TIDMDCL
RNS Number : 3101C
Dexion Commodities Limited
03 March 2011
Dexion Commodities Limited - recommended proposals for a change
to the Company's investment policy to permit a winding down and
appointment of liquidator
Summary
Further to its announcement of 23(rd) December 2010, the Board
has today published a circular (the "Circular") setting out details
of its proposed realisation and liquidation process and giving
notice of two extraordinary general meetings at which approval will
be sought from Shareholders for implementation of the
proposals.
At the Company's extraordinary general meeting held on 31 July
2009, Shareholders approved reorganisation proposals pursuant to
which the Company adopted a revised investment policy for the
continuing portfolio to refocus as a multi-manager, multi-strategy
portfolio of commodities themed hedge funds (managed on a day
to-day-basis by the Investment Adviser). At the same time those
Shareholders who did not wish to continue with their investment in
the Company on this basis were able to redeem some or all of their
Shares, such redemptions being funded from the realisation of
investments (comprising those investments apportioned to a
Redemption Portfolio) and payments being made on a timetable
corresponding to the timing of such realisations.
Since then the Company has not performed as well as the
Directors would have hoped and the Shares of each class have
continued to trade at significant discounts with the prospect of
continuation votes for each class being triggered in early July
2011 looking increasingly likely. Accordingly the Directors are
recommending the Winding Down of the Company and its subsequent
Winding Up.
In summary:
-- subject to the Winding Down Resolution being passed, the
Company's investment policy will be amended to provide that the
investments comprised in the Continuing Portfolio be realised in an
orderly and timely manner and the Company will commence the Winding
Down;
-- the Investment Management Agreement and Investment Advisory
Agreement will terminate on 31 March 2011 (but with fees being paid
at a reduced rate as if termination had occurred on 30 June 2011);
and
-- the Second Extraordinary General Meeting will be held at a
time when the Initial Investments have been realised, at which
point the Winding Up Resolution will be proposed for the Winding Up
of the Company and the appointment of a Liquidator.
Rupert Dorey, Chairman, said:
"The Board believes that a managed winding-down of the Company
and an orderly realisation of its assets, followed shortly
thereafter by the appointment of a Liquidator and a winding-up, is
the most appropriate course of action in the circumstances. We are
pleased that, if the proposals are approved by shareholders, the
Company will be able to realise the vast majority of its portfolio
on a faster timetable than would normally be the case as a result
of the efforts of the Board, the Investment Manager and the
Investment Adviser in securing favourable liquidity from the
underlying managers of the Company's investments."
Expected Timetable
2011
Latest time and date for receipt 9.00 a.m. on 23 March
of Forms of Proxy for the First
Extraordinary General Meeting
First Extraordinary General Meeting 9.00 a.m. on 25 March
Latest time and date for receipt 9.00 a.m. on 7 April
of Forms of Proxy for the Second
Extraordinary General Meeting
Second Extraordinary General 9.00 a.m. on 11 April
Meeting
First settlement of Winding Up May
monies
Background to the Proposals
Whilst not forming part of the Company's investment objective or
policy, the Company has targeted absolute annualised returns in
excess of 10 per cent. over the medium term with annualised
volatility of 6-9 per cent. over the medium term. However, in the
period 1 October 2009 to 31 December 2010, the Company's Continuing
Portfolio has failed to meet those targeted returns, with
annualised returns in that period being 0.34 per cent. (GBP
Shares), 0.27 per cent. (EUR Shares) and 0.51 per cent. (US$
Shares) and with annualised volatility of 5.81 per cent., 5.65 per
cent. and 5.77 per cent. respectively. Furthermore, in the period 1
July 2010 to 3 February 2011 the Company's Shares have traded at
average discounts of 12.88 per cent., 11.69 per cent. and 10.32 per
cent., respectively to their NAVs.
Given the small size of the Company's asset base, the Board has
been, and continues to be, unwilling to further reduce those assets
through the repurchase or redemption of Shares and hence the
Company's ability to reduce the current share price discount is
severely limited. Accordingly, in the absence of a significant
change in either market conditions or the Company's performance, it
is likely that the discount management provisions will be triggered
in early July 2011, necessitating a continuation vote for the
relevant classes of Shares in the Company. Notwithstanding the
Investment Adviser's views as to the outlook for commodity
strategies, the Board believes there is a real risk of one or more
of those votes failing.
