TIDMLMS
RNS Number : 3458S
LMS Capital PLC
05 November 2019
5 November 2019
For immediate release
LMS Capital plc (the "Company")
Publication of Circular and Notice of General Meeting
Following the announcement made by the Company on 27 September
2019 with regards to the Company's investment management
arrangements, the Board of LMS Capital plc announces that it will
be posting a circular (the "Circular") to all shareholders today
seeking shareholder approval for:
(a) the proposal made by Gresham House Asset Management Limited
("GHAM") as detailed in the Circular which is recommended by the
Board (acting by a majority which consists of each of the
Independent Directors) for the Company's ongoing investment
management arrangements; and
(b) associated amendments to the performance fee payable to GHAM
under the Company's Investment Management Agreement as a related
party transaction pursuant to the Listing Rules
(together, the "Proposal").
The Notice of the General Meeting at which an ordinary
resolution (the "Resolution") to approve the Proposal will be
considered is set out at the end of the Circular. The Resolution,
if approved, will result in GHAM continuing to act as the Company's
AIFM with the Investment Management Agreement being amended on the
terms summarised in Part II of the Circular, which constitutes a
related party transaction under the Listing Rules.
The General Meeting will be held at 10 Snow Hill London EC1A 2AL
at 10.00 a.m. on 28 November 2019. The Resolution will be proposed
as an ordinary resolution; this means that more than half of the
votes cast must be in favour for the resolution to be passed.
The Board (acting by a majority which consists of each of the
Independent Directors) considers that the Proposal is in the best
interests of the Company and its Shareholders as a whole.
The Board (acting by a majority which consists of each of the
Independent Directors) recommends that Shareholders vote in favour
of the Resolution to be proposed at the General Meeting and which
are set out in the Form of Proxy.
In the event that Shareholders do not pass the Resolution
approving the Proposal, and as previously announced, the
Independent Directors (being all of the current directors other
than Mr Rayne) intend to resign from the Board of the Company with
immediate effect following the General Meeting. In these
circumstances, it is expected that Mr. Rayne, together with the
replacement directors selected by him, would seek to implement the
internal management proposal that is referenced in the
Circular.
Expected timetable of principal events:
Date of the Circular 5 November 2019
Latest time and date for receipt 10.00 a.m. on 26 November
of Forms of Proxy 2019
General Meeting 10.00 a.m. on 28 November
2019
Announcement of results of the General 28 November 2019
Meeting
References to times in the Circular and above are to London
times unless otherwise stated. Any changes to the expected
timetable will be notified by the Company through a Regulatory
Information Service.
Defined terms contained in this announcement shall have the
meaning given to them in the Circular.
Further details of the Proposal and the Resolution which will be
put to Shareholders at the General Meeting are set out below.
Background
Management Review Process
On 26 July 2019, the Company announced that ahead of the third
anniversary of the appointment of GHAM as the incumbent investment
manager of the Company, the Board would commence a review of its
investment management arrangements. In conducting this review, the
Company received proposals from GHAM, Mr. Rayne (in respect of an
internal management proposal) and certain other third-party
investment managers. Since the proposals received included one made
by Mr. Rayne, it was resolved by the Board that the Independent
Directors (being Messrs. Knight, Birkett and Lerner) should carry
out the review to ensure any potential conflict of interest could
be carefully managed.
Each proposal received by the Company was assessed by the
Independent Directors against the following criteria:
(a) total implementation and annual running costs applied to the
Company under the proposed arrangements;
(b) practical deliverability of the proposal;
(c) ability, resources and track record of the proposed
management team to manage a listed investment company;
(d) an ability to find, manage and exit investments in a manner
that would be accretive to net asset value; and
(e) evidence of a plan to narrow the share price discount to net asset value.
Following presentations and written submissions in respect of
each of the proposals, the Independent Directors unanimously
concluded that the reappointment of GHAM on the terms described in
Part II of the Circular was in the best interests of the
Company.
On 27 September 2019, the Company announced the conclusions of
the majority of the Board (which comprised all of the Independent
Directors), namely that GHAM should continue as the appointed
investment manager of the Company. This decision was made on the
basis of GHAM's proposal on the terms described in Part II of the
Circular , including a reduction in the annual management fee
attributable to cash balances in the Company's portfolio.
