Statement re Publication of Circular
22 March 2013
ACORN INCOME FUND LIMITED (the "Company")
PUBLICATION OF CIRCULAR
Further to the statement in the announcement of annual results dated 22 March 2013, the Company confirms that a circular has now been published regarding proposed authorities to issue New Ordinary Shares and New ZDP Shares, disapplication of pre-emption rights, amendment to the Memorandum and adoption of the New Articles (the "Circular").
Key extracts are set out below and the Circular will shortly be available to view on the Company's website (http://www.premierfunds.co.uk/Adviser/funds/trusts/acorn.html) and at the National Storage Mechanism (www.morningstar.co.uk/uk/NSM).
Defined terms used in this announcement shall, unless the context otherwise requires, have the same meanings set out in the Circular.
Enquiries
Numis Securities Limited, Corporate Broker
Nathan Brown
+44 (0)20 7260 1000
Anson Fund Managers Limited, Secretary
Tel: +44 (0)1481 722260
EXTRACTS FROM CIRCULAR DATED 22 MARCH 2013
Authorities to issue New Ordinary Shares and New ZDP Shares, disapplication of pre-emption rights, amendment to the Memorandum and adoption of the New Articles
PART 1
CHAIRMAN'S LETTER
1 INTRODUCTION
The purpose of this letter is to explain the Board's proposals which include: (i) granting the Directors authority to issue New Ordinary Shares (at a discount to NAV and on a non-pre-emptive basis); (ii) granting the Directors authority to issue New ZDP Shares; and (iii) amending the Memorandum and adopting the New Articles (together the "Proposals").
The Proposals are conditional on the approval of Ordinary Shareholders at the Extraordinary General Meeting and, where indicated, the approval of ZDP Shareholders at the Class Meeting.
2 BACKGROUND TO THE PROPOSALS
The Company is an authorised closed-ended investment company incorporated in Guernsey with an objective of providing shareholders with a high income and also the opportunity for capital growth.
The Company currently has two classes of Shares in issue: Ordinary Shares and ZDP Shares. Its Ordinary Shares have been admitted to listing by the UK Listing Authority and traded on the London Stock Exchange since February 1999. In 2011, the Company implemented a placing of 12,000,000 ZDP Shares in order to refinance its existing bank facilities and those shares have been admitted to listing by the UK Listing Authority and traded on the London Stock Exchange since December 2011.
As at 15 March 2013, the Company had unaudited net assets of £25.573 million (293.11 pence per Ordinary Share) and a market capitalisation of £23.836 million).
The Company's performance has been strong in both absolute and relative terms as illustrated by the following returns:
|
|
Cumulative total return % to 19 March 2013 |
|||
|
|
1 year |
3 years |
5 years |
10 years |
|
NAV |
37.7 |
128.5 |
143.5 |
575.2 |
|
Ordinary Share price |
54.0 |
193.5 |
189.1 |
783.6 |
|
Numis Smaller Companies (excluding Investment Companies) Index |
23.3 |
60.6 |
81.1 |
349.5 |
Source: Datastream.
The Directors believe that there is likely to be enhanced market demand for the Ordinary Shares and the ZDP Shares given this strong performance and are therefore seeking to establish arrangements under which the Board has discretion to issue further Shares on a timely basis in response to market demand.
The arrangements have the potential to benefit existing Shareholders as they are designed to enhance secondary market liquidity in the Shares by providing an ongoing source of supply, and to enlarge the Company and thereby reduce the Ongoing Charges Ratio (previously known as the "TER") and, in turn, enhance the Company's ability to pay dividends. To that end, the Directors intend to put in place arrangements to actively market the Company and its Shares.
For the reasons set out above, your Board has convened the Extraordinary General Meeting and the Class Meeting, notice of each of which is set out at the end of the Circular, to seek your approval for the Proposals.
At 19 March 2013, the Company has 8,939,790 Ordinary Shares and 12,000,000 ZDP Shares in issue, all of which are fully paid, and of which 215,000 Ordinary Shares (representing approximately 2.4 per cent. of the Company's issued Ordinary Share capital) are held in treasury. At 19 March 2013, no ZDP Shares were held in treasury.
