Craven House Capital Regulatory News (CRV)

29 Dec 2009 11:43



29 December 2009

AIM Investments plc (the "Company")

Investing policy

The Company would like to notify its shareholders of the investing policy of the Company following the issue of new AIM Rules in relation to investing companies.

Qualifying Investments

AIM investments plc is seeking to identify and invest in good quality and high growth companies seeking admission to AIM, PLUS or other junior markets in Europe ("relevant stock markets").  The following list is the qualifying criteria for investee companies although the list is not intended to be exhaustive and the board will exercise discretion where necessary on each investment. 

The key consideration will be the quality of the investee company and whilst there will be a preference for those operating in Brazil, Russia, India and China ("BRIC regions"), other geographical locations will receive equal consideration

Growth potential will be the key determinant above any specific industry sector 

The investee company enjoys a good reputation within the territory in which it operates

Strong existing management team although strengthening of the board of the investee company will be a consideration

Accounting practices to IFRS or equivalent (preferably at least 3 years of audited accounts available)

The investee company has a history of profits with evidence of further growth and is currently earning or on target to achieve approximately £1million pre-tax profits per annum

Suitably robust or diversified business model (preference for any Intellectual Property to be owned)

The investee company will have a target market capitalization of circa £5-15 million for admission to the PLUS Market or £15-50 million for admission to the AIM market

The investee company has a history of robust corporate governance and provides transparency for potential investors 

Preference of directors / shareholders of investee company to part with equity rather than cash in order to fund the costs of an IPO

Some relevance of the underlying business to relevant stock markets

No material ongoing litigation 

Investment Strategy

The Investment Strategy is broadly that investments will take the form of a series of convertible loans to investee companies to fund the admission process to a relevant stock market. The proceeds of each loan will be held in a solicitor's client account or other stakeholder arrangement and used to settle all professional fees incurred in relation to an admission to the relevant stock markets.  The convertible loans will convert to equity at the admission price, which may be converted on or up to six weeks prior to admission to the relevant stock market. 

Investment Process

Realising Investments 

All investments made by the Company will be passive investments. It is not anticipated that any negotiated equity stake will be greater than 20% in the investee company. Additional board members may be provided to strengthen the board of investee companies but they will be independent of AIM Investments plc.

The length of time that investments are held will be at the discretion of the Board although it is anticipated that at least the value of the original investment amount will be realised prior to (in a pre-IPO sale of some description) or on admission to the relevant stock market.

Moreover, the length of time each investment will be held will also depend on negotiations with the appropriate advisers to the investee company subject to lock in rules of the relevant stock market and any orderly market agreements. Clearly, the Company would prefer to avoid lock in agreements where possible in order to increase the liquidity of the investments held. 

However, the Board will make the final decision on when to sell shares and may choose to appoint a fund manager at some point in the future to manage the Company's equity investments and cash. 

Spread of Investments

The Board will seek to diversify risk by making a spread of investments in companies from different territories but if particularly strong and reliable ties are developed in certain geographical areas, as well as a good stream of potential investee companies, it will not be required by its investment policy to look to other territories. In all investment decisions, the level of risk exposure will be considered as well as potential reward. 

The Company intends to make investments of up to £500,000 in each investee company  and its total investment level will be dependent on the initial funds raised plus the returns that are realised on the investments themselves. Therefore, the maximum exposure to any one investee company should diminish over time and with admissions executed. 

Gearing and Cross Holdings

The Company may consider conservative gearing if deemed appropriate. No cross holdings are anticipated. 

Returns and Dividend Policy

The Company seeks to gain up to 4 times (and a minimum of 3 times) the level of its initial investment in equity at the admission price of the investee company. These assets, either realised cash or retained shares, will provide strong asset backing for the Company. A dividend policy will be established once the cash position of the Company is strong. As the number of admissions to the relevant stock markets is limited in any one year, there is a clear point at which cash reserves are likely to become surplus to the Company's requirements and will be re-distributed to shareholders by way of a dividend. 

Time Constraints

The Company must make an investment by no later than 30 April 2010 to fulfil certain AIM rules.

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