11 Feb 2022 12:34
11 February 2022
LEI: 213800RLXLM87NO26S30
Jupiter Emerging & Frontier Income Trust PLC
("JEFI" or the "Company")
Publication of Circular and Notice of General Meeting
Further to the Company's announcement on 10 January 2022, the Company has today published a circular to shareholders detailing proposals to amend the terms of the Company's Redemption Facility, which require amendments to the Company's Articles of Association, and to introduce a regular vote on the continuation of the Company (the "Circular"). The Circular contains a notice convening a general meeting of the Company (the "General Meeting") to be held at 3.00 p.m. on 10 March 2022 at the offices of Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.
The Circular, together with the full form of the proposed new Articles (in the form of a comparison document showing the changes between the proposed new Articles and the existing Articles), will be available on the Company's website at www.jupiteram.com/JEFI, at the Company's registered office of The Zig Zag Building, 70 Victoria Street, London, United Kingdom, SW1E 6SQ and at the National Storage Mechanism via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Terms used and not defined in this announcement have the meanings given to them in the Circular.
For further information please contact:
Magnus Spence
Head of Investment Trusts and Alternatives
Jupiter Asset Management Limited, Company Secretary
investmentcompanies@jupiteram.com
020 3817 1000
LETTER FROM THE CHAIRMAN
1. Introduction
On 10 January 2022 the Company announced Proposals to amend the terms of the Company's Redemption Facility and to introduce a regular Continuation Vote on the continuation of the Company.
The Board has recently carried out a Shareholder consultation regarding the Company's Redemption Facility, through which Shareholders are able to request the redemption of all or part of their holding of Shares on an annual basis. Taking into account the views of Shareholders, the Board is proposing that the Redemption Facility be amended so that it is offered every three years, next to occur in June 2024; and that the maximum number of Redemption Requests that may be accepted at each Redemption Point will in aggregate be 20 per cent. of the Company's outstanding Ordinary Share capital. Operation of the Redemption Facility will continue to be at the discretion of the Board.
Alongside the proposed changes to the Redemption Facility, the Board intends to implement a Continuation Vote in respect of the continuation of the Company every three years. Operation of the Redemption Facility will be conditional on Shareholders approving the Company's continuation at the preceding Continuation Vote of the Company.
The proposed changes to the Redemption Facility require amendments to the Company's Articles of Association, and the Board is recommending that the Continuation Vote is also reflected in amended Articles. The proposed amendments to the Articles require the approval of Shareholders at the General Meeting that is being convened pursuant to the Circular.
In addition, the Board is also proposing the 2022 Continuation Resolution at the General Meeting, affording Shareholders the opportunity to vote on the continuation of the Company.
The General Meeting will be held at the offices of Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ, United Kingdom on 10 March 2022 at 3.00 p.m. The formal notice convening the General Meeting is set out in the Circular. Shareholders are asked to submit a proxy vote in advance of the meeting. Please see paragraph 8 below for further information.
The purpose of the Circular is to provide Shareholders with details of the Proposals and to set out the reasons why the Directors are recommending that Shareholders vote in favour of the Resolutions at the General Meeting.
2. Background to, and Reasons for the Proposals
Background
The Redemption Facility
The Company was launched as a closed-ended investment company on 15 May 2017 with an investment objective to achieve capital growth and income, both over the long term, through investment predominantly in companies exposed directly or indirectly to emerging markets and frontier markets worldwide. The Company carries on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Ordinary Shares of the Company are admitted to the premium segment of the Official List of the FCA and are traded on the premium segment of the London Stock Exchange's main market.
At launch, the Company established the Redemption Facility through which Shareholders have been entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The Directors have absolute discretion to operate the annual redemption facility on any given Redemption Point and to accept or decline in whole or part any Redemption Request. Redemptions may, at the discretion of the Directors, be settled by the payment of cash at a price calculated by reference to the Dealing Value per Ordinary Share or, alternatively, by way of the creation of a separate redemption pool of assets that may be realised in an orderly manner and the proceeds of such realisation paid to Shareholders in respect of Ordinary Shares that are redeemed.