3 AUTHORITIES TO ISSUE NEW ORDINARY SHARES AND NEW ZDP SHARES
The Board is proposing to issue up to 14 million New Ordinary Shares (being approximately 160 per cent. of the Company's issued Ordinary Shares, excluding treasury shares) and up to 19 million New ZDP Shares (being approximately 158 per cent. of the Company's issued ZDP Shares). The Proposals are designed to enable the Company to issue New Ordinary Shares and New ZDP Shares in response to market demand, on an ad hoc basis or by way of a series of placings or offers for subscription.
Further Issues of Ordinary Shares
In accordance with the Companies Law, the issue of the New Ordinary Shares requires the approval of Ordinary Shareholders in general meeting. At the EGM, Resolution 1 will be proposed to give the Directors authority to issue up to 14 million New Ordinary Shares. This authority will expire (unless renewed) at the annual general meeting to be held in 2014. The New Ordinary Shares will rank pari passu with the Existing Ordinary Shares in all respects.
The ZDP Share Rights permit the Board to issue further Ordinary Shares without the approval of existing ZDP Shareholders only if the Cover Test is met or if the Cover is otherwise increased by such Issues.
The Cover is 2.20 times as at 15 March 2013. The Directors will only issue New Ordinary Shares in circumstances where either the Cover Test is met or where Cover is otherwise increased by any further Issues of New Ordinary Shares when taking into account the issue of New ZDP Shares at the same time. Accordingly, the Directors do not require the consent of ZDP Shareholders to issue further Ordinary Shares in the circumstances described above for the purposes of the Issues.
Further Issues of ZDP Shares
In accordance with the Companies Law, the issue of the New ZDP Shares requires the approval of Ordinary Shareholders in general meeting. At the EGM, Resolution 2 will be proposed to give the Directors authority to issue up to 19 million New ZDP Shares. This authority will expire (unless renewed) at the annual general meeting to be held in 2014.
As the New ZDP Shares issued will rank pari passu in all respects with the Existing ZDP Shares, the Company requires the authority of ZDP Shareholders at a separate class meeting prior to the issue of any further ZDP Shares. The ZDP Resolution will be proposed at the CM to enable ZDP Shareholders to provide consent to the proposed issue of New ZDP Shares.
The Directors will only issue New ZDP Shares in circumstances where the Cover Test is met or where Cover is maintained or is otherwise increased, in each case, immediately following any such Issues. It is likely that this will be achieved by issuing New ZDP Shares in conjunction with the issue of New Ordinary Shares, thereby increasing Cover for ZDP Shareholders and increasing the NAV of the Company for the benefit of Ordinary Shareholders.
4 AUTHORITY TO ISSUE NEW ORDINARY SHARES AT A DISCOUNT TO NET ASSET VALUE
The issue of New Ordinary Shares at prices representing a discount to NAV per Share (other than on a pre-emptive basis) is only permitted under the Listing Rules if Shareholders have authorised such issues. Accordingly, Resolution 3 to be proposed at the EGM seeks Ordinary Shareholder approval for the issue of Ordinary Shares at a discount to the prevailing NAV per Ordinary Share.
The Board is proposing to seek such an authority from Existing Ordinary Shareholders on the basis that it will only to be utilised in the circumstances in (i) and (ii) below:
(i) where New ZDP Shares are issued at the same time at a premium to NAV such that the combined effect of the issue of both New Ordinary Shares at a discount to NAV and the issue of New ZDP Shares at a premium to NAV is that the NAV per Ordinary Share is increased; and
(ii) where there is no increase in gearing.
This power will expire (unless renewed) at the annual general meeting in 2014.
5 DISAPPLICATION OF PRE-EMPTION RIGHTS
In connection with the proposals to issue New Ordinary Shares referred to above, pursuant to the Listing Rules the Company is required to seek Ordinary Shareholder approval to issue Ordinary Shares otherwise than pro rata to existing Ordinary Shareholders. Resolution 4 to be proposed at the EGM is seeking Ordinary Shareholder approval for the disapplication of pre-emption rights in connection with the Issues.
The power to disapply pre-emption rights in relation to the issue of New Ordinary Shares will be limited to 14 million Ordinary Shares in aggregate (being 160 per cent. of the issued Ordinary Shares at the date of this announcement, excluding treasury shares). This power will expire (unless renewed) at the annual general meeting in 2014.