In conducting the management review, the Independent Directors
sought to ensure that all proposals were treated in an equal
manner. This included the management proposals being required to be
submitted by a defined date and no party being permitted to make
subsequent submissions in order to avoid any undue delay to the
process. The Independent Directors' decision was therefore based on
the information submitted to them in line with the timetable given
to all interested parties. This was particularly relevant in the
context of the internal management proposal which, in the opinion
of the Independent Directors, did not contain sufficient
information on the likely annual running costs to allow the
Independent Directors to make a definitive conclusion on whether
costs would increase or decrease as compared to the current
arrangements, or as to whether the internal management proposal
would have the resources which the Independent Directors consider
are required to drive long-term performance and Shareholder
value.
Internal Management Proposal
Mr. Rayne continues to support an internal management proposal
and has stated to the Board that his view is also supported by a
number of Shareholders that he represents.
Notwithstanding the conclusion of the Independent Directors, it
was acknowledged that Mr. Rayne and his family represent a
significant number of Ordinary Shares in the Company. The internal
management proposal made to the Company included reference to a
shareholder consent being required in order to implement a proposed
incentive scheme for the management team (in respect of which any
Shareholder connected to the management team could not vote in
accordance with the Listing Rules). Reference was also made during
discussions of the internal management proposal to a potential
return of capital that would also require Shareholder consent. In
order to assess the deliverability of the internal management
proposal prior to making the announcement on 27 September, the
Independent Directors offered Mr. Rayne the chance to demonstrate
that a majority of Shareholders (by voting rights) who were not
represented by him or his family supported his approach. Mr. Rayne
was unable to provide the Independent Directors with evidence of
such support.
The Independent Directors emphasise that the Company could have
entered into revised management arrangements with GHAM by a
majority board decision with only the proposed amendments to the
performance fee being subject to Shareholder approval.
Notwithstanding this, the Board has decided to make its majority
decision to reappoint GHAM subject to approval by Shareholders in
accordance with good corporate governance and to seek to provide
certainty for shareholders going forward.
In the event that Shareholders do not pass the Resolution
approving the Proposal, and as previously announced, the
Independent Directors intend to resign from the Board of the
Company with immediate effect following the General Meeting. In
these circumstances, it is expected that Mr. Rayne, together with
the replacement directors selected by him, would seek to implement
the internal management proposal with the approval of proposed
management incentivisation arrangements being sought from
Shareholders within the next year. Shareholders should note that
the Company and GHAM have agreed that if notice is served by the
Company to terminate the Investment Management Agreement on any
date before 30 November 2019, that notice shall expire (and GHAM's
appointment shall be terminated) with effect from 31 May 2020.
Dividend Policy and Continuation Vote
Subject to market conditions, applicable law and the Company's
performance, financial position and financial outlook, should the
Resolution be approved it is also the Directors' intention to pay
dividends to Shareholders on a twice-yearly basis from the
beginning of 2020 onwards. Whilst not forming part of its
investment policy, the Company will target the payment of dividends
which equate to a yield of 4 per cent. per annum on the Company's
current estimated unaudited net asset value (being 73.3 pence per
Ordinary Share as at 30 June 2019), payable in twice-yearly
instalments (the "Target Dividend"). The Company will also target a
progressive increase in the Target Dividend over time. Dividends
may be paid out of either or both of income and capital, subject to
applicable legal requirements.
The Target Dividend is a target only and does not constitute a
profit forecast. There can be no assurance that the Target Dividend
can or will be achieved from time to time and should not be seen as
an indication of the Company's expected or actual results or
returns. Accordingly, Shareholders should not place any reliance on
the Target Dividend or assume that the Company will make any
distributions at all.
The Board also intends to introduce a 5-year continuation vote.
The Directors will propose an ordinary resolution that the Company
continues its business as a closed-ended investment company (a
"Continuation Resolution") at the annual general meeting of the
Company held in 2024. If the Continuation Resolution is passed, the
Directors will put a further Continuation Resolution to
Shareholders at the annual general meeting of the Company every
five years thereafter.