After consultations with the Company's Investment Manager and
major Shareholders and given:
-- the Company's performance since the 2009 reorganisation;
-- the small size of the Company's asset base;
-- the share price discount at which the Shares continue to
trade;
-- the likelihood of one or more redemption offers being
required later in 2011;
-- the limited liquidity in the Shares; and
-- the Company's expense base (as a closed ended fund listed on
the main market of the London Stock Exchange) compared to its
assets,
the Board has concluded there is insufficient Shareholder
support for the Company pursuing its current investment objective
with its existing investment policy and that, rather than wait for
the outcome of the likely continuation votes, the Board should
accelerate the process and put forward proposals for an orderly
Winding Down of the Company and subsequently the Winding Up of the
Company and the appointment of the Liquidator.
Illiquid Investments
Approximately 0.4 per cent. of the Continuing Portfolio (using
estimated net asset values at
18 February 2011 and after the fair value adjustments referred
to below) comprises the Illiquid Investments, being those
Investments which cannot be realised within 6 months or are
currently gated, suspended, in liquidation or subject to other
Settlement Obstructions. On 7 February 2011, the Directors
announced fair value adjustments pursuant to which the estimated
aggregate value of the Illiquid Investments was reduced from
US$839,321 to US$260,287 as at 31 December 2010, a reduction of
approximately 69 per cent. These adjustments did not represent
values provided by the Investment Manager or Investment Adviser nor
were they derived from third party sources as there was a lack of
current information relating to the status of many of those
Illiquid Investments. The fair value adjustments made by the
Directors were intended to reflect estimates of the current values
of those Illiquid Investments following discussions with the
Investment Manager and should not be relied upon for any purpose.
It is unknown when a substantial part of those Illiquid Investments
can be realised or what amounts will be received upon such
realisation.
Continuing Portfolio Liquidity
As at 25 February 2011 (the latest practicable date prior to
posting of the circular to shareholders and using estimated net
asset values at 18 February 2011), the Board has been advised
that:
-- approximately 97.3 per cent. of the Continuing Portfolio
could be realised, on the basis of the conditional redemption
notices that have been served as referred to below and realisation
monies received, before 30 April 2011;
-- a further 2.3 per cent. of the Continuing Portfolio could be
realised, on the basis of the conditional redemption notices that
have been served as referred to below and redemption monies
received, before 31 May 2011; and
-- the remaining 0.4 per cent. of the Continuing Portfolio is
highly illiquid and it is currently uncertain when those
Investments can be realised.
The terms of subscription of the Company's Investments do not
generally permit a redemption notice for them to be withdrawn once
served. However, as part of the process relating to the termination
of the Company's investment management arrangements (as referred to
below) the Investment Adviser agreed it would seek consents from
the underlying managers of the Investments with redemption notice
periods in excess of one month (but excluding the Illiquid
Investments and assets in the Redemption Portfolio) to serve
conditional redemption notices which could be withdrawn if the
Winding Down Resolution was not passed and at no cost to the
Company. These consents have been forthcoming and conditional
redemption notices have been served with the result that the
expected redemption date for 97.3 per cent. of the Continuing
Portfolio (using estimated net asset values as at 18 February 2011
and assuming the Winding Down Resolution is passed) is 31 March
2011, with the redemption proceeds for those Investments expected
to be received by 30 April 2011.
Winding Down
Subject to the Winding Down Resolution having been duly passed,
the Company will commence the Winding Down. If the Winding Up
Resolution is not passed, the Winding Down would continue but would
be administered by the Directors.
The Company's investment objective and investment policy will be
amended to reflect the objective of realising the investments in
the Continuing Portfolio. The new investment objective and policy
of the Company will be to realise the Investments in the Continuing
Portfolio in an orderly and timely manner, with a view to
distributing cash to Shareholders (in accordance with their rights
to distributions on a winding up as set out in the Articles) at
appropriate times as sufficient investments are realised. The
Company will not make any new investments (other than cash and near
cash equivalent securities pending distributions).
Until the appointment of a Liquidator the Continuing Portfolio
will be managed by the Investment Manager and the Investment
Adviser (under the control and supervision of the existing Board)
but with a view to realising the Investments comprised in the
Continuing Portfolio in an orderly and timely manner. It is
currently expected that the Company's currency hedging programme
would continue until 31 March 2011, following which the GBP Shares
and EUR Shares would be exposed to movements in the exchange rate
between GBP and EUR respectively and the US$. It is anticipated
that the realisation schedule for the Investments comprised in the
Continuing Portfolio would be as set out further below (and subject
to the assumptions stated). Accordingly, subject to the passing of
the Winding Down Resolution, it is currently expected that all of
the Initial Investments will have been realised by 31 March 2011
with the realisation proceeds expected to be received by the
Company by 30 April 2011.
