Information  X 
Enter a valid email address

Exeter Smaller Co's (ESC)

  Print      Mail a friend

Thursday 07 July, 2005

Exeter Smaller Co's

Wind up proposal

Exeter Smaller Co's Income Fund Ld
07 July 2005



7 July 2005

                    Exeter Smaller Companies Income Fund Limited
                                 (the 'Company')

                                      and

                            ESCIF Securities Limited
                               (the 'Subsidiary')

               Proposals to wind up the Company and the Subsidiary

Introduction

The Board of the Company announced in February 2005 that, having consulted with
certain large shareholders, it had concluded that the most appropriate way
forward would be for the Group to be placed in members' voluntary liquidation.
Having consulted further with shareholders, the Company is today posting a
Circular to all the holders of Ordinary Shares and ZDP Shares seeking their
approval for the Company and the Subsidiary to be placed into early liquidation
and setting out the proposals for the distribution of the Company's assets
(after payment of its liabilities) on such winding up.

The following text comprises edited extracts from the Chairman's letter to
Shareholders in the Circular.

Reasons for the Proposals

The total assets of the Group stood at only £12.9 million as at the close of
business on 1 July 2005 (including £3.5 million remaining outstanding under the
Bank Loan).

The Board has taken steps to reduce the Company's running costs where
practically possible, including reducing the number of Directors, the fees paid
to service providers and printing costs.  Even so, the significantly reduced
size of the Company's portfolio means that it is anticipated that, in the
current financial year to 30 September 2005, expenses would be approximately
£0.6 million.  Your Board does not believe that the current size of the Group is
large enough to justify the ongoing cost base.  The Directors therefore believe
that it would be in the best interests of Shareholders for proposals to be put
to Shareholders now for a voluntary winding up of the Company and the
Subsidiary.

The Subsidiary is not due to be wound up in the ordinary course until 30
September 2007.  The arrangements between the Company and the Subsidiary (as set
out in the intra-group loan arrangements contained in the Loan Note and the
Contribution Agreement) provide for the Company to pay such amount to the
Subsidiary as is required to satisfy in full the entitlement of the ZDP Shares
on any winding up, or, to the extent that the Company does not have sufficient
assets to satisfy such entitlement in full, the Company shall pay to the
Subsidiary all of its remaining assets after payment of all other creditors of
the Company.  The Ordinary Shareholders do not have any entitlement to the
assets of the Company unless and until the ZDP Shareholders have been repaid in
full.  Total assets would need to grow at over 20 per cent. per annum for the
Ordinary Shares to have any value in September 2007.

As a consequence, if the Company and the Subsidiary were to be wound up now, in
the absence of the Proposals, all of the Company's assets (including any revenue
reserves) after payment of its liabilities would be attributable to the holders
of ZDP Shares.

The support of each class of Shareholder will be needed for a winding up of the
Subsidiary and the Company before 30 September 2007.  However, as no dividend is
currently being paid or is planned to be paid to Ordinary Shareholders and as it
is extremely unlikely that such Shareholders would receive anything on a winding
up of the Subsidiary on 30 September 2007, the Directors consider that only a
very small part of the Company's assets should be allocated to the Ordinary
Shares as part of the Proposals.

The Proposals

In February 2005, the Board indicated that it anticipated that, on an early
liquidation of the Company, Ordinary Shareholders would receive 0.10p per
Ordinary Share.  However, after further consultation with major shareholders of
each class of Share and after careful consideration of their views, the Board
has felt it necessary to amend its proposals, as described below.

The Proposals are now that each of the Company and the Subsidiary be placed in
members' voluntary liquidation and that the Company's assets (after payment of
its liabilities and after deducting the costs of implementing the Proposals) on
such winding up be distributed as follows:-


For each Ordinary Share               0.09p

For each ZDP Share                    the balance of the assets of the Group
                                      proportionately

If the Proposals are implemented, no dividends will be declared or recommended,
and holders of Ordinary Shares will not receive anything on the winding-up
except as set out above.

