Issue of Rights to Reclassify Participating Shares
Genesis Emerging Markets Fund Ld
13 January 2000
GENESIS EMERGING MARKETS FUND LIMITED
ISSUE OF RIGHTS TO RECLASSIFY PARTICIPATING SHARES
The Board announces proposals which will entitle
Participating Shareholders to realise up to 50% of their
investment in the Company.
The proposals do not in any way reflect a lack of
confidence in the emerging markets, which continue, in
the opinion of the Directors and the Manager, to offer
prospects for capital growth, but follow a request from a
fund management group that has a substantial holding of
Participating Shares and wishes to realise this holding
at a price closer to the net asset value than is
currently available in the secondary market. The group
wishes to manage the funds represented by that holding
within the group.
The Directors have considered how best to accommodate the
fund management group while at the same time protecting
the interests of investors who wish to continue to hold
Participating Shares. As a result the realisation has
been structured by way of an issue of Rights entitling
the holder to apply to reclassify Participating Shares
into a new class of Realisation Shares, which will then
be redeemed by the Company.
The Rights will be issued to Participating Shareholders
on the basis of the right to apply to reclassify one
Participating Share for every two Participating Shares
held and will be transferable.
The Board, after consultation with their advisers,
consider that the proposals represent a compromise that
allows Participating Shareholders who so wish to have the
opportunity to realise some or all of their holding and,
at the same time, allows the Company to retain sufficient
assets to permit the continuation of a satisfactory
secondary market in Participating Shares. Participating
Shareholders who wish to retain more than 50% of their
holding will also have the potential opportunity to
benefit from a sale of their Rights.
The proposals
If the proposals are approved at the Extraordinary
General Meeting referred to below, the Company will issue
each Participating Shareholder with the right to apply to
reclassify up to 50% of his holding of Participating
Shares into Realisation Shares which will then be
redeemed. The reclassification is to take place on
Monday, 6th March, 2000 (the 'Effective Date').
On the Effective Date, each asset of the Company will be
divided into two parts, in the same ratio as the number
of continuing Participating Shares bears to the number of
reclassified Realisation Shares; the second part will be
allocated to the Realisation Share Portfolio, while the
first part will be allocated to the Participating Share
Portfolio which will continue to be managed with the same
investment objectives and strategy as at present.
The assets allocated to the Realisation Share Portfolio
will then be realised. The intention is that, within
approximately 12 weeks of the Effective Date,
substantially all of the assets allocated to the
Realisation Share Portfolio will have been realised and
the proceeds used, after paying the liabilities
attributable to the Portfolio, to fund cash payments to
Realisation Shareholders.
The exact timing, form and size of payments to
Realisation Shareholders is uncertain as it depends on
the speed and prices at which the assets in the
Realisation Share Portfolio can be sold. Some of the
holdings of the Company are in unquoted securities or in
companies whose shares trade only sporadically and
realisation of these investments may take time to
achieve, with realisation only possible at prices less
than the prices quoted for the holdings on the relevant
stock exchange or the values used to calculate the Net
Asset Value of the Company. If it does not prove
possible to sell these investments for a price the
Directors consider reasonable in the short to medium
term, the Directors will consider alternative means of
achieving realisation so that redemption and cancellation
of the Realisation Shares can be completed.
The Rights will be issued in transferable form and will
be listed on the London Stock Exchange. This will enable
a Participating Shareholder who wishes to retain more
than 50% of his existing holding of Participating Shares
to sell some or all of his Rights. The price at which
Rights can be sold will depend on market conditions, but
the Directors consider that a listing on the London Stock
Exchange and the fact that Warburg Dillon Read has agreed
to make a market in the Rights should permit the
development of a satisfactory secondary market.
Exercise of Rights
The Rights will be issued in the form of Rights Letters
which will be despatched to persons appearing on the
register of Participating Shareholders on 4th February,
2000 (the 'Record Date'). The procedures necessary for
the exercise and for the sale of Rights will be described
in the appendix to the Rights Letter.
