held by such person as at the Record Date (with fractions of a share being issued and rounded down to four decimal places) and will become shareholders in Axiom Obligataire.

The Obligataire Option is the default option for Rollover Eligible Shareholders and a Rollover Eligible Shareholder wishing to receive the Obligataire Option does not need to submit a Form of Election. A Rollover Eligible Shareholder who does not submit a Form of Election will be deemed to have elected for the Obligataire Option.

Obligataire Institutional Option

Obligataire Institutional Shares will be issued to Obligataire Institutional Eligible Shareholders who elect for the Obligataire Institutional Option. Shareholders will receive one Obligataire Institutional Share for every one thousand AXI Ordinary Shares held by such person as at the Record Date (with fractions of a share being issued and rounded down to four decimal places) and will become shareholders in Axiom Obligataire.

A Shareholder should submit a Form of Election or a TTE Instruction in CREST if he or she is an Obligataire Institutional Eligible Shareholder and wishes to elect for the Obligataire Institutional Option.

Cash Option

Under the Cash Option, Shareholders will receive a cash distribution in the winding up of the Company equal to the "Cash Distribution Amount" (as defined below) in respect of each AXI Ordinary Share with Cash Rights.

On the Effective Date, or as soon as reasonably practicable thereafter, the Company shall allocate to the Cash Distribution Pool assets (which may include cash) with a valuation (valued in accordance with the usual valuation methodology of the Company) equal to the Cash Election Proportion multiplied by the AXI FAV.

Any non-cash assets within the Cash Distribution Pool shall be realised and Shareholders who elect (or are deemed to elect) for the Cash Option will receive a distribution in respect of each AXI Ordinary Share with Cash Rights held by them equal to the Liquid Cash Distribution Pool Value divided by the number of AXI Ordinary Shares with Cash Rights (the "Cash Distribution Amount").

It should be noted that the Cash Distribution Amount will reflect the costs of liquidating the non- cash assets required to be sold in order to fund the distribution. In addition, the NAV per share of the Company reflects the mid price of marketable securities (and of certain other investments) within the Company's portfolio. Consequently, as non-cash assets that are sold to fund the cash distribution are likely to be sold at the applicable bid price, the Cash Distribution Amount will almost certainly be less than the AXI FAV.

Shareholders who elect or are deemed to elect for one of the Rollover Options and who subsequently wish to redeem all or part of their investment in Axiom Obligataire should be able to do so on a daily basis in accordance with the provisions of the Prospectus of Axiom Obligataire at a price reflecting the NAV per share as of the relevant valuation day of Axiom Obligataire. Therefore, it may be in the interests of Rollover Eligible Shareholders to receive the Obligataire Option (or, subject to eligibility, the Obligataire Institutional Option), even if such Shareholders may ultimately wish to receive cash in respect of all or part of their investment.

Any Shareholder who is not a Rollover Eligible Shareholder will receive the Cash Option. A Rollover Eligible Shareholder should submit a Form of Election or a TTE Instruction in CREST if he or she wishes to elect for the Cash Option.

6             Implementation of the Proposals

Consents and Approvals

The Proposals require the consent of Shareholders at an Extraordinary General Meeting which has been convened for the purposes of considering the Proposals. Both the ordinary resolution and the special resolution to be put to Shareholders at the Extraordinary General Meeting are required to be passed in order for the Proposals to be implemented. An ordinary resolution requires a majority of votes cast (whether in person or by proxy) to be in favour. A special resolution requires at least 75 per cent of votes cast (whether in person or by proxy) to be in favour.

Notice of the Scheme has been given to the Guernsey Financial Services Commission, although its consent is not required. The Takeover Panel has confirmed that The City Code on Takeovers and Mergers will not apply to the Scheme.

Unless all of the conditions to which the Scheme is subject (further details of which are set out in Part III of this Circular) are satisfied, the Scheme will not be implemented. In such circumstances the Board will revert to its commitment to table a Discontinuation Resolution at the Company's annual general meeting later this year. In the event that the Discontinuation Resolution was passed, the Board would be required to formulate proposals to be put to Shareholders within four months to wind-up or otherwise reconstruct the Company.

The Scheme

Subject to the passing of the Resolutions at the Extraordinary General Meeting (and satisfaction of the other conditions of the Scheme, full details of which are set out in Part III of this Circular), the Scheme will take effect from the Effective Date.

Under the Scheme (if approved by Shareholders), the Company will be placed into voluntary liquidation under Guernsey law.

The AXI Ordinary Shares will be reclassified (in accordance with the Elections made or deemed to have been made under the Scheme) as:

·      AXI Ordinary Shares with Obligataire Rollover Rights;

·      AXI Ordinary Shares with Obligataire Institutional Rollover Rights; and

·      AXI Ordinary Shares with Cash Rights.