The first Redemption Point for the Ordinary Shares was 29 June 2018, at which approximately 0.19 per cent. of the Ordinary Shares then in issue were tendered for redemption. Subsequent Redemption Points were held on 28 June 2019, at which approximately 4.2 per cent. of the Ordinary Shares then in issue were tendered for redemption, and 30 June 2020, at which approximately 5.1 per cent. of the Ordinary Shares then in issue were tendered for redemption. In each case the tenders for redemption of Ordinary Shares were accepted in full by the Board. The most recent Redemption Point was on 30 June 2021, at which 25,670,791 Ordinary Shares were tendered for redemption. This was a significant proportion of the Company's share capital, representing 30 per cent. of the Ordinary Shares then in issue. Those tenders for redemption were also accepted in full by Board, utilising the redemption pool method referred to above.
The background to this significant redemption was the large discount at which the Ordinary Shares have continued to trade to the NAV per Ordinary Share, following a sharp fall in global equity markets in early 2020 resulting from the Covid-19 pandemic. When the Covid-19 pandemic struck in 2020, the markets into which the Company invests were particularly badly affected, being quick to fall and slower than the developed markets to recover. Having traded at, or close to, a premium for most of the time since the Company's launch in 2017 until the pandemic struck in March 2020, the Ordinary Shares have subsequently traded at a significant discount to Net Asset Value per Share, presenting the opportunity for investors to buy in at a discount, in the knowledge that they can redeem at close to the prevailing Net Asset Value per share every June.
The purpose of the Redemption Facility was to provide a degree of liquidity to Shareholders and a form of discount control for the Company, beyond the discount control mechanisms that are commonly available to a UK listed investment trust (being, primarily, a regularly renewed share buyback authority that may be exercised at the absolute discretion of the directors). The Redemption Facility offers a structure through which Shareholders are able periodically to request redemption of their Ordinary Shares, and subject to the Board's discretion and acceptance of Redemption Requests, receive back an amount calculated by reference to the prevailing Net Asset Value of the Company, at the absolute discretion of the Directors.
However, the experience of the 2021 Redemption Point, when some 30 per cent. of the Company's Ordinary Shares were redeemed, served to demonstrate that the Redemption Facility as currently offered is incompatible with the best interests of the Company and of Shareholders as a whole, and with the long-term viability of the Company.
Significant utilisation of the Redemption Facility would materially reduce the size of the Company which would lead to a more concentrated and less liquid portfolio of investments, limiting the Investment Adviser's ability to effectively manage the portfolio for maximum performance and value for the benefit of Shareholders. It would also increase the ongoing charges figure as the fixed costs of the Company would be spread over a smaller Net Asset Value. Further, redemptions reduce the number of Ordinary Shares in issue and so may adversely affect the secondary market liquidity of the Ordinary Shares.
Taking into account the views of Shareholders, the Board believes that the interests of the Company and of Shareholders as a whole will be better served by amending the Redemption Facility in a manner which will limit the scale of future outflows, while at the same time offering Shareholders a range of protections, including access to the Redemption Facility on a triennial basis and, also, the triennial Continuation Vote.
Accordingly, the Board is proposing that the Redemption Facility be amended so that it is offered every three years, next to occur in June 2024. Further, the Board is proposing that the number of Redemption Requests that may be accepted by the Board is capped, with the maximum number at each Redemption Point being, in aggregate, 20 per cent. of the Company's outstanding Ordinary Share capital. Where, in respect of any Redemption Point, the Company receives Redemption Requests in excess of that cap, redemptions will be scaled back provided that each Ordinary Shareholder will be entitled to tender for redemption up to a basic entitlement equal to 20 per cent. of such Ordinary Shareholder's holding of Ordinary Shares as at 5.00 p.m. on the date which is 20 Business Days prior to the Redemption Point. Again, the Board believes that the introduction of this cap best serves the long-term interests of the Company and the Shareholders as a whole.
Operation of the Redemption Facility will continue to be at the discretion of the Board.
The Continuation Vote
Following the consultation with Shareholders referred to above, and given the proposals to offer the Redemption Facility triennially and not annually, the Board believes that it would be appropriate for Shareholders to be given the periodic opportunity to vote on the continuation of the Company as an investment company.
