Korea Asia Fund Ld
6 November 2000
RECOMMENDED PROPOSAL FOR THE WINDING UP OF THE COMPANY
SUMMARY OF PROPOSAL
The Board proposes the voluntary winding up of the Company
and the appointment of the Liquidators.
If the Proposal is approved, the Company's portfolio will be
realised and all liabilities will be established and discharged.
In liquidating the Portfolio, the Liquidators have indicated
that they would seek to act so as to ensure an orderly and
controlled realisation of the Company's assets as soon as
practicable following liquidation. Market conditions and the
regulatory regime in Korea may affect the timing of the
realisation of the portfolio and the conversion and remittance of
funds outside Korea.
Subject to the above, and after setting aside a reserve in
respect of the costs of liquidation and the Company's known
actual and contingent liabilities, the Liquidators would be
hopeful of making an interim distribution of available net cash
proceeds to Shareholders within four weeks of the commencement of
liquidation.
BACKGROUND TO THE PROPOSAL
It was announced on 25th September, 2000 that the Board would
present to Shareholders a proposal for the winding up of the
Company. This announcement provides the background to and
details of the Proposal.
The Company was incorporated in 1990 as one of only three closed
ended funds with a local licence providing exposure to the Korean
stockmarket for non-Korean investors. Since incorporation the
Company has achieved a successful record of Net Asset Value
performance and has outperformed its benchmark index, KOSPI, over
the period. However, recently the Company's shares have traded
at a discount to Net Asset Value per Share.
The Board has therefore been actively considering for some time
the enhancement of Shareholder value and a number of different
possibilities have been discussed by the Board during that time.
These included repurchase of the Company's Shares, authority for
which was granted by Shareholders in 1999 and renewed at the
Annual General Meeting on 27th September, 2000.
In August of this year an institution claiming to be interested
in approximately 10 per cent. of the Company's Shares approached
the Board and published a paper in which it called for the
opportunity to realise shareholder value in the Company. The
paper contained proposals for the surrender of the Licence and a
capital restructuring to enable in specie redemptions by transfer
of part of the Company's portfolio at Net Asset Value, such a
right to redemption remaining an integral part of the continuing
fund.
The Board considered carefully the proposal put forth but
concluded, after taking advice, that for both practical and
technical reasons it was not viable. The Board also considered a
number of other possible courses of action, including continuing
with the status quo or winding up the Company and transferring
its assets into one or more successor funds.
Central to this process was contact by the Board, through its
financial advisers, HSBC, with institutions believed to represent
a large majority of the Company's Shares and IDRs, to obtain
their views on the future direction of the Company. Most of the
institutions contacted by HSBC expressed a desire for a cash exit
from the Company. A number of institutions expressed a desire to
continue as investors in the Company or a successor fund on the
basis that they would only wish to do so if the size of any
ongoing fund was sufficiently large, failing which they would
favour an exit for cash.
After lengthy and careful consideration, the majority of the
Board decided on 25th September, 2000 that it was in the best
interests of Shareholders and holders of IDRs as a whole to
propose the winding up of the Company.
THE PROPOSAL
Under the Proposal, the Company will be placed in members'
voluntary winding up on the passing of the Resolution. At that
point, under Cayman Islands law (which will govern the winding up
of the Company), the Directors will cease to be authorised to
manage the Company and control will pass to the Liquidators.
Accordingly, what follows in the remaining paragraphs will not be
within the power of the Directors, but sets out what the
Directors believe to be the present intentions of the Liquidators
(assuming that the persons named in the Resolution are appointed
as liquidators of the Company and remain in office as such). It
must be understood, however, that the Liquidators take no
responsibility for this announcement and cannot be bound by it,
particularly given the possibility of changing markets and other
circumstances.
In liquidating the portfolio, the Liquidators have indicated that
they would seek to act so as to ensure an orderly and controlled
realisation of the Company's assets as soon as practicable
following liquidation. Market conditions and the regulatory
regime in Korea may affect the timing of the realisation of the
portfolio and the conversion and remittance of funds outside
Korea. Whilst the Board might have otherwise commenced the
realisation process, the terms of the Licence do not in general
permit this. After discussion with the Liquidators, the Board has
instructed the Investment Manager to begin taking appropriate
steps to assist in the orderly realisation of the Company's
portfolio.