6 REGULATORY REQUIREMENTS IN RESPECT OF THE ISSUES
Application will be made to the UK Listing Authority for admission of any New Ordinary Shares and New ZDP Shares issued to the Official List (a premium listing in the case of the New Ordinary Shares and a standard listing in the case of the New ZDP Shares). Application will also be made to the London Stock Exchange for the New Ordinary Shares and the New ZDP Shares issued to be admitted to trading on the London Stock Exchange's Main Market for listed securities. It is expected that Admission will become effective and that unconditional dealings in the New Ordinary Shares and the New ZDP Shares will commence on the London Stock Exchange four Business Days following the Board's resolution to issue such Shares.
The New Ordinary Shares and the New ZDP Shares may be issued in certificated or uncertificated form.
The Company may, depending on the extent of any issuance, be required to publish a new prospectus under the Prospectus Rules in order to enable it to issue New Ordinary Shares and New ZDP Shares. This will incur a cost which the Board will take into account in considering the Cover following any Issues of New Ordinary Shares and New ZDP Shares.
7 AMENDMENT TO THE MEMORANDUM AND ADOPTION OF THE NEW ARTICLES
Updates to Memorandum and Articles
By way of background, the Companies Law was introduced in Guernsey on 1 July 2008 as a complete revision of Guernsey's companies law. It is proposed that the Company adopt the Amended Memorandum and the New Articles which have been updated to reflect certain changes brought in by the Companies Law. In addition, certain other changes will make the Company operationally more flexible and allow it to operate in a manner consistent with the Companies Law.
The existing Memorandum and Articles adopted on 5 January 1999 (as amended by special resolutions of the Company dated 2 February 1999, 4 February 1999, 10 October 2003 and 5 January 2007) were each drafted to comply with the requirements of the Companies (Guernsey) Law, 1994 to 1996, as amended.
Notwithstanding that generally a company may not alter any provision of its memorandum, certain transitional provisions designed to effect a smooth introduction of the Companies Law allow a company existing prior to the coming into force of the Companies Law, by special resolution, to make such amendments as may be necessary to ensure compliance with the Companies Law and, accordingly, the Company is able to amend the Memorandum.
Similarly, in the case of the articles of association of a company, the Companies Law makes general provision for amendments to be made by way of special resolution and, accordingly, the Company is also able to adopt the New Articles.
The proposed amendments to the Memorandum and the proposed adoption of the New Articles are designed to ensure that the Company complies with its ongoing legal and regulatory obligations. Set out in Part 2 is a summary of the material amendments proposed in respect of both the Memorandum and the Articles but should not be considered an exhaustive representation of the changes proposed in relation thereto. A copy of the Amended Memorandum and the New Articles will be available for inspection from the date of this announcement until the close of the EGM at Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ, at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH and at http://www.premierfunds.co.uk/library/trusts/info/articles-of-association.pdf.
In order to effect the proposed amendments to the Memorandum and to adopt the New Articles, Ordinary Shareholders are being asked to approve three separate resolutions, as required under Guernsey law. Ordinary Shareholders will be asked to approve Resolution 5 (to make certain amendments to the Memorandum) and to approve Resolution 6 (to amend the objects of the Memorandum). In addition, Ordinary Shareholders will be asked to approve Resolution 7 to adopt the New Articles.
8 BENEFITS OF THE PROPOSALS
The Board believes that the Proposals have the following principal benefits for Shareholders:
§ The Issues will help meet investor demand for investment in the Company which cannot be met in the secondary market.
§ An increase in the size of the Company is expected to improve market liquidity in the Shares. This may enhance the marketability of the Company and may result in a broader investor base over the longer term.
§ An increase in the size of the Company will reduce the Ongoing Charges Ratio and, in turn, enhance the Company's ability to pay dividends.
§ The proposed amendments to the Memorandum and the Articles are designed to ensure that the Company complies with its ongoing legal and regulatory obligations.
9 EXTRAORDINARY GENERAL MEETING
An Extraordinary General Meeting of the Company is being convened for 2.30 p.m. on 24 April 2013 to be held at the Company's registered office at Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ at which the following Resolutions will be proposed:
§ Resolution 1: to grant the Directors authority to issue up to 14 million New Ordinary Shares;
§ Resolution 2: to grant the Directors authority to issue up to 19 million New ZDP Shares in circumstances where the Cover Test is met or Cover is maintained or is otherwise increased, in each case, immediately following such issue. Resolution 2 is conditional upon the passing of the ZDP Resolution;
§ Resolution 3: to approve the issue of New Ordinary Shares at a discount to Net Asset Value in specified circumstances. Resolution 3 is conditional upon the passing of Resolution 1;
§ Resolution 4: to disapply pre-emption rights in connection with the issue of New Ordinary Shares. Resolution 4 is conditional upon the passing of Resolution 1;
§ Resolution 5: to make certain amendments to the Memorandum;
§ Resolution 6: to amend the objects clause in the Memorandum; and
§ Resolution 7: to adopt the New Articles.