Accordingly, it is proposed that at a general meeting of the Company to be held in 2024 and in every third year thereafter, the Directors shall propose an ordinary resolution to the Shareholders that the Company continues in existence as an investment company. Such resolution shall be proposed at the Company's annual general meeting to be held in each relevant year or, at the discretion of the Directors, at a specially convened general meeting, and in any event prior to the Redemption Point in the same year. If any such resolution is not passed, then the Directors shall, within three months after the date of the resolution, put forward to Shareholders proposals to the effect that the Company be wound up, liquidated, reorganised or unitised. In addition, the operation of the Redemption Facility will be conditional on the passing of the Continuation Vote in the same year.
The next Continuation Vote under the Articles, as amended, is therefore expected to be held in March 2024, with the first Redemption Point under the amended Redemption Facility being scheduled for June that year.
The Board is recommending that Shareholders vote in favour of Resolution 1 at the General Meeting in order to implement the regular Continuation Vote and the proposed changes to the Redemption Facility.
The 2022 Continuation Resolution
In addition to establishing the regular Continuation Vote, the Board is offering Shareholders the opportunity to vote on the continuation of the Company at the General Meeting to be held on 10 March 2022.
The Board believes that the continuation of the Company would be in the best interests of Shareholders, to allow the Investment Adviser to more fully pursue the investment opportunity of the Company in accordance with the Company's investment policy.
The Company's portfolio holdings have proven their resilience through what has been an unprecedented and challenging period since the start of the Covid-19 pandemic for many emerging and frontier market businesses. Income generation has already recovered to above pre-Covid levels and the Investment Adviser believes that a combination of attractive portfolio valuations and continued earnings growth should be conducive to a positive outlook for the Company's total returns in 2022. The Board retains its confidence in the Investment Adviser and takes great encouragement from the recovery both in the Company's Net Asset Value and in the earnings from investments.
The Board is therefore recommending that Shareholders vote in favour of the 2022 Continuation Resolution at the General Meeting.
Summary of the Proposals
The Proposals involve:
Proposal 1: the introduction of a regular Continuation Vote (to be implemented by Resolution 1 at the General Meeting);
Proposal 2: the amendment of the Redemption Facility such that, conditional on the passing of the Continuation Vote in the same year, it is held once every three years with the next Redemption Point to occur in June 2024, and with redemptions capped at 20 per cent. of Ordinary Shares in any year (to be implemented by Resolution 1 at the General Meeting); and
Proposal 3: the 2022 Continuation Resolution being put to shareholders at the General Meeting (to be implemented by Resolution 2 at the General Meeting).
Resolution 1 seeks to amend the Articles of Association in order to implement Proposals 1 and 2 above. Resolution 1 is conditional on the approval by Shareholders of Resolution 2.
If Resolution 2 is approved by Shareholders, the Company will continue as presently constituted as an investment company, with the next opportunity to vote on the Company's continuance being in 2024.
3. The proposed amendments to the Company's Articles of Association
If the Resolutions are approved by Shareholders at the General Meeting, the Company's Articles of Association will be amended with effect from the end of the General Meeting.
The proposed amendments to the Articles are set out in Part 2 of the Circular.
In addition, the full form of the proposed new Articles (in the form of a comparison document showing the changes between the proposed new Articles and the existing Articles) will be available for inspection on the Company's website at www.jupiteram.com/JEFI, on the FCA's National Storage Mechanism and at the General Meeting for at least 15 minutes before and during the meeting.
4. Benefits of the Proposals
The Directors consider that the Proposals will offer the following benefits to Shareholders:
§ As further described in paragraph 2 of the Circular, the proposed changes to the Redemption Facility should help minimise the risk that the Company's Net Asset Value is reduced to such an extent that the viability of the Company's investment policy, and the future of the Company, is prejudiced.
§ The continued access to the Redemption Facility will give Shareholders the triennial opportunity to redeem some of their Ordinary Shares, should they wish to do so, at a price calculated by reference to Net Asset Value or the realisation value of a redemption pool and which is not dependent on the market liquidity of the Shares.
§ The introduction of the Continuation Vote will allow Shareholders a regular opportunity to consider the future of the Company once every three years, which may also help to minimise any discount at which the Shares trade.
5. Costs and expenses of the Proposals
The costs and expenses of the Proposals will be borne by the Company and are not expected to exceed an aggregate of approximately £30,000 (plus VAT).
