EQPI Equity Part.Inc

TIDMEQPI TIDMEQPC

RNS Number : 6312J

Equity Partnership Inv Co PLC

01 July 2011

THE EQUITY PARTNERSHIP INVESTMENT COMPANY PLC

NOTICE OF EGM

The Board announces that a circular will be posted today convening an extraordinary general meeting of the Company, which is to be held at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP at 11 a.m. on 25 July 2011.

The purpose of the Circular is to provide details of proposals to be considered by Capital Shareholders at the EGM, which comprise:

1. the Distribution in Specie, which will enable those Capital Shareholders who wish to retain direct exposure to ESO's private equity portfolio beyond 31 July 2011 the opportunity to do so by receiving Remaining ESO Securities in specie; and

2. a renewal of the Company's authority to purchase Capital Shares.

The Board recommends thatCapital Shareholders vote in favour of the resolutions to be proposed at the EGM.

The text of the Chairman's letter is set out below. A copy of the Circular will be submitted to the National Storage Mechanism and will thereafter be available for inspection at www.Hemscott.com/nsm.do. Definitions used in the Circular shall have the same meanings when used in this announcement unless the context otherwise requires.

Enquiries:

The Equity Partnership Investment Company PLC

Philip Scales

Tel. 01624 681 250

Numis Securities

Nathan Brown

Tel. 020 7260 1426

Recommended proposals to (1) authorise the Distribution in Specie of the Distribution Shares and Convertible Loan Notes to holders of Capital Shares on liquidation of the Company; and (2) renew the Company's authority to purchase Capital Shares

Background to the Proposals

The Company was launched on 17 August 2001 with a planned life to 31 July 2011. At the 2008 AGM of the Company, a resolution that the Company should not continue as an investment company beyond 31 July 2011 was approved by the Capital Shareholders.

Following that approval, the Board stated that its priority was to ensure that the senior ranking Zero Dividend Preference Shares and Income Shares had their final entitlements, which are due on 31 July 2011, backed by a combination of liquid assets (namely cash and cash equivalents) and semi-liquid assets (namely listed or quoted securities).

With this objective in mind, on 31 August 2010 the Company announced the sale of the Company's private equity portfolio to ESO (the "Disposal"). The satisfaction of part of the consideration due to the Company for the Disposal by payment of GBP10.0 million in cash increased the liquidity and transparency of the Company's portfolio whilst the receipt of the ESO Instruments issued to the Company by ESO as the remainder of the consideration meant the Company has retained some exposure to what the Board and its advisers believed to be a potentially valuable portfolio of private equity investments.

The portion of the consideration made up of these ESO Instruments comprised 3,580,379 ESO Shares ("Disposal Shares") and 10,000,000 unsecured convertible loan notes of GBP1 each issued by ESO ("Convertible Loan Notes").

As I first described at the time of the sale of the Company's private equity portfolio to ESO, and recently detailed in the Chairman's Statement in the Company's interim report published on 29 March 2011, it has been the Board's intention to put forward proposals which:

1. enable those Capital Shareholders who wish to retain direct exposure to ESO's private equity portfolio beyond 31 July 2011 the opportunity to do so by receiving Remaining ESO Securities in specie (the "Distribution in Specie"), potentially allowing them to benefit from value creation in ESO's maturing and conservatively valued investments and a narrowing of the discount on ESO's listed shares; and

2. offer a liquidity mechanism to those Capital Shareholders who either do not wish to or are unable to receive the Distribution in Specie.

I have also previously cautioned that, because of the illiquid nature of certain of our remaining investments, it might be necessary to provide a continuation vehicle for any investments which can only be realised after 31 July 2011 if we are to maximise value for Capital Shareholders.

The purpose of this circular is to provide details of proposals (the "Proposals") to be considered by Capital Shareholders at an extraordinary general meeting of the Company to be held at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP at 11 a.m. on 25 July 2011 (the "EGM"). The Board recommends that Capital Shareholders vote in favour of the resolutions to be proposed at the EGM (the "Resolutions") to implement the Proposals. The Proposals comprise:

1. the Distribution in Specie; and

2. a renewal of the Company's authority to purchase Capital Shares.