In order to effect the Proposals in relation to Ordinary Shares it will be
necessary to amend the Loan Note and Contribution Agreement by means of the
Company and the Subsidiary entering into the Deed of Amendment.  The amendments
require the approval of the ZDP Shareholders at the ZDP Class Meeting and the
Subsidiary at the Subsidiary Extraordinary General Meeting.

Liquidation and Dealings

The Liquidators will set aside sufficient assets in a Liquidation Fund to meet
the Company's liabilities including the costs of the Proposals (see 'Costs of
the Proposals' below).  The Liquidators will also provide in the Liquidation
Fund for a Retention which they consider sufficient to meet any contingent and
unknown liabilities of the Company.  This Retention is currently expected not to
exceed £40,000.

On the basis of the published net asset value of the Company as at the close of
business on 1 July 2005, the net assets of the Company available for
distribution to ZDP Shareholders on a liquidation would be approximately £9.1
million (equivalent to approximately 103.4p per ZDP Share).  This assumes the
successful realisation of all the investments at carrying values, the payment of
0.09p per Ordinary Share to Ordinary Shareholders, the Retention not being
utilised and deducts the estimated costs of the Proposals (see 'Costs of the
Proposals' below).

Depending on prevailing market conditions and the Directors being satisfied that
the Proposals will be approved by Shareholders, the Company may dispose of some
of its portfolio prior to the Meetings.  If Shareholders approve all the
Resolutions, the Company will repay the Bank Loan before filing the relevant
Resolutions with H. M. Greffier.  It is expected that the Resolutions will be
filed on Friday 29 July 2005, after completion of all the Meetings.  Upon
filing, the winding-up will take effect.  The size and timing of the liquidation
distributions will depend on the timing and amount actually realised on the sale
of the investments.  The Liquidators expect to make an initial capital
distribution by Friday 12 August 2005, being the distribution of 0.09p per
Ordinary Share to Ordinary Shareholders and an initial capital distribution to
ZDP Shareholders on the Register at the close of business on Friday 29 July
2005.  It is currently expected that the initial capital distribution to ZDP
Shareholders will be of a sum equivalent to the Company's realised resources
(less the Liquidation Fund) which are available at the time of making the
distribution.  Based on the assumptions stated in the previous paragraph and
assuming that the entire portfolio has been realised prior to such distribution
being made, the initial capital distribution would be approximately 102.9p per
ZDP Share.

The assumed balance of the Company's assets, including the Retention, would
potentially be available for future distributions to ZDP Shareholders.  The size
and timing of any future distributions will again depend on the timing and
amount actually realised on the sale of the Company's assets and also the
ongoing costs payable during the liquidation and settlement of any currently
unknown or contingent liabilities.

The Share Registers will be closed at the close of business on Friday 29 July
2005 and, to be valid, all transfers must be lodged and transactions in CREST
settled before that time.  Transfers received by the Registrars after the close
of business on Friday 29 July 2005 will be returned to the person lodging them.
Shareholders should be aware that dealings in the Shares after close of business
on Tuesday 26 July 2005 will be for cash settlement only.

Dealings in Shares on the London Stock Exchange and the Channel Islands Stock
Exchange will be suspended at the opening of business on Friday 29 July 2005 and
at the same time the listing on the Official Lists will be suspended.  If the
Proposals become effective, it is the intention of the Company and the
Subsidiary to apply for the cancellation of the listings of the Ordinary Shares
and ZDP Shares on the Official Lists with effect from Tuesday 30 August 2005.

Shareholders should note that the amount finally distributed may be different
from the current carrying value of the underlying investments due to a variety
of factors including movement in the value of the underlying assets, the level
at which assets can be realised, the exact amount payable due to the early
termination of Swap Arrangement (as detailed below), settlement of any currently
unknown or contingent liabilities and ongoing costs associated with running the
Company and the realisation process.