6. Associated with the Proposals
Shareholders should have regard to the following when considering the Proposals:
§ The Dealing Value per Ordinary Share, at which Ordinary Shares may be tendered for redemption in the Redemption Facility, may not always equal the published unaudited NAV per Ordinary Share.
§ Shareholders should note that the operation of the Redemption Facility is and will continue to be entirely at the discretion of the Board, and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of Ordinary Shares that may be redeemed.
§ Although the position is not exacerbated by the Proposals, Shareholders should note that the Redemption Facility could have implications under Rule 9 of the Takeover Code for Shareholders with significant shareholdings. The nature of the Redemption Facility should enable the Company to anticipate the possibility of such a situation arising and prior to implementing any redemption the Board will seek to identify any Shareholders who they are aware may be deemed to be acting in concert under note 1 of Rule 37 of the Takeover Code and will seek an appropriate waiver in accordance with note 3 of Rule 37. However, neither the Company, nor any of the Directors, nor the Manager will incur any liability to any Shareholder(s) if they fail to identify the possibility of a mandatory offer arising or, if having identified such a possibility, they fail to notify the relevant Shareholder(s) or if the relevant Shareholder(s) fail(s) to take appropriate action.
§ Shareholders should be aware that the past performance of the Company or of the Investment Adviser or its principals is not necessarily indicative of likely future performance.
7. General Meeting
The Proposals are conditional on the approval by Shareholders of the Resolutions to be proposed at the General Meeting which has been convened for 3.00 p.m. on 10 March 2022.
Resolution 1, which will be proposed as a special resolution, will, if passed adopt amended Articles to implement the proposed changes to the Redemption Facility and the introduction of the Continuation Vote. Resolution 1 is conditional on the approval by Shareholders of Resolution 2.
If Resolution 2, which will be proposed as an ordinary resolution, is passed then the Company will continue as an investment company. If Resolution 2 is not passed, then the Board will put forward to Shareholders proposals for the future of the Company.
An ordinary resolution requires a simple majority of members entitled to vote and present in person or by proxy to vote in favour in order for it to be passed. A special resolution requires a majority of at least 75 per cent. of members entitled to vote and present in person or by proxy to vote in favour in order for it to be passed.
In accordance with the Articles, all Shareholders present in person or by proxy shall upon a show of hands have one vote and upon a poll shall have one vote in respect of each Ordinary Share held. In order to ensure that a quorum is present at the General Meeting, it is necessary for two Shareholders entitled to vote to be present, whether in person or by proxy (or, if a corporation, by a representative).
The formal notice convening the General Meeting is set out in the Circular.
The Board is pleased to be able to give Shareholders the opportunity to attend the General Meeting in person at the address set out in the notice convening the General Meeting in the Circular, with an option to view the proceedings online. Information on how to join the General Meeting virtually is set out in the notes to the notice convening the General Meeting.
8. Action to be taken in respect of the General Meeting
Shareholders are asked to submit proxy appointments in advance of the General Meeting, either online or by completing a hard copy form of proxy in accordance with the instructions set out in the Circular.
Recipients of the Circular who are the beneficial owners of Shares held through a nominee should follow the instructions provided by their nominee or their professional adviser if no instructions have been provided.
Please complete and submit your proxy vote online via the share portal at signalshares.com. You will need to log into your Signal Shares account, or register if you have not previously done so. To register you will need your Investor Code which can be found on your share certificate.
If you are unable to locate any of the documents on the Company's website, need help with voting online or require a paper proxy form sent to you, please contact our Registrar, Link Group, by email at enquiries@linkgroup.co.uk, or by calling +44 (0)371 664 0321. Lines are open from 9.00 a.m. to 5.30 p.m. Monday to Friday, calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate.
Shareholders who request a paper form of proxy are asked to complete and return the form, in accordance with the instructions printed thereon, to the Company's Registrar Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL, United Kingdom.
Shareholders who are CREST members may utilise the CREST electronic proxy appointment service.
In order for a proxy appointment to be valid, you must ensure that you have recorded proxy details using one of the methods set out above by 3.00 p.m. on 8 March 2022.
9. Recommendation to Shareholders
The Board considers that the Proposals are in the best interests of the Company and its Shareholders as a whole. Accordingly the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. The Directors intend to vote in favour of the Resolutions in respect of their holdings of Ordinary Shares, amounting to 468,236 Ordinary Shares in aggregate (representing approximately 0.78 per cent. of the issued share capital of the Company as at the date of the Circular).
