Further Information regarding

RNS Number : 0541X

Aurora Russia Limited

30 November 2010

 



30 November 2010

AURORA RUSSIA LIMITED

Further Information regarding the Notice of AGM

Further to the announcement released on 28 October 2010 concerning the notice of Aurora Russia Limited's ("Aurora Russia" or the "Company") Annual General Meeting ("AGM") to be held on 3 December 2010, following discussions with shareholders the Board of Aurora Russia sets out below some additional information relating to certain of the proposed resolutions to be put to shareholders at the AGM.

Proceeds from realisations

As previously indicated, the Board will return all of the cash proceeds from realisations of the Company's assets to shareholders, as long as the discount of the Company's share price is more than 20% of the latest published net asset value of the Company.  If for a period of six months immediately preceding the sale of an asset the share price discount to the NAV per share is less than 20%, then the Board will have the discretion to make additional investments in line with the strategy of the Company. 

The method by which the proceeds may be returned to shareholders (e.g. payment of dividends, share buy back or tender offer for shares by the Company) will be determined by the Board at the relevant time.  The Board intends that proceeds from the realisations will be returned to shareholders no later than the payment of any incentive fee due to the Manager in relation to such asset sale.

Incentivisation arrangements

The Board indicated in the circular relating to the AGM that it has agreed with the Manager to reduce the management fee from 2.0% to 1.5% of NAV per annum with effect from 31 March 2011 and to put in place a new incentive structure to better align its interests with shareholders, replacing the current option programme for the Manager.  The new incentive structure would involve the payment of a performance fee to the Manager, calculated by reference to a percentage of the value of any disposals realised by the Company.  It is proposed that, assuming that the Continuation Resolution is passed, the revised incentive arrangements will be put in place after the AGM. 

In the event that any follow on investments are made by the Company following the narrowing of the share price discount to NAV as described above, it is proposed that the Manager will receive a performance fee equal to 20% of the value of any amounts realised on the disposal of such further investments in excess of the amounts so invested.  The 20% performance fee would be subject to a hurdle rate which is expected to be at 12% per annum (the same as the hurdle rate for the Manager's current incentive arrangements under the Option Deed).  

Composition of the Board

The Directors believe that it is right to strengthen the Board where possible and the Board has agreed to appoint two new Independent Directors to represent shareholders as a whole as soon as practicable following the AGM. The Board does not intend to increase the size of the Board from seven Directors by such appointments, but rather two existing directors (including John McRoberts) would step down so as to keep the Board at its current size.  Furthermore, the Board will consider in due course whether it is appropriate to reduce the size of the Board to either six or five Directors, provided that it can maintain a board with the skills that are needed in a company such as Aurora Russia.

Company Expenses

In the year ended 31 March 2010 the Company's administration and operating expenses were £3.34 million, being 3.4% of the Company's current NAV or 8.1% of the Company's market capitalisation as at close of business on 29 November 2010. The £3.34 million of costs included non-recurring costs of approximately £400,000 incurred in relation to the Placing and in the acquisition of shares in OSG in January 2010 and a non-cash accrual of £600,000 for the options that may be issued to the Manager under the existing incentive arrangements, which will now be cancelled.

Therefore, the administrative and operating cash costs of the Company in the year ended 31 March 2010 were approximately £2.3 million, being 2.3% of the Company's current NAV or 5.5% of the Company's market capitalisation as at close of business on 29 November 2010.  The Board commits to keeping the Company's costs down and, as an example of this commitment, the Chairman has agreed to reduce his remuneration by £45,000 to £50,000 per annum (a 47% reduction).

AGM

The Company is holding its AGM at 2.00 p.m. on Friday 3 December 2010 at Trafalgar Court, Admiral Park, St. Peter Port, Guernsey, GY1 2JA and the latest time that proxies can be accepted is 2.00 p.m. on Wednesday 1 December 2010.

The proposals to be put to shareholders at the AGM are the outcome of extensive discussions with a wide range of shareholders as to what is in the best interests of the Company and its shareholders as a whole.

The Directors reiterate that they consider that the resolutions to be proposed at the AGM, and the Continuation Resolution in particular, are in the best interests of the Company and its shareholders as a whole and are most likely to promote the success of the Company for the benefit of its shareholders.

The Directors unanimously recommend that shareholders vote in favour of the resolutions as they intend to do so in respect of their own shareholdings which in aggregate amount to 1,200,000 Ordinary Shares, representing 1.07% of the Company's issued share capital as at the date of this letter.

Enquiries:

Aurora Russia Limited

Dan Koch                                [phone]

John McRoberts                      [phone]

Investec Investment Banking

Patrick Robb                           [phone]

Martin Smith                            [phone]

Financial Dynamics

Ed Gascoigne-Pees               [phone]

Sue I Ong                                [phone]

Notes to editors:

Aurora Russia

Aurora Russia floated on the Alternative Investment Market of the London Stock Exchange on 24 March 2006.  The Company has been established to make equity or equity related investments in small and mid-sized private Russian companies focused on the financial, business and consumer services sectors where the Directors of Aurora Russia believe there is potential for growth together with viable exit opportunities. The Company provides its investee companies with the necessary capital to continue to expand and develop and hands-on operational support to deliver significant step changes in performance and value creation. 

 

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