The Shares are currently listed on the Official List and traded
on the main market of the London Stock Exchange. However, subject
to the passing of the Winding Down Resolution, the listing for each
class of Shares will be suspended by no later than 31 March 2011
and cancelled by no later than 30 April 2011. At the point of
suspension the Shares will no longer be capable of being traded on
the London Stock Exchange.
The net proceeds generated from the realisation of the Initial
Investments (subject to the cash holdback referred to under
"Winding Up" below) are intended to be returned to Shareholders
pursuant to the Winding Up.
Winding Up
Once (or shortly before) the Initial Investments in the
Continuing Portfolio have been realised the Second Extraordinary
Meeting will be held to consider the Winding Up Resolution for the
Winding Up of the Company and the appointment of the Liquidator. In
the event that the realisation of the Initial Investments is
delayed for any reason the Board would propose the adjournment of
the Second Extraordinary General Meeting until such realisation has
been or is about to be completed. Whilst there can be no absolute
guarantee that such a voluntary liquidation would be approved by
Shareholders, there is at that stage little viable alternative for
the Company. At the time the Liquidator is appointed, the assets of
the Company are likely to comprise the remaining assets
attributable to the Redemption Portfolio together with the Illiquid
Investments and an amount of cash of approximately GBP200,000,
which cash and Illiquid Investments are intended to cover the costs
and expenses of the Winding Up (including those of the
Liquidator).
The Board is proposing the delay between the First Extraordinary
General Meeting and the Second Extraordinary General Meeting so as
to ensure that the Board, rather than the Liquidator, remains in
substantial control of the realisation of the Initial
Investments.
Amendments to Investment Management Agreement and Investment
Advisory Agreement and Trail Commissions
The Investment Management Agreement and Investment Advisory
Agreement contain termination provisions such that on a winding up
resolution being passed termination is deemed to occur 12 months
after such resolution is passed with management fees (and, where
applicable, performance fees) being paid to the date of
termination. The provisions in those agreements relating to a
managed winding down (which were introduced in the context of the
2009 reorganisation of the Company and the one-off continuation
vote the following year) are considerably more complex.
The Board's focus in relation to the Winding Down and the
Winding Up has been to achieve a solution which is as quick and
clean as possible for Shareholders. In particular this has involved
the Investment Adviser agreeing to seek consents from certain
underlying funds to the conditional redemption of certain
Investments, so enabling a significant part of the Continuing
Portfolio to be realised up to three months earlier than would
otherwise have been the case. Accordingly, at the start of this
process, the Board negotiated terms with the Investment Manager and
the Investment Adviser for the termination of the Investment
Management Agreement and the Investment Advisory Agreement which
involved:
-- termination of the Investment Management Agreement and
Investment Advisory Agreement on 31 March 2011;
-- management fees being paid as if the Investment Management
Agreement and Investment Advisory Agreement had terminated on 30
June 2011 (and from 1 April 2011 to 30 June 2011
-- being paid on the basis of the NAV of the Continuing
Portfolio as at 31 December 2010) at a reduced rate of 1.0 per
cent. per annum but subject to a maximum amount equal to 0.2499 per
cent. of the Company's market capitalisation as at 1 March 2011;
and
-- no performance fees being payable.
Qualifying Investors (or a financial intermediary where
Qualifying Investors are procured by a financial intermediary who
subscribed on their behalf) are currently entitled to a trail
commission of 0.5 per cent. per annum of the Total Assets
attributable to the Shares held by them calculated and payable
quarterly in arrears by the Investment Manager out of the
Investment Manager's management fee. Trail commission ceases to be
payable to Qualifying Investors in respect of Shares subsequently
disposed of by such Qualifying Investors (including on
cancellation) and is not pro-rated to take account of the date of
any disposal/cancellation of Shares during a quarter and is not
payable unless those Shares remain held at the NAV Calculation Date
at the end of the relevant quarter (subject to any variations
agreed by the Investment Manager with certain investors).
Trail commissions will cease to be payable to Qualifying
Investors from the end of March 2011, subject only to the Winding
Down Resolution being passed.
Redemption Portfolio
Since the creation of the Redemption Portfolio in July 2009,
approximately 98 per cent. by value (using NAVs at that date) of
the Investments comprised in it have been realised, with the
realisation proceeds being distributed to redeeming former
shareholders. On 7 February 2011, as part of the process referred
to under 'Illiquid Investments' above, the Directors announced fair
value adjustments resulting in the estimated aggregate value of
those Investments remaining in the Redemption Portfolio reducing
from US$1.37 million to US$0.39 million as at 31 December 2010
(together with US$0.42 million in cash, receivables and creditor
accruals).
