The
information contained in this announcement is restricted and is not
for publication, release or distribution in the United States of
America, any member state of the European Economic Area, Canada,
Australia, Japan or the Republic of South Africa.
8 April 2024
Literacy Capital plc (the
"Company")
Proposed B Share Scheme,
amendment to AIFM Agreement and notice of Annual General
Meeting
Literacy Capital plc has today
released a circular and notice of its annual general meeting (the
"AGM") to be held at 10.00
a.m. on 15 May 2024 at 3rd Floor, Charles House, 5-11 Regent
Street, St James's, London, SW1Y 4LR (the "AGM Circular").
As well as a description of the
ordinary course business to be proposed at the AGM, the AGM
Circular contains details of:
- a
proposed mechanism to return capital to shareholders through the
issue and immediate redemption of bonus shares (the "B Share Scheme"); and
- a
proposed amendment to the AIFM Agreement between the Company and
Book Asset Management LLP (the "Investment Manager" or the
"AIFM"), designed to ensure
that the management fee payable to the Investment Manager by the
Company fairly takes into account time spent managing capital which
is subsequently returned to Shareholders pursuant to the B Share
Scheme or otherwise (the "AIFM
Agreement Amendment").
Full details of the proposed B Share
Scheme and the AIFM Agreement amendment, each of which is
conditional on the passing of the relevant resolutions at the AGM,
are contained in the AGM Circular. A summary of those proposals is
set out below.
B
Share Scheme
As the Company's portfolio matures
and realisations occur, the Board believes it would be prudent to
have a method for returning available capital amounts to
Shareholders from time to time. While not all capital profits will
be returned and may instead be reinvested or used to reduce the
Company's credit facility, there may be circumstances where the
Board decides that it is prudent to return capital.
After due consideration, the Board
believes that one of the fairest and most efficient ways of
returning cash to Shareholders is by adopting a B Share Scheme
whereby the Company will be able to issue redeemable B Shares to
Shareholders and to redeem them on each Redemption Date without
further action being required by Shareholders ("B Share Returns of
Capital").
The quantum and timing of B Share
Returns of Capital to Shareholders following receipt by the Company
of the net proceeds of realisations of investments will be
dependent on the Company's liabilities at the time of such return
(including any outstanding borrowings), its pipeline of investment
opportunities and outstanding investment commitments and general
working capital requirements. In particular, the net cash proceeds
from realisations of investments, after settlement of and provision
for liabilities of the Company, will normally be applied towards
the repayment of any outstanding borrowings prior to returning
capital to Shareholders. Accordingly, the quantum and timing of B
Share Returns of Capital are at the discretion of the Board, which
will announce details of each B Share Return of Capital, including
the relevant Record Date, Redemption Price and Redemption Date,
through an RIS Announcement.
The adoption of a B Share Scheme will
not limit the ability of the Company to return cash to Shareholders
by using other mechanisms and, if the B Share Scheme is adopted,
the Board will continue to review its efficiency over time. The
Board's proposal to adopt a B Share Scheme should not be taken as
any indication as to the likely timing or quantum of any future
returns of cash to Shareholders and Shareholders should not
conclude that returns of capital are imminent or likely.
AIFM Agreement Amendment
The purpose of the proposed variation
is to ensure that the AIFM is remunerated fairly (in a way which
does not disadvantage Shareholders), by taking into account the
variations in the Net Asset Value of the Company which would be
caused by any returns of capital (whether pursuant to the B Share
Scheme or otherwise). The AIFM Agreement Amendment, which is
conditional on Shareholder approval as described in the following
paragraph, would be implemented pursuant to a conditional deed of
amendment and restatement to the AIFM Agreement which has been
entered into by the Company and the AIFM dated the date of this
announcement (the "AIFM
Agreement Deed of
Amendment").
The Company is not admitted to the
Official List and as such the Company is not subject to the Listing
Rules. Nevertheless, as a matter of good corporate governance, and
as set out in the Company's IPO Prospectus, the Company voluntarily
complies with Listing Rule 11 as if the Company were subject to the
Listing Rules. Listing Rule 11 (if applicable) would require the
Company to seek prior approval of Shareholders before entering into
a transaction with a "related party" within the meaning of the
Listing Rules. The AIFM would be a related party for these purposes
and therefore the AIFM Agreement Deed of Amendment is conditional
on the passing of the Related Party Transaction Resolution at the
AGM.
Under the terms of the AIFM
Agreement, the Investment Manager is entitled to a management fee
in respect of each financial year equal to 0.9 per cent. of the
adjusted audited Net Asset Value as at the end of that year. The
Company makes quarterly payments in advance on account against this
sum, and a "true-up" exercise is then performed following the
publication of the Company's audited annual Net Asset Value in
order to ensure that any overpayment or underpayment of the
management fee is reflected in the next accounting period's
management fee (a "Year-end Adjustment").
