Circ re. Tender Offer

RNS Number : 5183X

Advance Developing Markets Fund Ltd

08 February 2013

 



Advance Developing Markets Fund Limited

("ADMF" or the "Company")

Tender Offer for up to 15 per cent. of Shares in issue

&

Publication of circular

Introduction

Further to the Company's announcement on 20 December 2012, a circular explaining the terms of a Tender Offer for up to 15 per cent. of the Shares in issue (the "Circular"), notices of an Annual General Meeting and an Extraordinary General Meeting, both to be held on 15 March 2013, together with the Company's Annual Financial Report for the period ending 31 October 2012, will today be posted to Shareholders.

A copy of the above documents will be submitted to the National Storage Mechanism and will shortly be available on the Company's website: www.advance-emerging .com.

The Chairman's Letter in respect of the Tender Offer, two further Conditional Tender Offers, the notice of the Annual General Meeting at which the Company will seek Shareholders' approval for, inter alia, the Continuation Resolution and the notice of the Extraordinary General Meeting at which the Company will seek Shareholders' approval for the Tender Offer and the Conditional Tender Offers, as contained in the Circular, is set out below.

Terms used and not defined in this announcement bear the meaning given to them in the Circular to be published today.

Chairman's Letter

"Dear Shareholder,

Tender Offer for up to 15 per cent. of the Shares in issue

Authority for Conditional Tender Offers

Notice of Annual General Meeting

and

Notice of Extraordinary General Meeting

1.   Introduction

On 20 December 2012, the Company announced proposals to make available a Tender Offer for up to 15 per cent. of the Shares in issue and further Conditional Tender Offers for up to 10 per cent. of the Shares in issue at 6 monthly intervals over the next 12 months.  In light of the five yearly continuation vote due to take place at the 2013 Annual General Meeting, these proposals were developed following a period of consultation in the autumn of 2012 with Shareholders owning over 75 per cent. of the issued Shares and the appointment of an independent investment consultant to review the Company's investment management arrangements and performance.

The purpose of this document is to:

·     set out the mechanics and the terms and conditions of the Tender Offer;

·     explain how Shareholders may tender their Shares in the Tender Offer should they wish to do so;

·     provide details of the further Conditional Tender Offers;

·     give notice of the Annual General Meeting at which the Company will seek Shareholders' approval for, inter alia, the Continuation Resolution; and

·     give notice of the Extraordinary General Meeting at which the Company will seek Shareholders' approval for the Tender Offer and the Conditional Tender Offers.

The Notices of the Annual General Meeting and Extraordinary General Meeting are set out at the end of this document. 

This letter is not a recommendation for Shareholders to tender their Shares under the Tender Offer. Whether or not Shareholders tender their Shares will depend on, among other things, their view of the Company's prospects and their own individual circumstances, including their tax position, on which they should seek their own independent advice.

2.   The Tender Offer

The Board proposes to make available a Tender Offer for up to 15 per cent. of the Shares in issue (excluding treasury shares) on the Record Date to enable those Shareholders (other than Excluded Shareholders) who wish to realise a portion of their holding of Eligible Shares to do so.

The Tender Price will be an amount equal to a discount of 1 per cent. to the Formula Asset Value per Share as at the close of business on 15 March 2013, calculated in accordance with paragraph 4 of Part III of this document. The Tender Price being equal to a 1 per cent. discount to the Formula Asset Value per Share allows Shareholders who wish to realise a portion of their holding of Eligible Shares to do so at a price close to NAV per Share whilst providing for a small uplift to NAV per Share for continuing Shareholders.

The Record Date for the Tender Offer is the close of business on 21 December 2012.

Under the terms of the Tender Offer, Shareholders (other than Excluded Shareholders) will be entitled to tender up to their Basic Entitlement, being 15 per cent. of the Eligible Shares they held as at the Record Date. Shareholders may also be able to tender additional Eligible Shares, but any such excess tenders above the Basic Entitlement will only be satisfied, on a pro rata basis, to the extent that other Shareholders tender less than their aggregate Basic Entitlement. Tender applications will be rounded down to the nearest whole number of Shares.

The results of the Tender Offer are expected to be announced on 19 March 2013.

Conditions of the Tender Offer

The Tender Offer is subject to, (i) the Continuation Resolution being passed at the AGM, (ii) the Tender Resolution being passed at the EGM, and (iii) certain other conditions set out in paragraph 3 of Part III of this document.  In addition, the Tender Offer may be suspended or terminated in certain circumstances, as set out in paragraph 3 of Part III of this document.