The Directors have discussed with the Liquidators the likely
amount and timing of distributions to Shareholders. The
Liquidators have indicated that they would be hopeful of making a
first distribution to Shareholders within four weeks of the
commencement of liquidation in an amount equal to such net cash
proceeds from the disposal of investments as are then available,
less known actual and contingent liabilities of the Company. The
registered Shareholders will be responsible for passing this
distribution on to any underlying investors or holders of IDRs,
as applicable.
The Liquidators envisage making a second distribution to
Shareholders shortly after the disposal programme has been
substantially completed. A third distribution would be made on
completion of the liquidation. The Liquidators expect, based on
current knowledge and circumstances, that the third distribution
will be final, but further distributions may prove necessary
depending on the progress of the realisation of the portfolio.
Before any cash is distributed to Shareholders, the Liquidators
have indicated that they would set aside cash or other assets to
provide for known accrued or potential liabilities of the
Company, including provision or reserve for:
any liabilities arising under or in connection with the
Company's contracts, including those with the Investment Manager,
the Registrar, the Custodian and the Depositary;
any liabilities to taxation;
all other accrued liabilities of the Company, including
fees, costs and expenses incurred by the Company in formulating,
preparing and implementing the Proposal and associated documents;
the costs and expenses of winding up the Company, including
the fees and expenses of the Liquidators;
any other amounts considered by the Liquidators to be
appropriate to provide for any contingencies.
To the extent that any part of the cash or other assets set aside
was not required to meet the Company's liabilities and
liquidation costs, any balance remaining in the hands of the
Liquidators would be distributed to Shareholders in due course.
IDR HOLDERS
The Deposit Agreement may be terminated on 90 days' written
notice. The following summary of the treatment of IDR holders
assumes that the Deposit Agreement remains in force throughout
the winding up of the Company, though this may not be the case.
The Deposit Agreement provides that amounts distributed upon a
liquidation of the Company will be paid to IDR holders in the
same way as any other distribution. The Depositary is obliged to
notify the IDR holders of such payment as soon as reasonably
practicable, specifying the amount payable per deposited Share.
Such notification is required, if practicable, to be made no more
than 14 days after the distribution has been received by the
Depositary or its agent. IDR holders would then present the
coupon specified in the notice from the Depositary at the
Depositary's specified office (or at the office of such of its
agents as it may specify) in order to receive the relevant
distribution.
Any distribution remaining unclaimed at the end of 12 years from
the date on which the distribution had been made available to IDR
holders would be retained beneficially by the Depositary.
FACTORS AFFECTING REALISATION PROCEEDS
The Net Asset Value of the Company on 2nd November, 2000 (the
latest practicable date prior to the publication of this
announcement) was US$238,911,750.
The costs to be incurred by reason of the Proposal and, if
approved, the subsequent winding up of the Company, are estimated
to be approximately US$825,000. This estimate does not include
any costs associated with the realisation of the Company's assets
or any amount in respect of taxation. This estimate disregards
the cost of servicing existing contracts, including the
Investment Management Agreement, during the period subsequent to
the appointment of the Liquidators, or any costs of or
liabilities from terminating such contracts.
There are a number of factors not currently known to, or within
the control of, the Liquidators which may affect the total amount
to be distributed to Shareholders, including, but not limited to:
Performance of the Korean stock market. Investors should be
aware that the value of securities can go down as well as up. The
price at which the Liquidators realise any particular investment
is likely to be affected by the performance of the Korean stock
market generally;
Accelerated nature of the sale. Although the Liquidators
have indicated that they would seek to act so as to achieve an
orderly and controlled realisation of the Company's assets,
securities will be sold which might otherwise, if the Company
were not winding up, be held as longer term investments. The
amount realised on the disposal of any such securities might be
less than the price they would ordinarily realise had the fact of
the Company's winding up not been announced;
Nature of the portfolio. A small part of the Company's
portfolio consists of less liquid securities which in particular
may be disposed of at a price lower than the value that would, on
a going concern basis, have been attributed to those securities
for the purposes of calculating Net Asset Value;
Currency risk. The principal foreign currency of the
Company's underlying investments is Korean won. The Company's
reporting currency is US dollars. The proceeds of the realisation
of the portfolio will be converted from Korean won into US
dollars before being distributed to Shareholders. Shareholders
should be aware that the exchange rate may fluctuate over the
period.