Details of the Proposals

1. Distribution in Specie

At the time of the sale of the Company's private equity portfolio to ESO, the share prices of the Income Shares and the Capital Shares indicated investors' concerns that insufficient liquidity could be raised over the remaining life of the Company to satisfy its obligations to Zero Dividend Preference Shareholders and Income Shareholders. The Capital Share discount, in particular, reflected the concern that assets may have to be sold at distressed valuations, thereby eroding the residual value available to Capital Shareholders. Following the sale of the private equity portfolio to ESO the prices of both Income Shares and the Capital Shares rose substantially, reflecting, in the Board's opinion, increased confidence that sufficient liquidity would in fact be available by the end of July 2011. Securing funding for the Company's obligations to the senior ranking Zero Dividend Preference Shareholders and Income Shareholders via the sale of the private equity portfolio to ESO also enabled the Manager to focus on securing the best possible outcome for Capital Shareholders over the remaining life of the Company.

At the time of the sale of the Company's private equity portfolio to ESO, the Board stated its intention to provide Capital Shareholders with the option to elect to receive a pro rata entitlement to the Disposal Shares and Convertible Loan Notes received from ESO as part consideration for the sale of EPIC's unlisted investments to ESO which would give them a substantial income and an opportunity to participate in further growth in the value of the combined private equity portfolios (comprising the existing portfolio of ESO at the time of Disposal and the private equity portfolio sold to ESO by the Company).

The Board hereby confirms that it intends to put in place a mechanism whereby some or all of these Disposal Shares and Convertible Loan Notes, as well as the 2,612,718 ESO Shares previously held by the Company (together "Remaining ESO Securities"), will be distributed pro rata (subject to certain limited exceptions - see the paragraph headed "Overseas shareholders" below) to holders of Capital Shares at or soon after the end of July 2011. This mechanism is designed to maximise value for Capital Shareholders by retaining their exposure to the Company's existing investments rather than the Company being forced to realise the Remaining ESO Securities in the secondary market which may erode value.

It is not possible at this stage to provide precise details of the individual entitlements to any Distribution in Specie. However, for indicative purposes only, if the entitlements of the holders of the Zero Dividend Preference Shares and Income Shares and other expenses and liabilities can be satisfied out of cash and other assets of the Company, a total of 6,193,097 Distribution Shares and 10,000,000 Convertible Loan Notes would fall to be distributed to Capital Shareholders. At the date of this Circular there are 40,304,312 Capital Shares in issue which would give rise to an entitlement to 0.154 ESO Shares and 0.248 Convertible Loan Notes for every Capital Share. Based on the value of the Company's net assets as at 24 June 2011, the Board estimates that the final entitlements of the Income Shares and the Zero Preference Dividend Shares will be covered by cash at 31 July 2011 and therefore that all of these holdings in ESO will be available for a Distribution in Specie.

The Board is hopeful that EPIC's other remaining assets will have been sold before the end of July 2011 although there can be no guarantee at this time. Other investments not sold at the time of the liquidation of the Company will be realised by the liquidator when suitable opportunities arise and the resulting net proceeds will be distributed when available. It is therefore the Board's intention to distribute a combination of cash, Distribution Shares and Convertible Loan Notes to Capital Shareholders in specie proportional to their holding of Capital Shares.

The Board understands that some Capital Shareholders may be unable or unwilling to receive and retain an investment in ESO. It is therefore the Company's intention to engage Numis Securities Limited, the Company's corporate broker, to sell, prior to 31 July 2011, in the market any Capital Shares held by investors who have indicated to the Company that they do not wish to receive the Distribution in Specie. Shareholders wishing to be considered for this arrangement are requested to write to the Company at its registered office at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP with full details of their holdings no later than 5.00 p.m. on 15 July 2011. Numis will use its reasonable endeavours, working in conjunction with the Board and Manager, to achieve the best possible sale price for such Capital Shares, but it is not possible to provide assurance as to the price that will be achieved in practice.