Implementation of the Tender Offer will require approval by the Shareholders at the Extraordinary General Meeting, which is to be held at 11.30 a.m. on 15 March 2013 (or as soon as practicable thereafter as the Annual General Meeting shall have concluded or been adjourned).  The Tender Offer is also conditional upon Westhouse Securities having received payment from the Company in respect of the purchase price for the Repurchased Shares in accordance with the Repurchase Agreement.

Further details of the Tender Offer

Shareholders (other than Excluded Shareholders) on the Register on the Record Date are invited to tender for sale some or all of their Eligible Shares (subject to the overall limits of the Tender Offer) to Westhouse Securities who, as principal, will purchase at the Tender Price the Eligible Shares validly tendered (subject to the overall limits of the Tender Offer) and, following the completion of all those purchases, sell the relevant Eligible Shares on to the Company at the Tender Price by way of an on-market transaction, in accordance with the terms of the Repurchase Agreement. All transactions will be carried out on the London Stock Exchange.

The Tender Offer is subject to certain conditions, and may be terminated in certain circumstances as set out in paragraph 3 of Part III of this document. Further details of the calculation of the Tender Price are set out in paragraph 4 of Part III of this document.  Shareholders' attention is drawn to the letter from Westhouse Securities set out in Part II of this document and, for Shareholders who hold their Shares in certificated form, to the Tender Form which together constitute the terms and conditions of the Tender Offer.

Details of how to tender Eligible Shares can be found in paragraph 5 of Part III of this document. Shareholders should note that, once tendered, Shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.

Shareholders are not obliged to tender any Shares and, if they do not wish to participate in the Tender Offer, Shareholders should not complete or return their Tender Form or send a TTE Instruction.

Shareholders who are in any doubt as to the contents of this document or as to the action to be taken should immediately consult their stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial Services and Markets Act 2000 or other appropriately qualified independent adviser.

3.   Conditional Tender Offers

In addition to the Tender Offer, the Board proposes to seek the necessary authorities to enable the Company to implement two Conditional Tender Offers.  If implemented, each Conditional Tender Offer will be for up to 10 per cent. of the Company's Shares in issue (excluding treasury shares) at the end of the relevant period to which each Conditional Tender Offer relates. The price at which the Company's Shares will be purchased under each Conditional Tender Offer will be an amount equal to a discount of 1 per cent. to the Formula Asset Value as at the close of business on a calculation date, following the period end to which each Conditional Tender Offer relates, which will be set by the Directors and which will be set out in a circular to be sent to Shareholders.

A Conditional Tender Offer will be implemented:

·      following the end of the 6 month period ending 31 October 2013 if: (i) the Shares trade at an average discount to NAV per Share of more than 10 per cent. over the period from 1 May 2013 to 31 October 2013, or (ii) the Company's performance over that period, as measured by its Net Asset Value total return, is less than that of the MSCI Emerging Markets TR Index (net) in Sterling terms; and

·      following the end of the 6 month period ending 30 April 2014 if: (i) the Shares trade at an average discount to NAV per Share of more than 10 per cent. over the period from 1 November 2013 to 30 April 2014, or (ii) the Company's performance over that period, as measured by its Net Asset Value total return, is less than that of the MSCI Emerging Markets TR Index (net) in Sterling terms.

The average discount to NAV per Share for each of the periods noted above will be calculated by reference to the NAV per Share, the quoted closing price of the Shares (as derived from Bloomberg) and the resulting discount as at each weekly NAV calculation date for the relevant period.

In order to implement each Conditional Tender Offer, Westhouse Securities will, as principal, purchase the Shares accepted under the relevant Conditional Tender Offer at the applicable tender price and, following completion of these purchases, will sell the relevant Shares on to the Company at the same price by way of an on-market transaction. The terms and conditions upon which it is intended that the Conditional Tender Offer would be implemented will be substantially the same as those set out in Part III of this document and will be included in a circular sent to Shareholders following the end of the relevant 6 month period. In the event that a Conditional Tender Offer is implemented, a Shareholder need not have participated in the Tender Offer in order to participate in a subsequent Conditional Tender Offer.

4.   Annual General Meeting

Notice of the Annual General Meeting of the Company, to be held at 11 New Street, St Peter Port, Guernsey, GY1 2PF at 11.00 a.m. on 15 March 2013, is set out on page 34 of this document.

Resolutions 1 to 7, which cover the adoption of the financial statements for the year ended 31 October 2012, the approval of the directors' remuneration report, the re-election of Mr T. Mahony, Mr W. Collins and Mr M. Hadsley-Chaplin as directors of the Company, the re-appointment of KPMG Channel Island Limited as auditors of the Company and authorising the directors to determine the auditors' remuneration, will be proposed as ordinary resolutions.