Taxation. Based principally on certain management
information, the Directors believe that the Company conducted its
affairs during the year to 31st March, 2000 so as to satisfy the
criteria to be eligible for investment trust status in respect of
that year, and that it will have continued to do so for the
period commencing on 1st April, 2000 and ending on the
commencement of the winding up. However, formal approval as an
investment trust is ultimately a matter to be determined by the
taxation authorities.
Liabilities under contracts. The precise extent of the
Company's liability under or in the event of termination of its
contracts may not be known. The amount of such liability would
depend upon the time it takes to realise the portfolio, the time
at which the Liquidators choose to terminate the contracts (if at
all), whether counterparties choose to terminate contracts, and
any agreements the Liquidators may reach with the other parties
to any of the contracts.
SHAREHOLDER APPROVAL AND ACTION TO BE TAKEN
The implementation of the Proposal requires the approval of
Shareholders at the EGM convened for 4.00 p.m. (London time) on
27th November, 2000 (or at any adjournment thereof). In order to
be passed at the EGM, the Resolution will require the approval of
three-quarters of the votes cast by Shareholders present and
voting, in person or by proxy. In accordance with the Articles,
on a show of hands every Shareholder present in person and
entitled to vote will have one vote. On a poll, every Shareholder
present in person or by proxy will have one vote for every Share
held. If the Proposal is approved it will bind all Shareholders
whether or not they have voted in favour of the Proposal at the
Meeting. If the Proposal is not approved, the Company will
continue in existence.
INVESTORS HOLDING SHARES, DIRECTLY OR THROUGH EUROCLEAR OR
CLEARSTREAM, LUXEMBOURG
Registered Shareholders in the Company should complete, and
persons who own Shares indirectly through Euroclear or
Clearstream, Luxembourg should request Euroclear or Clearstream,
Luxembourg (or, if applicable, the broker or other intermediary
to whose account at Euroclear or Clearstream, Luxembourg such
Shares are credited, to request Euroclear or Clearstream,
Luxembourg) to arrange for its nominee Shareholder to complete, a
Proxy Form for the Extraordinary General Meeting and return it to
Aquis Court, 31 Fishpool Street, St. Albans, Hertfordshire AL3
4RF (marked for the attention of Mr. Steve Martin) as soon as
possible and, in any event, so as to arrive not later than 4.00
p.m. (London time) on 25th November, 2000.
Completing Proxy Forms will not preclude registered Shareholders
from attending the EGM and voting in person (or by corporate
representative) if they wish to do so.
INVESTORS HOLDING SHARES IN THE FORM OF IDRS, DIRECTLY OR THROUGH
EUROCLEAR OR CLEARSTREAM, LUXEMBOURG
The votes attributable to Shares held in the form of IDRs,
whether directly or indirectly through Euroclear and/or
Clearstream, Luxembourg, can only be exercised by the Depositary
(or its nominee) as the registered Shareholder, or by a proxy
appointed by it. The Depositary (or such nominee) will not
exercise voting rights or appoint a proxy without express
instructions from the relevant IDR-holder in relation to the
underlying Shares.
In the case of those IDRs that are held through Euroclear or
Clearstream, Luxembourg, the instructions to the Depositary must
come from the clearing system (or other person recognised by the
Depositary as the holder of the relevant IDRs). Therefore, each
underlying owner of IDRs should make arrangements for its brokers
(or other account-holding participant in the relevant clearing
system) to require the clearing system to give the necessary
voting or proxy instruction to the Depositary.
INSTRUCTIONS TO CLEARING SYSTEMS
Persons holding Shares or IDRs through Euroclear or Clearstream,
Luxembourg should require the relevant clearing system and the
Depositary (in the case of IDRs) to give the necessary voting or
proxy instruction within the above time limit. The Directors
cannot be held responsible for any failure to lodge proxies
within the specified time.
It is important to note that, without the correct instructions to
the relevant clearing system from the account-holding participant
(and, in the case of IDRs, the onward notification by the
clearing system to the Depositary) votes will not be able to be
exercised and the Proposal could consequently fail through want
of votes to pass the Resolution.
Instructions to Euroclear and/or Clearstream, Luxembourg must be
made via their electronic/telex/SWIFT instruction systems.
Instructions sent to Euroclear or Clearstream, Luxembourg are
requested by them to be received before 4.00 p.m.