Any Rights not exercised by 3.00 p.m. on 25th February,
2000 will be transferred to Warburg Dillon Read, which
has undertaken to use reasonable endeavours to sell these
Rights at the best price reasonably available. The
proceeds of sale (after deduction of the expenses of
procuring the purchasers) will be distributed in sterling
pro rata amongst the Participating Shareholders to whom
the relevant Rights were originally issued except that
amounts of less than £5.00 will be retained for the
benefit of the Company.
Any Rights that are not exercised prior to the Effective
Date will lapse.
Expenses
The costs associated with the implementation of the
Issue, which are not expected to exceed US$2.5 million,
will be met from the cash and proceeds of realisation of
the assets allocated to the Realisation Share Portfolio.
Expenses of the Company directly attributable to a
particular Portfolio, for example the costs of
realisation of assets in the Realisation Share Portfolio,
will be met from the assets allocated to that Portfolio.
Expenses of the Company not directly attributable to one
of the two Portfolios will be met from both Portfolios
pro rata to the number of shares in issue in each class.
Realisation Shares
Distributions will be made to Realisation Shareholders
using the net proceeds of sale of the assets allocated to
the Realisation Share Portfolio. The exact time, form
and amount of distributions will be at the discretion of
the Directors. It is, however, anticipated that
substantially all of the assets allocated to the
Portfolio will have been realised, and the net proceeds
used to fund distributions, within 12 weeks of the
Effective Date. The Realisation Shares will be freely
transferable and will be listed on the London Stock
Exchange. The Company has undertaken to use its best
endeavours to procure that the Realisation Shares will,
in any event, be redeemed and cancelled within 12 months
of the Effective Date.
Proposed facility for the Company to purchase
Participating Shares
Your Directors also propose to seek the approval of
Shareholders for the Company to establish a facility to
repurchase up to 2,020,000 Participating Shares,
representing a maximum of 14.98 per cent. of the
Participating Shares in issue following the
implementation of the Issue.
The Board believes that the creation of this facility may
assist in maintaining any narrowing of the discount at
which the Participating Shares trade as a result of the
Issue.
The Directors are aware that some Participating
Shareholders are concerned that the Company should not
contract, in terms of number of Participating Shares in
issue or gross assets, to an extent that materially and
adversely affects either secondary market liquidity in
the Participating Shares or the ability to benefit from
the 'economies of scale' inherent in collective
investment. Any decision by the Directors to repurchase
Participating Shares will take these concerns fully into
account.
Repurchases of Participating Shares may be made by either
a single purchase or a series of purchases, in each case
with the aim of maximising the benefit to Participating
Shareholders. Exercise of the facility will depend upon
investment considerations and market conditions
prevailing at the time. It should not be assumed that
any repurchase of Participating Shares will necessarily
take place.
The repurchase of Participating Shares will normally be
funded out of cash reserves held within the Participating
Share Portfolio by the Company, but may, on occasions, be
met from short-term borrowings. It is the Directors'
intention that the funding of any repurchases will not
result in any increase in the Company's long-term
borrowings. The authority of the Directors to repurchase
Participating Shares will last until the conclusion of
the Annual General Meeting of the Company to be held in
2000, but may be renewed.
Extraordinary General Meeting
The proposals require the amendment of the Articles of
Association, to provide for the new class of Realisation
Shares and to make a number of other changes. These
amendments and the proposals as a whole require the
approval of the Participating Shareholders and the
appropriate resolutions will be proposed at an
Extraordinary General Meeting of the Company which is
being convened for 11.00 a.m. on Monday, 7th February,
2000, at Bermuda House, St. Julian's Avenue, St. Peter
Port, Guernsey.
ENQUIRIES
Richard Carss
Genesis Emerging Markets Fund Limited 0171 201 7200
Howard Myles
Warburg Dillon Read 0171 568 2140
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