Those Capital Shareholders who do not have their shares sold in this way will continue to have their Capital Shares traded on the Main Market of the London Stock Exchange until the date of the Company's liquidation, which is scheduled for 31 July 2011. All Capital Shareholders at the time of liquidation will participate in the Distribution in Specie of the Distribution Shares and Convertible Loan Notes, subject to the paragraph below titled "Overseas shareholders".

The Articles require that the Distribution in Specie be authorised by a special resolution. Your Board is seeking authorisation for the Distribution in Specie now so that, if approved, arrangements can be made in advance of 31 July 2011 to effect the Distribution in Specie which will then be implemented by the liquidator.

The authorisation sought at the EGM gives your Board and, after the appointment of a liquidator of the Company, the Company's duly appointed liquidator a wide discretion to make arrangements for the Distribution in Specie. It is currently anticipated that this discretion will include (without limitation):

-- determining the ratio of the Distribution Shares and Convertible Loan Notes to be distributed for each Capital Share held;

-- determining the mechanism and procedure for implementing the Distribution in Specie;

-- putting in place arrangements to deal with any fractional entitlements to the Distribution Shares and/or Convertible Loan Notes, including whether or not to ignore fractions; and

-- determining whether any holders of Capital Shares resident outside of the United Kingdom should be excluded from the Distribution in Specie and, if so, putting in place arrangements for the sale of the Distribution Shares and/or Convertible Loan Notes that would otherwise be distributed to them for their benefit (please see the paragraph headed "Overseas shareholders" below).

Details of arrangements for the distribution will be circulated following approval of the Distribution in Specie at the EGM.

2. Purchase of Capital Shares

The Company's authority to purchase Capital Shares expired at its annual general meeting held earlier this year. The directors of the Company believe it may be advantageous for the Company to have the flexibility to purchase Capital Shares in the closing stages of the Company's life so as to help satisfy the wishes of Capital Shareholders wishing to dispose of their Capital Shares and to enhance the net asset value of the remaining Capital Shares.

A resolution to grant such authority, as required by the Isle of Man Companies Act 1992, appears as resolution 2 in the Notice of EGM.

It is proposed that the Board be authorised to purchase in the market up to 14.99 per cent. of the issued Capital Shares. Any purchase of the Capital Shares will be made subject to the requirements of Manx Law and in accordance with the Articles and the special resolution passed by the Capital Shareholders authorising such purchase. Any Capital Shares so purchased shall be treated as cancelled on purchase and the nominal amount of the Company's issued Capital Shares shall be diminished by the nominal value of the cancelled Capital Shares accordingly.

In accordance with section 13 of the Isle of Man Companies Act 1992, the authority granted by Capital Shareholders must specify the maximum price payable. This has been set at GBP1 per Capital Share (or, if less, 105 per cent. of the average of the middle market quotations taken from the Official List of the UK Listing Authority for the five business days before the purchase was made) but purchases of the Capital Shares will only be made for cash at prices below the estimated net asset value per share at the relevant time. The minimum price payable per Capital Share under the authority has been set at 10 pence, the nominal value of the Capital Shares.

The authority to purchase Capital Shares will expire on the earlier of 30 September 2011 or the date of liquidation of the Company.

An undertaking has been given that the power to purchase Capital Shares will not be exercised unless, after such purchase, sufficient cash resources would remain to satisfy in full the entitlements of the Zero Dividend Preference Shareholders and Income Shareholders on 31 July 2011. Subject to that undertaking being satisfied and sufficient shares being available, it would be the Board's intention to seek to purchase up to 14.99 per cent. of the issued Capital Shares within the parameters permitted by the share buyback authority. While retaining its absolute discretion as to the execution and pricing of any purchases, the Board currently believes that purchases of Capital Shares at prices of up to 25 pence per Capital Share would be in the interests of Capital Shareholders as a whole.

There are no outstanding options or warrants to subscribe for Capital Shares or Income Shares.

Outlook for ESO

ESO's current objective is to grow its net asset value by developing the core portfolio of its seven largest investments. ESO intends in the short term to realise the smaller assets and embark on share buy-backs to improve liquidity and narrow the share price discount to net asset value.