Resolution 8, the Continuation Resolution, will also be proposed as an ordinary resolution.  Shareholders are given the opportunity to vote on the future of the Company every 5 years and, as referred to above, in light of this resolution the Board consulted with Shareholders in the autumn of 2012 and appointed an independent investment consultant to review the Company's investment management arrangements and performance.

The recent consultation exercise by the Board, which covered Shareholders owning over 75 per cent. of the issued Shares, revealed a range of views on the Company's continuation, management arrangements and appropriate measures to reduce the discount to Net Asset Value. The Board would like to thank all Shareholders for the time they made available. The Board believes that the Tender Proposals set out in this document strike a fair balance between those Shareholders who wish to realise part of their investment in the Company at close to NAV per Share and those who wish to maintain their investment in the Company.

The Board appointed Mercer Limited to review the investment management arrangements and performance of the Company's Manager, Advance Emerging Capital Limited.  Based on the results of this review and the discussions with Shareholders the Board has concluded that the continuation of the Company and the continuing appointment of the Manager is in the best interests of Shareholders as a whole. 

The long term performance of the Company has been very strong and investors have benefited through its underlying NAV performance. This is illustrated by the fact that a £1 investment in the Company at launch in 1998 would equate to an underlying NAV per Share of £5.25 at 1 February 2013 (excluding any value attributable to the bonus issue of subscription shares in 2008 and dividends paid). As stated in the Company's annual report and accounts for the year ended 31 October 2012, the Board remains convinced of the long term case for investing in emerging markets and takes encouragement from the fact that underlying fundamentals remain attractive in the majority of markets in which the Company's assets are ultimately invested.

Resolution 9, which is the renewal of the Company's general annual authority to make ad hoc market repurchases of Shares up to 14.99 per cent of the outstanding issued share capital, will be proposed as an ordinary resolution.  This general authority does not relate to, or form part of, the Tender Proposals and the Tender Proposals are not conditional upon the passing of resolution 9 at the AGM. The Board monitors the level of discount at which the Shares trade relative to the NAV per Share and considers it desirable that the Company's shares do not trade at a significant discount to NAV per Share and believes that, in normal market conditions, the Shares should trade at a price which on average represents a discount of less than 10 per cent. to the NAV per Share.  To assist the Board in taking action to deal with a material increase in the discount it seeks this authority from Shareholders annually to buy-back Shares.  Shares may be repurchased when, in the opinion of the Board and taking into account factors such as market conditions and the discounts of comparable funds, the Company's discount is higher than desired and Shares are available to purchase in the market.  During the year ended 31 October 2012, the discount to NAV per Share averaged 8.7 per cent. and the Company repurchased 475,000 Shares during the year, representing 0.6 per cent. of the Shares in issue at the time of repurchase. 

5.   Extraordinary General Meeting

A notice convening the EGM, which is to be held at 11 New Street, St Peter Port, Guernsey, GY1 2PF, at 11:30 a.m. on 15 March 2013 (or as soon as practicable thereafter as the Annual General Meeting shall have concluded or been adjourned) is set out at the end of this document.  At the EGM the following Tender Resolution will be proposed as an ordinary resolution:

(a)     for the Company to be given authority to make on-market purchases of up to 11,320,343 Shares pursuant to the Tender Offer, at the Tender Price;

(b)     for the Company to be given authority to make on-market purchases of up to 10 per cent. of the Shares in issue pursuant to a Conditional Tender Offer following the end of the 6 month period ending 31 October 2013;

(c)     for the Company to be given authority to make on-market purchases of up to 10 per cent. of the Shares in issue pursuant to a Conditional Tender Offer following the end of the 6 month period ending 30 April 2014.

To be passed, the Tender Resolution requires the approval of not less than 50 per cent. of the Shareholders who vote in person or by proxy at the EGM.    

6.   Expenses

The fixed costs and expenses payable by the Company in connection with the Tender Offer, are estimated to amount to approximately £120,000. This amount does not include portfolio realisation costs and commission payable to Westhouse Securities (being 0.2 per cent. of the amount equal to the Tender Price multiplied by the number of successfully tendered Eligible Shares).  All costs and expenses in relation to the Tender Offer will be borne by Shareholders participating in the Tender Offer.

7.   Taxation

Shareholders who sell Eligible Shares in the Tender Offer may, depending on their individual circumstances and subject to the availability of any exemption or relief, incur a liability to taxation.  UK resident Shareholders should be aware that HMRC may seek to treat part of the disposal proceeds of their Eligible Shares as income. The attention of Shareholders is drawn to Part IV of this document, which sets out a general guide and is not exhaustive.  Shareholders should seek advice in relation to their own specific circumstances.