The Company's Liquidators will transfer the assets of the Company (excluding the cash required to fund (i) the cash distribution payable in relation to the Cash Option and (ii) the Winding Up Costs, including a provision for the Liquidators' retention as described below, but otherwise constituting the entire remaining business of the Company) to Axiom Obligataire. The consideration for this transfer will comprise two elements:

·      the Obligataire Shares to be issued by Axiom Obligataire to the holders of AXI Ordinary Shares with Obligataire Rollover Rights; and

·      the Obligataire Institutional Shares to be issued by Axiom Obligataire to the holders of AXI Ordinary Shares with Obligataire Institutional Rollover Rights.

The auditor of Axiom Lux will issue a valuation report on the value of the assets to be transferred to Axiom Obligataire in accordance with the provisions of Luxembourg law.

Holders of AXI Ordinary Shares with Cash Rights will instead receive (in full satisfaction of their rights in respect of the assets of the Company in the Liquidation) a cash distribution in the winding up of the Company equal to the Cash Distribution Amount in respect of each AXI Ordinary Share with Cash Rights.

The Company will request that the listing of the AXI Ordinary Shares is cancelled as soon as reasonably practical following implementation of the Proposals. The Reclassified Shares will not be admitted to the Official List or traded on the London Stock Exchange.

Neither the Obligataire Shares, nor the Obligataire Institutional Shares will be listed or traded on any stock exchange. Instead, liquidity will be achieved through daily creation and redemption of the:

·      Obligataire Shares by Axiom Obligataire at a price reflecting the NAV per Obligataire Share at the relevant time; and

·      Obligataire Institutional Shares by Axiom Obligataire at a price reflecting the NAV per Obligataire Institutional Share at the relevant time.

The Company, the Liquidators, Axiom Obligataire and the Investment Manager have entered into the Transfer Agreement, which is conditional upon (a) the passing of each of the Resolutions; and (b) the approval of the winding up and the appointment of the Liquidators.

The Liquidators' retention will comprise a reserve to be set aside for the protection of potential creditors and to fund the costs of the Liquidation as detailed in paragraph 3.3 of the Scheme. Any surplus from this reserve (which would be expected to be de minimis) will be transferred to Axiom Obligataire in due course for the benefit of the holders of Obligataire Shares and Obligataire Institutional Shares (in proportion to the respective Elections for the Obligataire Option and the Obligataire Institutional Option under the Scheme).

Following implementation of the Scheme, the Company will be wound up.

Further details of the Scheme are set out in Part III of this Circular.

Tax

The attention of Shareholders is drawn to Part V of this Circular ("Taxation").

The Company has sought a tax clearance in respect of certain aspects of the Scheme in the UK (as noted below). However, tax clearances have not been obtained in respect of every aspect of UK taxation or in respect of any other jurisdiction in which Shareholders are or may be located. Shareholders are advised to take their own tax advice as to the tax consequences for them of the Scheme. Shareholders will need to consider whether or not the Scheme itself gives rise to any liability for them to pay tax.

UK taxation of Shareholders in relation to the Scheme

For Cash-Paid Shareholders, the cash distribution received by them in satisfaction of their rights in respect of the assets of the Company in the winding up of the Company should be treated as a capital distribution for tax purposes. Accordingly, as a result of its receipt a Cash-Paid Shareholder will be treated as disposing of its interest in the relevant AXI Ordinary Shares in consideration for the cash distribution and for Cash-Paid Shareholders who are UK-resident individuals any gain arising will be subject to capital gains tax (at rates of up to 20%) and for Cash-Paid Shareholders within the charge to corporation tax, any gain arising will be subject to corporation tax at the Shareholder's relevant marginal rate.

The Scheme, through which the AXI Ordinary Shares will be exchanged for New Shares, should not result in a charge to UK capital gains tax for individual Rollover Shareholders, nor a charge to corporation tax on chargeable gains for UK resident corporate Rollover Shareholders, on the basis that the transaction should qualify as a "scheme of reconstruction" and the conditions of section 136 of the TCGA should be met.

The application of section 136 of the TCGA may however be restricted under section 137(1) of the TCGA in the case of any Shareholder who alone, or together with any connected persons, holds five (5) per cent. or more of the AXI Ordinary Shares. Section 137(1) of the TCGA will not apply if the exchange is effected for bona fide commercial reasons and does not form part of a scheme of arrangements of which the main purposes, or one of the main purposes, is avoidance of liability to capital gains tax or corporation tax.