The ESO Board and the ESO Investment Adviser are aware that some shareholders who have been invested for a significant period of time in the Capital Shares may have different aspirations and investment time horizons from the majority of ESO's current shareholder base. ESO expects to generate sufficient cash to provide liquidity for those shareholders who are likely seek it over the next two to three years. However the ESO Board and the ESO Investment Adviser believe that the core portfolio has the potential to generate substantial returns for shareholders and that some holdings are likely to require further investment in order to maximise value. It should be noted that the ESO Investment Adviser's interests are closely aligned with those of the shareholders of ESO with the ESO Investment Adviser's team owning approximately 12 per cent. of the ESO Shares in issue and a carried interest entirely dependent on the successful and timely realisation of investments.

The Board believes that the combination of the current ESO share price discount, conservative valuations and a positive outlook for the underlying investments means the Distribution Shares and Convertible Loan Notes are likely to provide an attractive capital gain and income opportunity for both short and longer term investors. The Board therefore recommends that Capital Shareholders support the Proposals.

Overseas shareholders

Any person resident outside of the United Kingdom who is to receive his or her entitlement to the Distribution Shares and/or Convertible Loan Notes pursuant to the Distribution in Specie will be required to satisfy himself or herself as to full observance of the laws of the relevant territory in connection therewith, including obtaining any requisite government or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territory. In addition, the Company will not distribute Distribution Shares and/or Convertible Loan Notes to any person resident outside of the United Kingdom where it has received legal advice that such distribution would violate any legal prohibition or would necessitate registration, filing or other steps that the Board considers to be unduly onerous. To the extent lawful and commercially feasible, the Company will sell any Distribution Shares and/or Convertible Loan Notes that are not distributed to such Capital Shareholders for their benefit.

Trading Distribution Shares and Convertible Loan Notes

The Distribution Shares are admitted to trading on AIM.

In accordance with the terms of issue of the Convertible Loan Notes, application is being made for their admission to trading on PLUS. Eligibility for admission of the Convertible Loan Notes, and the ESO Shares, has been confirmed subject to completion of the formal application process. The Company will make an announcement once trading on PLUS has commenced, which is expected to be effective in mid-July 2011.

Liquidation Arrangements

The Company and EPIC Securities intend to publish separate circulars shortly convening further extraordinary general meetings, to propose resolutions to appoint liquidators and to provide details of proposals for those companies' liquidations, including the proposed entitlements of the Capital Shares, Income Shares and Zero Dividend Preference Shares.

The Board is unable at this time to estimate the entitlements of the Capital Shares, Income Shares and Zero Dividend Preference Shares in those intended liquidations.

The Company and EPIC Securities will be placed into liquidation, and trading in shares of each will cease, on the passing of any winding-up resolutions.

Extraordinary general meeting

Capital Shareholders will find at the end of this Circular a notice convening the EGM. The EGM is convened to be held at 11 a.m. on 25 July 2011 and will be held at IOMA House, Hope Street, Douglas, Isle of Man.

Special resolutions to: (1) authorise the Distribution in Specie; and (2) renew the Company's authority to purchase Capital Shares, will be considered at the EGM.

The quorum for the EGM is two persons entitled to attend and to vote on the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation which is a member. Only holders of Capital Shares will be entitled to vote on the resolutions to be proposed at the EGM.

Action to be taken

Capital Shareholders will find enclosed a form of proxy for use at the EGM. Whether or not Capital Shareholders propose to attend the EGM, they are requested to complete and return the proxy form in accordance with the instructions printed thereon as soon as possible, and in any event, so as to be received by not later than 48 hours before the meeting is held. The completion and return of the proxy form will not prevent Capital Shareholders from attending and voting in person at the EGM, should they so wish.

No action is required at this time in respect of the intended liquidations of the Company and EPIC Securities.

Recommendation

In the Board's opinion, the Proposals are in the best interests of the Capital Shareholders as a whole. Accordingly, the directors of the Company unanimously recommend that holders of Capital Shares vote in favour of the Resolutions to be proposed at the EGM.

Yours faithfully

Cameron McPhail

Chairman

This information is provided by RNS

The company news service from the London Stock Exchange

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