Resolutions 1 to 3 will be proposed as ordinary resolutions and Resolutions 4 to 7 will be proposed as special resolutions. An ordinary resolution requires a simple majority of the votes cast to be cast in favour for it to be passed. A special resolution requires a majority of 75 per cent. of the votes cast to be cast in favour for it to be passed. The notice convening the Extraordinary General Meeting is set out at the end of the Circular.
10 ACTION TO BE TAKEN BY ORDINARY SHAREHOLDERS
An EGM Form of Proxy will be enclosed with the Circular distributed to Ordinary Shareholders. If you are an Ordinary Shareholder, whether or not you intend to attend the Extraordinary General Meeting, you are requested to complete the EGM Form of Proxy in accordance with the instructions printed on it and return it to the Registrar, Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ so as to arrive as soon as possible and, in any event, not later than 2.30 p.m. on 22 April 2013.
11 CLASS MEETING OF ZDP SHAREHOLDERS
A Class Meeting of the ZDP Shareholders is being convened for 2.50 p.m. on 24 April 2013 to be held at the Company's registered office at Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ at which the following ZDP Resolution will be proposed as an ordinary resolution:
§ to consent to the issue of up to 19 million New ZDP Shares as described in Resolution 2 to be proposed at the EGM.
The ZDP Resolution will be proposed as an ordinary resolution. An ordinary resolution requires a simple majority of the votes cast to be cast in favour for it to be passed. The notice convening the Class Meeting is set out at the end of the Circular.
12 ACTION TO BE TAKEN BY ZDP SHAREHOLDERS
A CM Form of Proxy will be enclosed with the Circular distributed to ZDP Shareholders. If you are a ZDP Shareholder, whether or not you intend to attend the Class Meeting, you are requested to complete the CM Form of Proxy in accordance with the instructions printed on it and return it to the Registrar, Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ so as to arrive as soon as possible and, in any event, not later than 2.50 p.m. on 22 April 2013.
13 RECOMMENDATION
The Board considers the Proposals to be in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends that Ordinary Shareholders vote in favour of the Resolutions to be proposed at the EGM and that ZDP Shareholders vote in favour of the ZDP Resolution to be proposed at the CM.
PART 2
PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES
Amended Memorandum
The Amended Memorandum will reflect, amongst other things, the following changes:
(i) references to the term "Memorandum of Association" will be replaced with the term "Memorandum of Incorporation";
(ii) references to the Company's authorised share capital will be deleted;
(iii) the Company will be stipulated as being a "non-cellular company";
(iv) the objects of the Company will be replaced in their entirety with the statement that the "objects and powers of the Company are not restricted"; and
(v) the final paragraph regarding the details of the signature of the Company will be deleted in its entirety.