Clearance has been obtained from HMRC under section 138 of the TCGA to confirm that HMRC is satisfied that the Scheme will be effected for bona fide commercial reasons and will not form part of any such scheme for the avoidance of tax.

The New Shares will constitute interests in an offshore fund for UK tax purposes. The Investment Manager intends to apply for the New Shares to be recognised by HMRC as interests in a "reporting fund" for the purposes of the UK regime of taxation of offshore funds. The effect of maintaining reporting fund status for the New Shares throughout a Shareholder's relevant period of ownership would be that any gains on disposal of New Shares would be taxed as capital gains. However, there can be no guarantee that reporting fund status will be maintained for the New Shares. Were the application for reporting fund status to be unsuccessful or such status subsequently to be withdrawn for the New Shares, any gains arising to Shareholders resident or ordinarily resident in the United Kingdom on a sale, redemption or other disposal of relevant New Shares (including a deemed disposal on death) would be taxed as offshore income gains rather than capital gains, and so (for UK individual Shareholders) subject to income tax at rates of up to 45%.

If and for so long as the New Shares constitute interests in a reporting fund, then Axiom Obligataire is required to calculate and report the income returns for each reporting period (as defined for United Kingdom tax purposes) on a per-share basis to all relevant holders of New Shares. UK-resident individual holders of New Shares, at the end of the reporting period to which the reported income relates, will be subject to income tax on their proportionate share of the excess (if any) of reported income over distributions paid in respect of the reporting period. The excess reported income will be deemed to arise to such UK holders of New Shares six months following the last day of the relevant reporting period. On the basis of the investment policy of Axiom Obligataire, it is expected that the distributions and excess reported income of Axiom Obligataire will be subject to tax for Shareholders as interest rather than as dividends, and accordingly Shareholders who are UK tax resident individuals will be liable to income tax on the amount of such distributions and excess reported income, at a rate of 20% for basic rate taxpayers, 40% for higher rate taxpayers and 45% for additional rate taxpayers.

On the basis of the investment policy of Axiom Obligataire, it is expected that the New Shares will be treated for corporation tax purposes as creditor relationships within the loan relationships regime contained in Parts 5 and 6 of the Corporation Tax Act 2009 with the result that all returns on the New Shares in respect of such a Shareholder's accounting period (including gains, profits and losses and of which the distributions and reported income of Axiom Obligataire will form components) will be taxed or relieved as an income receipt or expense on a "fair value accounting" basis. Accordingly, such a person who acquires New Shares may, depending on its own circumstances, incur a charge to corporation tax on an unrealised increase in the value of its holding of New Shares.

Further information on the United Kingdom taxation position may be found in Part V of this Circular under the heading "United Kingdom".

Luxembourg tax considerations

Luxembourg UCITS, such as Axiom Lux, are tax exempt in Luxembourg with the exception of a subscription tax (taxe d'abonnement) levied at the rate of 0.05% per annum based on the NAV at the end of the relevant quarter, calculated and paid quarterly. Interest and dividend income received by a Luxembourg UCITS may be subject to non-recoverable withholding tax in the source countries. The Luxembourg UCITS may further be subject to tax on the realised or unrealised capital appreciation of its assets in the countries of origin. However, Axiom Lux may benefit from double tax treaties entered into by Luxembourg which may provide for exemption from withholding tax or reduction of applicable withholding tax rates. Distributions by the Luxembourg UCITS as well as liquidation proceeds and capital gains derived therefrom are made free and clear of withholding tax in Luxembourg.

7             Settlement arrangements

Dealings in AXI Ordinary Shares in CREST will be disabled with effect from 24 August 2023.

Contract notes in respect of Obligataire Shares and Obligataire Institutional Shares to be issued to Shareholders who validly elect for either of the Rollover Options will be issued by CACEIS on or around 5.30 p.m. (London time) on 4 September 2023 or as soon as practicable thereafter.

Shareholders who elect (or are deemed to have elected) for the Cash Option will receive their cash distribution winding up of the Company as follows:

·      Shareholders who hold their AXI Ordinary Shares in uncertificated form will receive payment through CREST on 12 September 2023 or as soon as practicable thereafter; and

·      payment of the cash distribution to Shareholders who hold their AXI Ordinary Shares in certificated form will be made by cheque. All cheque payments will be made in pounds sterling and will draw on a branch of a UK clearing bank. Cheques will be despatched at the risk of the person entitled to such payment by first class post on 12 September 2023 or as soon as practicable thereafter. Cheques will be sent to Shareholders at the address appearing in the Register or, in the case of joint holders, to the holder whose name appears first in the Register in respect of the joint holding concerned.

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[1]         Subject to receipt of HMRC clearance.

 

END