Shareholders should also note that it cannot be guaranteed that the Company will
be able to dispose of its entire portfolio prior to the Liquidators making the
initial capital distribution.

Support for the Proposals

The Board has received irrevocable undertakings to vote in favour of the
Resolutions from Shareholders holding 44.1 per cent. of the issued Ordinary
Shares and 60.2 per cent. of the issued ZDP Shares.

Repayment of the Company's Bank Facility

In connection with the Proposals, the remaining £3.5 million of the Bank Loan
(which is due for repayment on 30 September 2007) will be repaid following the
Resolutions being passed and prior to the filing of certified copies of the
relevant Resolutions with the H.M. Greffier in Guernsey.  In addition, it is
proposed that the Company's Swap Arrangements with Bank of Scotland will be
terminated at the same time, which will trigger the requirement to pay breakage
costs.

On the assumption that there are no changes to the relevant circumstances, it is
estimated that the costs associated with the early repayment of the Bank
Facility and the early termination of the Swap Arrangements will be
approximately £155,000.  This amount has been deducted for the purposes of
calculating the estimated initial capital distribution referred to above.  The
actual breakage costs associated with the early termination of the Swap
Arrangements payable by the Company will be dependent on the prevailing interest
rates at the time of termination.  Any change from the current estimate referred
to above will affect the amount available for distribution to Shareholders.

Costs of the Proposals

The expenses incurred in relation to the Proposals (including all financial
advice, other professional advice, the current estimate of the breakage costs
associated with the early termination of the Company's Swap Arrangements
referred to above, the compensation payable to the Manager and the Liquidators'
charges) are currently estimated to amount to approximately £284,000.

Extraordinary General Meetings and ZDP Class Meeting

The implementation of the Proposals will require Shareholders to vote in favour
of all the resolutions to be proposed at the ZDP Class Meeting and the
Extraordinary General Meetings of the Company and the Subsidiary which have been
convened on Friday 29 July 2005 starting at 10.00am.

Recommendation

The Directors, who have been advised by Collins Stewart Limited, consider that
the Proposals are in the best interests of the Shareholders as a whole. In
providing its advice, Collins Stewart Limited has placed reliance on the
Directors' commercial assessment of the Proposals.

Expected timetable
                                                         2005

Latest time and date for receipt of forms 
of proxy for the Meetings                     10.00 a.m. on Wednesday 27 July
Suspension of Shares from trading on 
the London Stock                          Opening of business on Friday 29 July
Exchange and the Channel Islands Stock 
Exchange and suspension of listing on 
the Official Lists ZDP Class Meeting           10.00 a.m. on Friday 29 July
Extraordinary General Meeting of the 
Subsidiary                                     10.05 a.m. on Friday 29 July
Extraordinary General Meeting of the Company   10.10 a.m. on Friday 29 July
Share registers close                       Close of business on Friday 29 July
First liquidation distribution                      by Friday 12 August
Cancellation of the listing of the Shares on the     Tuesday 30 August
Official Lists


                                    --Ends--

Enquiries:

Hugh Field                Collins Stewart Limited             020 7523 8325

The definitions used in this announcement are as set out in the Circular to
Shareholders dated 7 July 2005.

Collins Stewart Limited is acting for Exeter Smaller Companies Income Fund
Limited and ESCIF Securities Limited and no one else in connection with the
Proposals and will not be responsible to any person other than Exeter Smaller
Companies Income Fund Limited and ESCIF Securities Limited for providing the
protections afforded to clients of Collins Stewart Limited or for providing
advice in relation to the Proposals.

A copy of the Circular is available for inspection at the UKLA's Document
Viewing Facility at 25 The North Colonnade, Canary Wharf, London E14 5HS.


                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                                                                                                        

a d v e r t i s e m e n t