20th Nov 2007 14:08
NSF Securities Limited20 November 2007 NSF Securities Limited (the "Company") Recommended proposals for the reconstruction and winding-up of the Company 20 November 2007 The Board has today announced Proposals for the reconstruction of the Company.The Proposals will, if approved, become effective on 11 December 2007, being theplanned winding-up date of the Company. Terms used and not defined in this announcement shall, unless the contextotherwise requires, bear the meaning given to them in the Circular issued by theCompany dated 19 November 2007. Introduction The Articles require the Directors to put a resolution to Shareholders on 11December 2007 to consider the winding-up or reconstruction of the Company. TheDirectors, with their advisers, have reviewed the courses of action available,which include a simple liquidation of the Company, but have concluded that it isin the interests of Shareholders as a whole to propose a scheme ofreconstruction. This will comprise a members' voluntary liquidation of theCompany pursuant to section 78 of the Companies (Guernsey) Laws 1994 to 1996, asamended, together with the opportunity for ZDP Shareholders: • to roll over their interests in ZDP Shares into Accumulation Unitsin Diversified Absolute Return Fund to a value of their Final CapitalEntitlement per ZDP Share less an initial charge of one per cent. (to becontributed towards the cost of the Proposals). The ability of the Company topay the Final Capital Entitlement of 168.48 pence per ZDP Share in full issubject to the Group's net assets at the Effective Date exceeding £42 million.As at 15 November 2007 the Group's net assets were approximately £87 million(unaudited). In the event of the Group's net assets being less than £42 millionon the Effective Date, the amount payable to ZDP Shareholders as their FinalCapital Entitlement will be reduced pro rata to the shortfall. DiversifiedAbsolute Return is an authorised open ended unit trust with an investmentobjective to achieve a positive absolute return in different market conditionsfrom a portfolio of securities; • to receive their Final Capital Entitlement (subject as above), being168.48 pence per ZDP Share in cash, providing an Election is made to receivecash; or • to elect for a combination of Accumulation Units and cash. Pursuant to the Proposals, ZDP Shareholders (other than Overseas Shareholders)who wish to receive cash must positively elect to receive cash. OverseasShareholders will, however, be deemed to have elected to receive cash.Accumulation Units in Diversified Absolute Return are not available to OverseasShareholders. Notwithstanding the above, the Diversified Absolute Return Option is notavailable in respect of fewer than 600 ZDP Shares. Accordingly, any Election ordeemed Election for the Diversified Absolute Return Option in respect of fewerthan 600 ZDP Shares will be invalid and will, in any event, be deemed to be anElection for the Cash Option. Benefits of the Proposals The Directors believe that the Proposals will have the following benefits: • a choice of options for ZDP Shareholders, that would not be the caseif the Company were simply to be wound up; • for those ZDP Shareholders who wish to realise some or all of theirinvestment, the opportunity to receive cash equal to the Final CapitalEntitlement in respect of each ZDP Share; • enable the ZDP Shareholders (other than Overseas Shareholders) toretain an exposure to an actively managed fund which seeks to provide capitalgrowth similar to that provided by zero dividend preference shares without suchshareholders incurring an immediate liability to capital gains tax, as a resultof them being able to elect for the Diversified Absolute Return Option; and • the standard initial charge for investing in Diversified AbsoluteReturn will be discounted from five per cent. to one per cent. in respect ofAccumulation Units to be issued pursuant to the Proposals. The Diversified Absolute Return Option Diversified Absolute Return is an authorised unit trust with an investmentobjective to achieve a positive absolute return in different market conditionsfrom a portfolio of securities. In order to achieve its investment objective,Diversified Absolute Return's investment policy is to invest in zero dividendpreference shares, fixed-interest securities, units in collective investmentschemes, investment trusts, money market investments, deposits and any otherpermitted asset type deemed appropriate to meet the investment objective. Unitsof Diversified Absolute Return are currently "qualifying investments" for ISAsand PEPs. Diversified Absolute Return was launched in May 1991 and New Star became itsinvestment manager on 1 September 2003. On 31 October 2007, the net assets ofDiversified Absolute Return were approximately £105 million (unaudited). Portfolio Diversified Absolute Return's assets are predominantly invested in zero dividendpreference shares with the remainder of its assets invested in other productsand strategies chosen to deliver positive absolute returns. At 31 October 2007,the assets of Diversified Absolute Return were invested as shown in the tablebelow: Investment type Percentage of assets Zero dividend preference shares 49.4 Defined return funds or similar products 18.6 Private equity 8.7 Absolute return managers 7.6 Property funds 4.9 Energy and resources 4.5 Structured products 4.0 Special situations 2.3 Cash 0.0 Total 100.0 Performance Between 1 September 2003, when New Star Investment Funds was appointed as itsinvestment manager, and 31 October 2007, the compound annual return onDiversified Absolute Return was 12.2 per cent. which compares to 11.5 per cent.for Datastream's index of zero dividend preference shares. The percentage return of Diversified Absolute Return in each of the five yearsended 30 September 2007 is shown in the table below: Year ended 30 September 2003 2004 2005 2006 2007 New Star Diversified Absolute Return Fund 37.0 19.0 20.9 6.9 2.5 Source: Lipper (mid-mid basis). Past performance is not necessarily a guide tofuture performance. Manager Diversified Absolute Return is currently managed by Paul Craig at New Star. Mr.Craig joined New Star from Exeter Asset Management in September 2003, and is adirector of New Star Asset Management Limited. He has 19 years of investmentexperience, including 10 years gained at Exeter Asset Management. He isresponsible for the management of four unit trusts investing in closed-end fundswith combined assets of approximately £492 million at 31 October 2007. At 31October 2007, Mr. Craig was rated "A" by Citywire. The annual management charge is 1.2 per cent. and other estimated expensesamount to 0.22 per cent. per annum. The Accumulation Units are not listed on any stock exchange and thus may not betraded as such but can be purchased or redeemed through New Star InvestmentFunds. The Cash Option Those ZDP Shareholders who have elected (or who are deemed to have elected) forthe Cash Option will receive cash in an amount equal to such number of ZDPShares in respect of which an Election for the Cash Option has been or is deemedto have been made multiplied by the Final Capital Entitlement of such ZDPShares. Details of the Scheme Apportionment of net assets on Liquidation On the Resolution being passed at the Second General Meeting to wind-up theCompany, New Star Financial Opportunities will be required to repay immediatelythe 2001 Loan Note and the 2005 Loan Note to the Company and New Star FinancialOpportunities will be required to discharge immediately its obligations underthe 2001 Undertaking and the 2005 Undertaking to contribute such amount to theCompany as will, together with the amounts repaid under the 2001 Loan Note andthe 2005 Loan Note, result in the Company having sufficient cash to distribute168.48 pence in respect of each ZDP Share. Calculation of value for the purposes of the Proposals Accumulation Units will be issued at their net asset value as at noon on theCalculation Date, calculated in accordance with the FSA Regulations by referenceto the valuation of Diversified Absolute Return at that time to the nearest twodecimal places. The number of Accumulation Units to be issued to each relevantZDP Shareholder will be such number as has a value, at the relevant net assetvalue, equal to the aggregate Final Capital Entitlement of the ZDP Shares inrespect of which such ZDP Shareholder elected to receive Accumulation Units lessan initial charge of one per cent. (such one per cent. charge being remitted inwhole by the Unit Trust Manager to New Star Financial Opportunities to reducethe cost to New Star Financial Opportunities of providing the rolloveropportunity). Conditions The Scheme is conditional upon the passing of the requisite resolutions at theMeetings and satisfaction of certain other Conditions. If the Accumulation Unitsare for any reason not issued by 14 December 2007, elections for the DiversifiedAbsolute Return Option will be deemed to be elections for the Cash Option. Costs and Commissions The total costs of the Proposals are expected to amount to approximately£160,000 (including amounts in respect of VAT). These costs will be borne by NewStar Financial Opportunities, being the Ordinary Shareholder. An initial charge of one per cent. will be payable in connection with the issueof Accumulation Units under the Scheme to meet the costs incurred by New StarFinancial Opportunities in providing the rollover opportunity. Tax Consequences For ZDP Shareholders ZDP Shareholders should note that: (i) implementation of the Proposals shouldnot constitute a disposal by ZDP Shareholders of their ZDP Shares