The Investment Adviser, as investment manager or adviser to certain Jupiter-managed investment funds, exercises discretion over, and intends to vote in favour of the Resolutions in respect of, 7,065,000 Ordinary Shares in aggregate (representing approximately 11.82 per cent. of the issued share capital of the Company as at the date of the Circular).
PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION
If the Resolutions are approved by Shareholders at the General Meeting, the Company's Articles of Association will be amended with effect from the end of the General Meeting as set out below.
1 The definition of Redemption Point will be amended as follows:
"5.00 p.m. on the last Business Day in June each year 2024 and on the last Business Day in June every third year thereafter (or such other date and/or time as the Directors may determine) on which date holders of Ordinary Shares which have submitted valid Redemption Requests to have their Ordinary Shares redeemed will be considered for redemption at the discretion of the Board".
2 At Article 191.1, the following new sub-Articles will be inserted:
"191.1.7 The Company shall not be bound to accept any requests to redeem any Ordinary Shares in respect of any Redemption Point. The acceptance of any Redemption Request shall be at the absolute discretion of the Directors who may accept such request in whole or in part. In exercising such discretion, the Directors shall limit the aggregate number of Ordinary Shares to be redeemed (and/or, if applicable, sold to an incoming investor or purchased by the Company as referred to in article 191.2) at any Redemption Point to 20 per cent. of the Company's issued Ordinary Share capital (excluding Ordinary Shares held in treasury) (the "20 per cent. Limit").
191.1.8 If, in respect of any Redemption Point, the Directors shall receive Redemption Requests for Ordinary Shares in excess of the 20 per cent. Limit then redemptions under consideration by the Directors (or, if applicable, sales to an incoming investor or purchases by the Company) shall be scaled back (the "Scale Back") so that each holder of Ordinary Shares which has submitted a valid Redemption Request will have considered for redemption (or, if applicable, as aforesaid) such number of Ordinary Shares, rounded down to the nearest whole number, as represents 20 per cent. of such Ordinary Shareholder's holding of Ordinary Shares as at 5.00 p.m. on the date which is 20 Business Days prior to the Redemption Point (the "basic entitlement") or, if lower, the number of Ordinary Shares tendered as set out in such Redemption Request, and to the extent that, following any Scale Back, the aggregate number of such tendered Ordinary Shares is less than the 20 per cent. Limit, excess tenders for redemption pursuant to the relevant Redemption Request above an Ordinary Shareholder's basic entitlement may, at the discretion of the Directors, be satisfied (subject to the 20 per cent. Limit) pro rata and in proportion to the number of Ordinary Shares tendered for redemption by Ordinary Shareholders in aggregate in excess of their basic entitlement (rounded to the nearest whole number of Ordinary Shares). The basic entitlement will apply to each registered Ordinary Shareholder.
191.1.9 The provisions of this Article 191 (redemption facility) shall not be applied by the Directors if any Ordinary Resolution for the continuation of the Company proposed in accordance with Article 193.1 is not passed at any preceding General Meeting of the Company."
3 A new Article 193 will be inserted headed "Duration of the Company" and providing as follows:
"193.1 At a General Meeting to be held in 2024 and in every third year thereafter, the Directors shall propose an Ordinary Resolution to the Shareholders that the Company continues in existence as an investment company. Such resolution shall be proposed at the Company's Annual General Meeting to be held in each relevant year or, at the discretion of the Directors, at a specially convened General Meeting, and in any event prior to the Redemption Point in the same year.
193.2 If the resolution proposed in accordance with Article 193.1 is not passed, then the Directors shall, within three months after the date of the resolution, put forward proposals to Shareholders to the effect that the Company be wound up, liquidated, reorganised or unitised."
4 Certain minor amendments will be made to implement the addition of the new Articles set out above.
In the case of any discrepancy between this announcement, the Circular and the proposed new Articles then, following their adoption, the terms of the Articles will prevail.
The full form of the proposed new Articles (in the form of a comparison document showing the changes between the proposed new Articles and the existing Articles) will be available for inspection on the Company's website at www.jupiteram.com/JEFI, on the FCA's National Storage Mechanism and at the General Meeting for at least 15 minutes before and during the meeting.