(Brussels/Luxembourg time) on 21st November, 2000. Instructions
sent to Euroclear via EUCLID are requested by them to be received
before 4.00 p.m. (Brussels/Luxembourg time) on 21st November,
2000. These instructions must be given by the actual participant
in whose Euroclear or Clearstream, Luxembourg account the
relevant Shares or IDRs are held. On receipt of these
instructions Euroclear or Clearstream, Luxembourg, as
appropriate, have indicated that they will respectively (a) in
the case of Shares, complete (or cause its nominee to complete) a
Proxy Form in respect of those Shares in accordance with the
voting instructions received from the account-holding participant
and (b) in the case of IDRs, advise the Depositary to complete
(or cause its nominee to complete) a Proxy Form in respect of the
Shares represented by those IDRs in accordance with the voting
instructions received from the account-holding participant.
If any assistance is required please contact the following
Depositary and/or Euroclear and/or Clearstream, Luxembourg
helplines:
Depositary Helpline:
Ms. Veronique Cridel/Hilary Durst
Tel: + 352 46 26 85 284/236
Fax: + 352 46 26 85 380
Email: [email protected]
Email: [email protected]
Euroclear Helpline:
Veerle Bossaerts
Tel: + 322 224 1425
Fax: + 322 224 1459
Email: [email protected]
Clearstream, Luxembourg Helpline:
Bernard Lecaillon
Tel: + 352 46 56 4 407
Fax: + 352 46 56 48 254
STOCK EXCHANGE DEALINGS AND SETTLEMENT
If the Resolution is passed without adjournment, the last day for
dealings on the London Stock Exchange in the Shares for normal
account settlement will be 17th November, 2000. Dealings on the
London Stock Exchange in the Shares are expected to be suspended
with effect from 4.30 p.m. (London time) on 27th November, 2000.
In order to maintain the Company's investment trust status, it is
expected that the listing for the Shares will not be cancelled
until the realisation of the Company's portfolio is complete.
Such maintenance of the listing is in accordance with current
practice. However, Shareholders and IDR holders should be aware
that this is a matter that is ultimately at the discretion of the
UKLA.
Any purported transfer of shares after the Company has been
placed in liquidation without the sanction of the liquidators
will be void.
DIVIDEND
It is the present intention of the Directors that no dividend be
payable in respect of the period from 1st April, 2000 to the date
of the EGM.
OTHER COLLECTIVE INVESTMENT FUNDS SPECIALISING IN KOREAN EQUITIES
In its announcement made on 25th September, 2000, the Board
indicated that it would provide information on other collective
investment funds specialising in Korean general equities. Part II
of the circular posted to Shareholders contains a list of some of
the collective investment funds which the Directors understand
specialise in Korean equities. This information is compiled from
publicly available information and the Directors make no
representation as to its accuracy or completeness. The Directors
are not authorised to, and do not, make any recommendation to
Shareholders as to investment in Korean equities generally or in
relation to any particular fund, whether specialising in Korean
equities or otherwise. Shareholders should seek their own
personal financial advice from their stockbroker, bank manager,
solicitor, accountant or other professional adviser authorised
under the Financial Services Act 1986.
EXPECTED TIMETABLE
Suggested latest time for receipt of instructions by Euroclear
and Clearstream, Luxembourg
4.00 p.m. (Brussels/Luxembourg time) on 21st November, 2000
Suggested latest time for receipt of instructions by Depositary
4.00 p.m. Luxembourg time on 23rd November, 2000
Latest time for receipt of Form of Proxy for the Extraordinary
General Meeting
4.00 p.m. (London time) on 25th November, 2000
Extraordinary General Meeting
4.00 p.m. (London time) on 27th November, 2000
Dealings in Shares suspended
4.30 p.m. (London time) on 27th November, 2000
QUERIES
Steve Martin
KPMG (Company Secretarial Advisors)
Tel. 01227 733102
Tom Durie
HSBC Investment Bank plc (Broker to the Company)
Tel. 020 7336 2004
Notes:
Definitions used in this announcement shall have the same meaning
as set out in the Circular despatched to Shareholders.
HSBC Investment Bank plc, which is regulated by The Securities
and Futures Authority Limited, is acting for Korea Asia Fund
Limited and for no-one else and will not be responsible to anyone
other than Korea Asia Fund Limited for providing the protections
afforded to customers of HSBC Investment Bank plc or for
providing advice in relation to the Proposal or any matter
referred to in this announcement.