for thepurposes of UK taxation of chargeable gains to the extent that AccumulationUnits are received; and (ii) all ZDP Shareholders who elect or are deemed toelect for the Cash Option should note that they will thereby make a disposal forthe purposes of UK taxation of capital gains and such ZDP Shareholders withinthe scope of UK taxation of capital gains in respect of their holdings of ZDPShares therefore may realise a chargeable gain or allowable loss, depending ontheir applicable circumstances. ZDP Shareholders should be aware that the Accumulation Units do not representany form of "roll-up investment" for UK income taxation purposes. Dealings in Shares and Reclassified Shares As part of the reconstruction of the Company, it is necessary to reorganise theCompany's share capital. Accordingly, subject to the passing of the Resolutionsset out in the notices convening the Class Meeting and the First GeneralMeeting, the ZDP Shares will be reclassified with different rights, depending onthe elections made by ZDP Shareholders (or deemed to have been so made) underthe Proposals, following the passing of the Resolutions at the Class Meeting andthe First General Meeting, which is expected to be at approximately 10.40 a.m.on 11 December 2007. The Register in respect of the ZDP Shares will close from 5.00 p.m. on 7December 2007 and the last date for dealings on the London Stock Exchange andthe CISX on a normal rolling settlement basis will be 4 December 2007. As from 4December 2007, dealings should be for cash settlement only and will beregistered in the normal way if the transfer, accompanied by the documents oftitle, is received by Capita Registrars by 5.00 p.m. on 7 December 2007.Transfers received after that time will be retained by Capita Registrars andregistered prior to the opening of the Register in respect of ReclassifiedShares. The Register in respect of the Reclassified Shares is expected to openat approximately 10.40 a.m. on 11 December 2007. However, investors who purchase ZDP Shares on or after 10 December 2007 shouldbe aware that they will receive unlisted Reclassified Shares reflecting theOptions which the transferring Shareholder has elected for (or has been deemedto elect for) pursuant to the Scheme. No application has been made nor will bemade for the Reclassified Shares to be admitted to the Official List of the UKListing Authority or the Official List of the CISX or to trading on the LondonStock Exchange or the CISX. Suspension of trading in, and cancellation of listing of, ZDP Shares Trading in the ZDP Shares on the London Stock Exchange and on the CISX will besuspended at 7.30 a.m. on 11 December 2007. Subject to the passing of theresolution to wind up the Company to be proposed at the Second General Meetingof the Company on 11 December 2007, the Company will be placed in liquidationand consequently cancellation of the listing of the ZDP Shares will occur at8.00 a.m. on 12 December 2007. The Company has applied to the FSA and the CISXto cancel the listing of the ZDP Shares with effect from 8.00 a.m. on 12December 2007. Deemed Elections ZDP Shareholders (other than Overseas Shareholders) who do not return a Form ofElection or (as appropriate) send a TTE Instruction to CREST will be deemed tohave elected for the Diversified Absolute Return Option in respect of theirentire holdings of ZDP Shares. Overseas Shareholders will not receive a Form of Election and will be deemed tohave elected for the Cash Option in respect of their entire holdings of ZDPShares. The Diversified Absolute Return Option is not available in respect of fewer than600 ZDP Shares. Accordingly, any Election or deemed Election for the DiversifiedAbsolute Return Option in respect of fewer than 600 ZDP Shares will be invalidand will, in any event, be deemed to be an Election for the Cash Option. Expected Timetable 2007 Date from which it is advised that dealings in ZDP Shares 4 December should only be made on the basis of cash settlement and immediate delivery of documents of title Latest time for receipt of Forms of Election 1.00 p.m. on 7 December Latest time for receipt of TTE Instructions from 1.00 p.m. on 7 December Shareholders holding ZDP Shares in uncertificated form Record Date for the purposes of Elections and 5.00 p.m. on 7 December Company's Register closes Latest time for receipt of Forms of Proxy for the Class 11.00 a.m. on 8 December Meeting Latest time for receipt of Forms of Proxy for the First 10.30 a.m. on 9 December General Meeting Latest time for receipt of Forms of Proxy for the Second 10.40 a.m. on 9 December General Meeting Class Meeting 11.00 a.m. on 10 December Listing of ZDP Shares suspended 7.30 a.m. on 11 December First General Meeting 10.30 a.m. on 11 December ZDP Shares reclassified as Reclassified Shares and 11 December* Company's