Shareholders who are in any doubt as to their tax position should seek advice from an appropriately qualified professional.

8.   Overseas Shareholders and Excluded Shareholders

Before participating in the Tender Offer, Shareholders with an address outside the United Kingdom or who are resident outside the United Kingdom should satisfy themselves that they are lawfully entitled to participate in the Tender Offer and should ensure full observance of the laws of any relevant territory in connection therewith (including obtaining any requisite consents, observing any other applicable formalities and paying any taxes required to be paid in such territory).  Tender Forms will not be sent to Excluded Shareholders and the Tender Offer may not be accepted from within any of the Restricted Territories.

Shareholders with registered or mailing addresses overseas or who are citizens of, or nationals of, or residents in, an overseas jurisdiction should read paragraph 10 of Part III of this document.

9.   Action to be taken

Forms of Proxy

Whether or not you wish to tender your Eligible Shares under the Tender Offer, and regardless of whether you intend to be present at the AGM or the EGM you are requested to complete and return the accompanying Forms of Proxy in accordance with the instructions printed thereon, so as to be received by Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as soon as possible, and in any event not later than 11.00 a.m. on 13 March 2013 in respect of the Form of Proxy for the AGM and not later than 11.30 a.m. on 13 March 2013 in respect of the Form of Proxy for the EGM.  The completion and return of the Forms of Proxy will not prevent Shareholders from attending the AGM or the EGM and voting in person should they wish to do so.

Tender Offer

Shareholders who hold their Eligible Shares in certificated form and who wish to participate in the Tender Offer should complete the Tender Form in accordance with the instructions set out therein and return the completed Tender Form by post or hand (during normal business hours only) to the Receiving Agent, Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by no later than 1.00 p.m. on 1 March 2013, and they should also return the valid share certificate(s) and/or other documents of title in respect of the Eligible Shares tendered.  A reply-paid envelope (for use within the UK only) is enclosed for your convenience.

Shareholders who hold their Eligible Shares in uncertificated form (that is, in CREST) and who wish to participate in the Tender Offer should take the appropriate action in CREST to tender their Eligible Shares and should arrange for the relevant Eligible Shares to be transferred to escrow by no later than 1.00 p.m. on 1 March 2013, as described in paragraph 5.3 of Part III of this document.

Shareholders who wish to continue with their existing investment in the Company should not return a Tender Form or tender their Eligible Shares through CREST.

10.          Recommendation

Your Board considers that the Tender Proposals are in the best interests of the Company and of Shareholders as a whole.  Accordingly, the Board recommends that Shareholders vote in favour of the Continuation Resolution and the Tender Resolution, as the Directors intend to do in respect of their own beneficial holdings, which, in aggregate, amount to 30,000 Shares, representing 0.04 per cent. of the Company's issued Share capital as at the date of this document.

The Board makes no recommendation to Shareholders as to whether or not they should tender their Eligible Shares in the Tender Offer. The Directors do not intend to tender any of their own Shares.  Whether or not Shareholders decide to tender their Eligible Shares will depend, amongst other factors, on their view of the Company's prospects and their own individual circumstances, including their own tax position.

Yours faithfully

Richard Bonsor

Chairman"

Expected Timetable

Record Date for Tender Offer	Close of business on 21 December 2012
Posting of this document, Tender Form and Forms of Proxy	8 February 2013
Latest time and date for receipt of Tender Forms and TTE Instructions (Closing Date)	1.00 p.m. on 1 March 2013
Latest time and date for receipt of Forms of Proxy for the Annual General Meeting	11.00 a.m. on 13 March 2013
Latest time and date for receipt of Forms of Proxy for the Extraordinary General Meeting	11.30 a.m. on 13 March 2013
Annual General Meeting	11.00 a.m. on 15 March 2013
Extraordinary General Meeting	11.30 a.m. on 15 March 2013 (or as soon as practicable thereafter as the AGM shall have concluded or been adjourned)
Announcement of results of Annual General Meeting and Extraordinary General Meeting	15 March 2013
Calculation Date	Close of business on 15 March 2013
Announcement of results of Tender Offer and Tender Price	19 March 2013
Distribution of sale price of Repurchased Shares and crediting of CREST accounts and despatch of cheques	Week commencing 25 March 2013
Despatch of balancing Share certificates and TFE messages in respect of any unpurchased Eligible Shares	Week commencing 25 March 2013

All times are UK times. Times and dates are subject to change.

Enquiries

Advance Developing Markets Fund Limited

Richard Bonsor, Chairman                                                                       020 7484 7484

Westhouse Securities Limited

Financial adviser and broker

Alastair Moreton                                                                                         020 7601 6118

Darren Vickers

 

END

 

 

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