Realisation of the remaining investments in the Redemption
Portfolio will continue during the Winding Down and afterwards
during the Winding Up. If the Winding Up Resolution is approved by
Shareholders, the Liquidator would take responsibility for
realising the remaining investments in the Redemption Portfolio.
Realisations of assets in the Redemption Portfolio may still not
have occurred even after all of the investments in the Continuing
Portfolio have been realised.
Continuing Portfolio realisations and Continuing Portfolio
liquidity
On the basis of the composition of the Continuing Portfolio as
at 18 February 2011, assuming the Winding Down Resolution is passed
on or before 25 March 2011, the assumptions set out in the table
immediately below and taking account of the Company's prevailing
net cash position, the Investment Adviser's current expectation is
that the Continuing Portfolio could be realised in accordance with
the following indicative timetable (which should not be relied upon
for any purpose), assuming no requirement to maintain a balanced
investment portfolio during the realisation period:
Cumulative Percentage
Continuing Portfolio
Realisation proceeds received
by
30 April 2011 97.3
31 May 2011 99.6
After 100.0
(The above table is based on a pro forma NAV of the Continuing
Portfolio of the Company. The pro forma NAV includes the estimated
valuations of the Continuing Portfolio as at 18 February 2011 and
assumes such valuations are unchanged from that date. Such
valuations may be estimated and/or unaudited and may be inaccurate
and/or subject to conflicts of interest. Investments may not
realise the assumed cash sum or percentage of such valuations at
the times assumed or at all. The pro forma NAV of the Continuing
Portfolio takes into account the actual cash balances held by the
Company as at 25 February 2011 (the latest practicable date prior
to the publication of the shareholder circular) and attributable to
the Continuing Portfolio, and assumes receipt of the cash proceeds
of those disposals made on 1 March 2011 on or before 31 March
2011.
The above table assumes that further Continuing Portfolio
realisations are made with effect from 30 March 2011 and further
assumes no Settlement Obstructions other than those of which the
Investment Adviser had actual knowledge as at 25 February 2011.
There may be other matters or factors which affect the
availability, amount or timing of receipt of the proceeds of
realisation of some or all of the Company's investments. The
expected realisation proceeds do not include costs of realisation,
including redemption penalties. The expected realisation proceeds
take no account of ongoing fees and expenses or the impact of
currency hedging on the Company's cash resources.
The remaining 0.4 per cent. of the Continuing Portfolio is
invested in six underlying funds that are currently in liquidation
or subject to other Settlement Obstructions. It is currently
uncertain when those Investments can be realised and accordingly it
has not been reflected in the schedule above. The information in
this table has not been subject to audit.)
However, it is emphasised that there is no guarantee that the
Continuing Portfolio will realise the amounts referred to above or
that the Continuing Portfolio can be realised in accordance with
the above indicative timetable. It is also emphasised that the
values of any Investments as at the time of realisation, and hence
the amounts returned to Shareholders on a Winding Up of the
Company, may differ significantly from the values used in this
announcement.
Distributions
As stated above, distributions of cash pursuant to the Winding
Down are likely to be made by way of a distribution by the
Liquidator pursuant to the Winding Up. This will be by way of
cheques drawn upon a UK clearing bank posted to the Shareholder's
registered address. Such payments will be at the sole risk of the
Shareholder concerned.
Distributions of cash by a Liquidator pursuant to the Winding Up
will take place in the normal course of a liquidation and through
the usual channels. The Liquidator will only be in a position to
make a distribution after the conclusion of a creditor notice
period, which is generally a period of 2 to 3 weeks following the
appointment of the Liquidator. Should any additional creditor
claims, of which the Liquidator was not previously aware, arise
during the creditor notice period, this may impact on the timing
and amount of any distribution.
Capitalised terms shall have the meaning given to them in the
Circular unless otherwise stated.
Enquiries:
Robin Bowie Tel: +44 (0) 20 7832 0900
Dexion Capital
Chris Copperwaite Tel: +44 (0)1481 732815
Dexion Capital (Guernsey) Limited
David Yovichic Tel: +44 (0) 20 7523 8361
Collins Stewart Europe Limited
Collins Stewart Europe Limited, which is authorised and
regulated in the United Kingdom by the Financial Services
Authority, is acting for Dexion Commodities Limited and no one else
in connection with the matters described in this announcement and
will not be responsible to anyone other than Dexion Commodities
Limited for providing the protections afforded to clients of
Collins Stewart Europe Limited or for giving advice in relation to
the contents of this announcement or on any of the matters referred
to herein.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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