The purpose of the proposed
variations to the management fee in the AIFM Agreement Deed of
Amendment is to ensure that the Year-end Adjustment equitably takes
into account any capital returns (made pursuant to the proposed B
Share Scheme or otherwise) during the accounting period in
question. The Independent Directors believe that the proposed
variations to the management fee are reasonable primarily as the
current management fee is calculated based on the year-end net
assets, and as such its continuance would mean (where capital is
returned) that the Investment Manager receives no income reflecting
the capital it has managed throughout part of the year which is
returned to Shareholders before year-end. This is particularly
inequitable to the Investment Manager under a scenario where the
capital is distributed to Shareholders later in the
year.
By way of example, the following
table compares the current fee calculation with the proposed fee
calculation, assuming that:
- the adjusted
audited Net Asset Value at the start of a financial year is £300
million; and
- there is no
increase or decrease in the Net Asset Value in the course of the
year other than that caused by a return of capital of £10
million.
|
Current fee calculation
(£)
|
Proposed fee calculation
(£)
|
Adjusted audited Net Asset Value at the start
of the financial year (1 January)
|
300
|
300
|
Capital return made during the second quarter
of the year
|
-20
|
-20
|
Adjusted audited Net Asset Value at the end of
the financial year (31 December)
|
280
|
280
|
Adjustment for return of capital
|
No adjustment is provided for in the
current IMA
|
+10
|
Adjusted audited Net Asset Value for the
purpose of calculating the management fee
|
280
|
290
|
For the
avoidance of doubt, the above example is illustrative only. No
reliance should be placed on the above example as an indicative of
potential returns to Shareholders. Specifically there can be no
guarantee as to the timing or value of returns, if any returns are
made.
The table illustrates that, in this example,
half the amount returned to shareholders is added back to the
adjusted audited Net Asset Value for the purpose of calculating the
management fee. Pursuant to the proposals the adjusted audited Net
Asset Value at year end, for the purpose of the management fee
calculation, will be adjusted by adding: one quarter of the amount
of capital returned in the first quarter, half of the amount
returned in the second quarter, three-quarters of the amount
returned in the third quarter and all of the amount returned in the
fourth quarter. These adjustments reflect the period under which
the capital is managed by the AIFM prior to
distribution.
In further voluntary compliance with
Listing Rule 11, the Company has received advice from Singer
Capital Markets Advisory LLP, as the Company's financial adviser,
that that the proposed variations to the fee provisions of the AIFM
Agreement brought about by the entry into of the AIFM Agreement
Deed of Amendment (the "Related Party Transaction") are fair and
reasonable so far as the shareholders of the Company are concerned.
In providing its advice, Singer Capital Markets Advisory LLP has
taken into account the Independent Directors' commercial assessment
of the Related Party Transaction. The "Independent Directors" for
these purposes are Simon Downing, Christopher Sellers and Rachel
Murphy. Paul Pindar and Richard Pindar are not considered to be
Independent Directors for these purposes as they are principals of
the Investment Manager.
An electronic copy of the circular
can be viewed at www.literacycapital.com/investors/reports-and-results,
and will shortly be submitted to the National Storage
Mechanism.
Any capitalised terms not defined in
this announcement shall have the same meaning as in the AGM
Circular.
For
further information, please contact:
Literacy Capital plc / Book Asset Management
LLP
Richard Pindar / Tom
Vernon
+44 (0) 20 3960 0280
MHP
Group
Reg Hoare / Ollie Hoare /
Matthew Taylor
book@mhpgroup.com
+44 (0) 20 3128 8100
Singer Capital Markets Advisory LLP, Financial
Adviser
Robert Peel / Angus
Campbell (Corporate broking)
Alan
Geeves / James Waterlow / Sam Greatrex (Sales)
+44 (0) 20 7496 3000
LEI:
2549006P3DFN5HLFGR54
A copy of this announcement will be
available on the Company's website
at www.literacycapital.com.
Neither the content of the Company's website, nor the content on
any website accessible from hyperlinks on its website for any other
website, is incorporated into, or forms part of, this announcement
nor, unless previously published by means of a recognised
information service, should any such content be relied upon in
reaching a decision as to whether or not to acquire, continue to
hold, or dispose of, securities in the Company.
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.
RNS may use your IP address to
confirm compliance with the terms and conditions, to analyse how
you engage with the information contained in this communication,
and to share such analysis on an anonymised basis with others as
part of our commercial services. For further information about how
RNS and the London Stock Exchange use the personal data you provide
us, please see our Privacy
Policy.