TIDMCAI
RNS Number : 2938C
Castle Alternative Invest AG
12 April 2013
CASTLE ALTERNATIVE INVEST
Pfaeffikon, Switzerland, 12 April 2013 - CASTLE ALTERNATIVE
INVEST AG (SIX: CASN, LSE: CAI) has received a request from a
minority shareholder holding approximately 3.0% of CAI's shares to
place items on the agenda of the next shareholders' meeting as
follows:
Capital Distribution and Capital Reduction, Share Buy Backs
The Shareholder Futureal 2 Global Euro Szarmaztatott Befektetesi
Alap ("Futureal") has requested that the following items be put on
the agenda in accordance with article 699, paragraph 3 of the Swiss
Code of Obligations and proposes that the following motions be
considered by the shareholders of the Company:
1. Distribution of all Reserves from Capital Contributions
That the maximum amount of distributable capital contribution
reserves available is distributed to shareholders and,
consequently, that the entire distributable legal reserves from
capital contributions, amounting to CHF 50'349'000, be released and
that a proportionate amount per share be distributed to the
shareholders. No distribution shall be made on the treasury shares
held by the Company.
2. Reduction of Share Capital
a) To reduce the share capital from CHF 81'764'085.00 by CHF
80'946'444.15 to CHF 817'640.85 by way of a reduction in the par
value of each registered share form CHF 5.00 to CHF 0.05 and a
distribution of CHF 4.95 per share to the shareholders;
b) to confirm by reference to a report by the auditors that the
claims of creditors are fully covered notwithstanding the capital
reduction;
c) to amend article 4 of the articles of association according
to the following wording, to be effective as at the date of the
entry of the capital reduction in the commercial register (the
proposed amendments are shown in italics):
Article 4: Share capital
"The share capital of the Company amounts to CHF 817'640.85 and
is divided into 16'352'817* registered shares with a par value of
CHF 0.05 per share. The shares are fully paid-in."
*the number of registered shares will be reduced by any share
cancellations approved at the forthcoming AGM
3. Additional Share Buyback Programs
In addition to the 10% share buyback proposed in the Annual
General Meeting ("AGM") agenda (the "Initial Share Buyback"), that
the Board shall convene an Extraordinary Shareholders Meeting after
the completion of the Initial Share Buyback at which Meeting it
shall be resolved to cancel all the shares repurchased under the
Initial Share Buyback and the Board of Directors shall be
authorized and instructed to implement a follow-on share buyback
program of 10% of the then outstanding share capital. The Board
shall implement share buyback programs for as long as the weighted
average discount to the Net Asset Value in the previous quarter was
above 5% provided that the share buyback programs comply with
applicable law, in particular the regulations of the Swiss Takeover
Board.
Since the requested items fall within the remit of the General
Meeting and comply with the applicable provisions of the Code of
Obligations and the Articles of Association, they will be put on
the agenda of the forthcoming ordinary general meeting.
After careful review, the board of CAI has concluded that they
are not in the best interests of the majority of the shareholders
and recommends rejecting all three proposed motions for the
following reasons:
1. The long term track record of CAI AG's fund of hedge fund
portfolio has been good.
Since inception, the Company's NAV has increased by 6.2% per
annum, exceeding both equity and bond returns over that 16 year
period with low volatility. In 2012, the NAV rose by 7.9%, towards
the upper end of returns for funds of hedge funds generally. We
believe that the majority of shareholders appreciates this
performance and wishes to remain invested in the company as long as
it remains a going concern. The portfolio as it currently stands
remains liquid and well balanced. The side-pockets representing
7.3% of total assets include less liquid funds which are going
concerns including two private equity structures. The holdings in
side-pockets that are winding down are reducing steadily, with
realizations generally meeting or exceeding pre-distribution net
asset values.
2. The company's shares have traded at an unacceptably large
discount to NAV in the last year but the discount is now
narrowing.
The board believes that the best way to reduce this discount is
to buy shares through the second line for cancellation, as this has
the dual benefit of enhancing the NAV as well as reducing the
discount. It has been doing this for three years with the result
that a total of 5.2 million shares have been bought back and either
have been or will shortly be cancelled. The buyback strategy showed
encouraging results initially but experienced a setback last year
as a number of large institutional investors needed to sell their
positions for regulatory and other reasons. The elimination of this
institutional 'overhang' by the end of November 2012 has resulted
in a sharp improvement in the effectiveness of the buyback program,
with the discount reducing to around 20% from nearly 30% in the
last few months. The board believes that this trend will continue
as the buyback program is maintained. While it is still possible to
buy back shares at substantial discounts, which is NAV enhancing,
the board sees little merit in making capital distributions either
tax-free or otherwise. While capital distributions may appear
attractive, they would result in a distortion of the portfolio as a
result of the forced redemption of its more liquid components,
leaving the remaining portfolio less liquid. Capital distributions
would also reduce the Company's ability to maintain its share
buyback program and do nothing to restore the balance of supply and
demand for the shares.
Given this belief, the board sees no alternative but to
recommend that shareholders reject the first two proposals
submitted by Futureal for inclusion in the agenda for the
forthcoming AGM.
3. Extraordinary Shareholders Meetings can be called in the
event of premature completion of buyback programs.
With regard to Futureal's third proposal, the board is
sympathetic to the intentions of the proposal, namely that if the
board finds that it has bought back all the shares permitted in a
particular buyback program before the date of the formal end of the
program has been reached, it should propose a new program. Were
this to occur, the board fully intends to convene an Extraordinary
Shareholders Meeting to approve the cancellation of all the shares
repurchased under the initial program and to implement a follow-on
program. However, given the fact that the rules governing the
conduct of such programs are being revised at the current time, the
board feels that it would be unwise for shareholders to vote for a
resolution binding the board to a particular course of action in
the future, potentially limiting the board's ability to react in
shareholders' best interests, when regulatory and other conditions
may have changed.
The board intends to continue to buyback shares as necessary in
order to restore a balance between the supply of and the demand for
the Company's shares in a tax-efficient and prudent manner. If
these efforts go so far as to render the operation of the company
uneconomic, the board believes the proper course of action would be
for a liquidation vote to be proposed. However, this is not the
case at present, as the company's total expense ratio remains in
line with the sector norm.
In the circumstances, the board sees no alternative but to
recommend that shareholders reject Futureal's third proposal in the
AGM agenda.
CAI's ordinary general meeting is scheduled for 14 May 2013. The
deadline for registration in the shareholder's register to vote at
the ordinary general meeting is 3 May 2013.
For further information, please contact
Pia Skogstrom - +44 207 529 0960
This information is provided by RNS
The company news service from the London Stock Exchange
END
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