If a Continuation Resolution is not passed, the Directors will
be required to put forward proposals for the reconstruction,
reorganisation or winding-up of the Company to the Shareholders for
their approval within six months following the date on which the
relevant Continuation Resolution is not passed. These proposals may
or may not involve winding-up the Company or liquidating all or
part of the Company's then existing portfolio of investments and,
accordingly, failure to pass a Continuation Resolution will not
necessarily result in the winding-up of the Company or liquidation
of all or some of its investments.
Resolution
The Proposal is subject to the approval of Shareholders, and the
Notice of the General Meeting at which the Resolution to approve
the Proposal will be considered is set out at the end of the
Circular. The Resolution, if approved, will result in GHAM
continuing to act as the Company's AIFM with the Investment
Management Agreement being amended on the terms summarised in Part
II of the Circular, which constitutes a related party transaction
under the Listing Rules.
If the Resolution is not approved, Shareholders should expect
that Mr. Rayne and the new directors will proceed with alternative
proposals.
Action to be taken by shareholders
The General Meeting will be held at 10 Snow Hill London EC1A 2AL
at 10.00 a.m. on 28 November 2019 to approve the Resolution
described in the Circular.
The Resolution will be proposed as an ordinary resolution; this
means that more than half of the votes cast must be in favour for
the resolution to be passed.
Subject to the applicable restrictions on voting on related
party transactions in the Listing Rules, all Shareholders are
entitled to attend and vote at the General Meeting. In accordance
with the Articles, all Shareholders present in person or by proxy
shall upon a show of hands have one vote and upon a poll shall have
one vote in respect of each share held. To ensure that a quorum is
present at the General Meeting, two Shareholders entitled to vote
must be present, whether in person or by proxy (or, if a
corporation, by a representative).
The Notice of the General Meeting is set out at the end of the
Circular and a Form of Proxy is enclosed with the Circular.
Shareholders are asked to complete and return the Form of Proxy
enclosed with the Circular, together with any power of attorney or
other authority under which they are signed or a notarially
certified or office copy thereof, in accordance with the
instructions printed thereon Link Asset Services, Corporate
Actions, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, as soon as
possible and, in any event, so as to arrive by no later than 10.00
a.m. on 26 November 2019. Alternatively, Shareholders may submit
their proxy vote electronically via the Registrar's website by
visiting www.signalshares.com. For an electronic proxy to be valid,
the appointment must be received by the Registrar by no later than
10.00 a.m. on 26 November 2019. Shareholders who hold their Shares
electronically may submit their votes through CREST. Shareholders
are requested to complete and return a Form of Proxy, vote
electronically or submit their votes through CREST, whether or not
they wish to attend the General Meeting.
This announcement contains inside information.
For further information, please contact:
LMS Capital plc
Martin Knight, Chairman + 44(0)20 7935 3555
J.P. Morgan Cazenove (Corporate
Broker)
Michael Wentworth-Stanley + 44(0)20 7742 4000
LEI: 2138004UJ1TW8UCELX08
Important Information
The initial yield target is a target only and does not
constitute a profit forecast. There can be no assurance that the
initial yield target can or will be achieved from time to time and
neither should be seen as an indication of the Company's expected
or actual results or returns. Accordingly, investors should not
place any reliance on the initial yield target in deciding whether
to invest in the Company.
In addition, this announcement includes statements that are, or
may be deemed to be, "forward-looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "may", "will", or
"should" or, in each case, their negative or other variations or
comparable terminology. These forward-looking statements relate to
matters that are not historical facts regarding the Company's
investment strategy, financing strategies, investment performance,
results of operations, financial condition, prospects and dividend
policies of the Company and the instruments in which it will
invest. By their nature, forward-looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance. There are a number of factors that could cause actual
results and developments to differ materially from those expressed
or implied by these forward-looking statements. These factors
include, but are not limited to, changes in general market
conditions, legislative or regulatory changes, changes in taxation
regimes or development planning regimes, the Company's ability to
invest its cash in suitable investments on a timely basis and the
availability and cost of capital for future investments.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
NOGLELFBKFFZFBL
(END) Dow Jones Newswires
November 05, 2019 07:45 ET (12:45 GMT)
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