Register re-opens Second General Meeting 10.40 a.m. on 11 December Effective Date for implementation of Proposals 11 December Entitlement of ZDP Shareholders (other than those 12.00 noon on 11 December who have elected, or are deemed to have elected, for the Cash Option) to Accumulation Units determined Accumulation Units issued by Diversified Absolute Return 11 December Cheques despatched to ZDP Shareholders who have on or as soon as practicable after 11 Decemberelected for the Cash Option and CREST payments made Cancellation of listing of ZDP Shares 8.00 a.m. on 12 December Contract notes for Accumulation Units despatched on or as soon as practicable after 12 December * The reclassification of ZDP Shares in respect of which no Election for theCash Option (or deemed such Election) has been made will occur immediatelyfollowing the passing of the Resolutions proposed at the Class Meeting and theFirst General Meeting, this being expected to be at approximately 10.40 a.m. on11 December 2007, and are a technical requirement of the Scheme. Shares will bereclassified according to the Elections made (or deemed to have been made) byZDP Shareholders. Definitions The following definitions apply throughout this announcement unless the contextrequires otherwise: "Articles" or "Articles of the articles of association of the Company, as amended from time to time Association" "Calculation Date" the date on which the creation price for the Accumulation Units will be determined pursuant to the Transfer Agreement for the purposes of calculating the number of Accumulation Units to be issued to ZDP Shareholders electing for the Diversified Absolute Return Option, and which is expected to be 11 December 2007 "Cash Option" the option for ZDP Shareholders to realise their ZDP Shares for cash in accordance with the Scheme "Class Meeting" the class meeting of ZDP Shareholders convened for 10 December 2007 at 11.00 a.m. and any adjournment thereof "Diversified Absolute Return the right of election by ZDP Shareholders to roll over their ZDPOption" Shares into Accumulation Units "Effective Date" the date on which the special resolution for the winding-up of the Company to be proposed at the Second General Meeting is passed, when the Scheme shall become effective (which is expected to be 11 December 2007) "Election" an election for the Diversified Absolute Return Option and/or the Cash Option (as the context may require) in respect of ZDP Shares including, where appropriate, a deemed election under the Scheme "Final Capital Entitlement" 168.48 pence or, if the assets of the Group available for distribution to ZDP Shareholders on a winding-up of the Company are insufficient to enable the Company to pay 168.48 pence in respect of each ZDP Share on liquidating, such lower sum per ZDP Share as is available to be paid to ZDP Shareholders upon the liquidation of the Company "First General Meeting" the extraordinary general meeting of the company convened for 11 December 2007 at 10.30 a.m. and any adjournment thereof "Group" the Company and New Star Financial Opportunities "Meetings" The Class Meeting, the First General Meeting and the Second General Meeting"New Star" or "Manager" New Star Asset Management Limited, authorised and regulated by the FSA "New Star Financial New Star Financial Opportunities Fund LimitedOpportunities" "Proposals" the proposals for the liquidation and reconstruction of the Company and the Resolutions to be approved at the Meetings, including the approval of the Scheme, the changes to the Articles and all ancillary matters "Record Date" 5.00 p.m. on 7 December 2007, being the record date for ZDP Shareholders to participate in the Scheme "Reclassified Shares" ZDP Shares as reclassified into A Shares and B Shares for the purpose of the Scheme upon the passing of the Resolution set out in the notice convening the relevant First General Meeting "Register" the register of members of the Company "Resolutions" the resolutions to be proposed at the Meetings "Second General Meeting" the general meeting of the Company convened for 11 December 2007 at 10.40 a.m. or as soon thereafter as the First General Meeting has concluded "ZDP Shares" the zero dividend preference shares of 25p each in the capital of the Company "ZDP Shareholders" holders of Zero Dividend Preference Shares Copies of the Circular have been submitted to the UK Listing Authority and willshortly be available for inspection at the UK Listing Authority's DocumentViewing Facility which is situated at: Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS Tel. no. 020 7066 1000 Enquiries: Ravi Anand/Robert Peel New Star Asset Management Limited 020 7225 9292/6171 David Benda/Katie Standley Winterflood Investment Trusts 020 3100 0291/0293 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
NSF.L