New Articles
The New Articles will reflect, amongst other things, the following changes:
(i) references to the term "Articles of Association" will be replaced with the term "Articles of Incorporation";
(ii) the standard articles of incorporation prescribed pursuant to section 16(2) of the Companies Law will be excluded;
(iii) to amend the current definitions and to include additional definitions, inter alia, to reflect the inclusion of CREST settlement wording and to update provisions in accordance with the CREST Rules;
(iv) to include the provisions relating to the ZDP Rights as set out in the 2011 Prospectus;
(v) to include pre-emption provisions in order to meet new requirements for 'premium' listed companies under the Listing Rules;
(vi) to include new provisions required under DTR 5;
(vii) to delete the provisions which enable the Directors to refuse to register a transfer in circumstances where a member has not complied with the provisions of a direction notice given by the Company;
(viii) to include a provision that for lost, defaced or destroyed certificates, it may now be renewed for such fee as the directors decide and to delete the provisions which permits new certificates to be delivered free of charge on the transfer of shares;
(ix) to include a provision that requires 14 clear days' notice for a call upon monies unpaid on shares where there was previously no notice period;
(x) to delete the provision pursuant to which the Directors may receive from members payment in advance of calls and to pay interest thereon;
(xi) to include a provision that requires 14 clear days' notice for payment in relation to forfeiture where there was previously no notice period;
(xii) to include an additional provision to permit transfers of shares to be effected in writing or in any form acceptable to the Board;
(xiii) to include provision to enable the Directors to suspend the registration of share transfers subject to the provisions of the CREST Guernsey Requirements;
(xiv) to include new provisions dealing with the Directors' ability to refuse to register a transfer of shares to certain persons if such transfer would breach certain United States regulations;
(xv) to include a provision to empower the Board to implement such arrangements as they think fit in accordance with the Companies Law and UK Listing Authority;
(xvi) to delete the power of the Company to convert all or any of its fully paid shares into stock and reconvert that stock into paid-up shares of any denomination;
(xvii) to change the quorum requirements for a general meeting from two members present in person or by proxy to one or more members present in person or by proxy and holding 5 per cent. or more of the voting rights available at such meeting;
(xviii) to change the provisions in relation to permitted adjournments of general meetings from 7 clear days to 14 clear days and, in the case of adjourned meetings for which separate notice must be given, reducing the period from 30 days to 14 clear days;
(xix) to change the provisions in relation to appointing a chairman of the general meeting to include the chairman of the Board, any member of the Board or, if no Directors are present, any member;
(xx) to enable polls, if requested, to be taken at the meeting at which the same is demanded, rather than at any time between the date of the meeting and a period of 30 days thereafter;
(xxi) to change the minimum number of Directors from three to two and to change the quorum from three to two;
(xxii) to change the time by which the Directors must have received notice for any person to be eligible for election as a Director from not less than 7 nor more than 42 clear days to 14 clear days before the meeting;
(xxiii) to include substantive amendments in relation to the disqualification and retirement of directors allowing for removal where they resign, are absent from meetings of the Board for 12 consecutive months, where they die or become of unsound mind, become insolvent, are requested to resign by all their co-directors, are removed by the Company in general meeting, they become resident in the United Kingdom and, as a result thereof, a majority of the Directors are resident in the United Kingdom, if they become ineligible pursuant to the Companies Law or they become prohibited from being Directors by reason of any order made under any provisions of any law or enactment;
(xxiv) to provide more flexibility to the Company in respect of the payment of Directors' reasonable expenses incurred in connection with the business of the Company;
(xxv) to update the provisions in relation to which the Directors may have a conflict of interest regarding the disclosure of directors' interest in transactions with the Company and their ability to count in the quorum and vote notwithstanding such interests (as the case may be), so as to comply fully with the new position set out by the Companies Law;
(xxvi) to move the provisions in relation to the common signature from the Memorandum to the New Articles;
(xxvii) to remove the requirement that distributions only be paid out of profits resulting from the Company's business so as to provide for the increased flexibility based on a solvency test now permitted under the Companies Law;
(xxviii) to permit the Company to offer scrip dividends to shareholders by enabling the Board to capitalise out of any amount standing to the credit of any revenue reserve or fund (including retained earnings) a sum equal to the relevant value per share determined by the Board and apply it in paying up in full the appropriate number of shares for issue and distribution to shareholders who have elected to receive scrip dividends;
(xxix) to delete the provision which provides that any sum standing to the credit of the share premium account or capital redemption reserve fund may only be applied in the paying up of unissued shares to be issued to members credited as fully paid;
(xxx) to include a requirement that, in circumstances where a member is required to disclose the identity of a person with an interest in the shares, that member must now be given twenty-eight (28) days after the service of the notice, or fourteen (14) days if the shares concerned represent 0.25 per cent or more in value of the issued shares of the relevant class to make such disclosure and, if any member is in default, permitting the Company to serve a direction notice that, in respect of the shares comprising the shareholder account in the register and any other shares held by that member, that member is not entitled to attend or vote at any general meeting or exercise any other rights; and
(xxxi) to delete Article 138 so that the consent of the CISX is no longer required for any amendment to the Articles.
For further information contact:
Numis Securities Limited
Corporate Broker
Tel: +44 (0)20 7260 1000
Anson Fund Managers Limited
Secretary
Tel: +44 (0)1481 722260
22 March 2013
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