Juridica Investments Regulatory News (JIL)

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Juridica Investment Limited

("Juridica" or the "Company")

Discontinuation Resolution, New Management Arrangements and Notice of Extraordinary General Meeting

The Board of Juridica announces that today the Company has posted a circular to Shareholders that contains a notice convening an Extraordinary General Meeting ("EGM") to consider a special resolution to discontinue the Company as required by the Company's Articles. The EGM will be held on 14 November 2013 at 11.00 a.m. at Legis House, 11 New Street, St Peter Port, Guernsey GY1 2PF.

The Circular contains a recommendation from the Board that shareholders vote against the special resolution in order to allow for the continuation of the Company for a further three years.

The circular also contains an overview of changes that are proposed to be made to the investment management arrangements of the Company. Further details of the changes are set out below and in the circular. The Board believes that, taken together, the changes described in the circular are in the best interests of Shareholders as a whole.

Summary

· The Board recommends that Shareholders vote AGAINST the special resolution that the Company be voluntarily wound up, ensuring that the Company will continue for a further three years;

· The Board believes that the investment case for the Company remains attractive, that the investment approach remains appropriate and that the Company provides the best way for Shareholders and investors to benefit from the investment opportunities available in litigation finance; and

· Conditional upon the rejection of the special resolution at the EGM, the Company will terminate the existing management agreement with Juridica Capital Management Limited with effect from 31 December 2013 and enter into a new management agreement with Fields Capital Management Limited. The New Investment Manager is wholly owned by Fields Asset Management LLC and Fields Asset Management LLC is controlled by Richard W. Fields. The New Management Agreement is substantially similar to the Existing Management Agreement. The Board believes that the Company will benefit from receiving services from the New Investment Manager which will, as compared to the Existing Investment Manager, have increased resources and capacity as a result of its ability to undertake multiple mandates.

Further details on the Company and the changes being implemented are set out in the circular (a copy of which can be found on the Company's website) and are summarised below.

Lord Brennan, Non-Executive Chairman of the Company, said:

"Juridica has delivered strong returns to investors since inception. Through careful investment selection and management, the Company is now in the enviable position of having a maturing portfolio of high quality investments which we expect to deliver continued returns to shareholders. We therefore recommend shareholders vote for the fund to continue its work for the next three years."

Defined terms in this announcement shall have the meaning given to them in the circular.

For more information, please visit www.juridicainvestments.com or contact:

Juridica Capital Management Limited +1 (866) 443 1080

Richard W. Fields

Cenkos Securities plc +44 (0) 20 7397 8900

(Nominated Adviser and Joint Broker)

Nicholas Wells

Camilla Hume

Peel Hunt LLP +44 (0)20 7418 8900

(Joint Broker)

Guy Wiehahn

1. Introduction

The Company was admitted to trading on AIM on 21 December 2007 having raised £80 million (approximately US$158.5 million based on the then prevailing exchange rates) at £1 per Ordinary Share. It raised a further £35 million (approximately US$51.7 million based on the then prevailing exchange rates) on 30 April 2009 at £1.14 per Ordinary Share. The investment objective of the Company was to build a diversified portfolio of investments in claims and to provide Shareholders with an attractive level of dividends and capital growth through investing directly and indirectly in litigation and arbitration cases, claims and disputes. The Company appointed Juridica Capital Management Limited as its exclusive investment manager to identify and manage direct and indirect investments by the Company in cases, claims and disputes.

Since flotation, the Company has assembled a diverse portfolio of investments in business-to-business related claims within the antitrust and competition, intellectual property and general commercial litigation sectors. From inception to date the Company's portfolio has generated gross cash proceeds of approximately US$117.3 million. After providing for required reserves and operating expenses, the Company has returned or agreed to return (inclusive of the dividend of 10 pence per Ordinary Share payable on 15 January 2014 as announced by the Company on 4 July 2013) a total of £42 million (or approximately US$64 million) to Shareholders in the form of US$54 million in dividends and US$10 million when it acquired Ordinary Shares in its buyback programme in September 2010. Assuming that the portfolio develops as expected, the Company anticipates making additional dividend payments to Shareholders over the next twelve months.

2. Discontinuation Resolution

The Company does not have a fixed life. However, the Directors undertook in the Admission Document that they would, before the sixth anniversary of Admission, convene a Shareholders' meeting at which a special resolution to voluntarily wind up the Company would be proposed. The Articles require that such a resolution be proposed before 21 November 2013, being one month prior to the sixth anniversary of Admission. Accordingly, the Discontinuation Resolution, which proposes that the Company be voluntarily wound up, is being put to Shareholders at the Extraordinary General Meeting. The Discontinuation Resolution determines whether the Company should be wound up, or should instead continue as an investing company admitted to trading on AIM. The Board believes that there continues to be significant opportunities for the Company to invest in a diversified portfolio of new claims that will generate attractive returns for Shareholders. If passed, the Discontinuation Resolution would prevent future investment including future investment in existing claimsthat may require incremental capital to realise their maximum value.

If the Discontinuation Resolution is voted down, it will be put to Shareholders again by no later than 14 November 2016 in accordance with the Company's Articles.

The Directors unanimously recommend that Shareholders vote against the Discontinuation Resolution.

3. New management arrangements

3.1 Overview of and rationale for the proposals

The Existing Investment Manager was appointed pursuant to a Management Agreement dated 17 June 2007. The Existing Management Agreement had an initial term of six years to 17 December 2013, and automatically renews for subsequent periods of three years unless terminated before the next automatic renewal date.

The Company has entered into an agreement with the Existing Investment Manager pursuant to which certain amendments have been made to the Existing Management Agreement. If the Discontinuation Resolution is voted down (namely that Shareholders vote to continue the Company for an additional 3 years), the Company will serve notice on the Existing Investment Manager to terminate the Existing Management Agreement with effect from 31 December 2013 (which it is permitted to do following the expiry of the initial term), subject to the New Management Agreement becoming unconditional in accordance with its terms (which are further described below). Further details relating to the amendments made to, and termination of, the Existing Management Agreement are set out in section 3.2 below.

The Company has also entered into the New Management Agreement with the New Investment Manager pursuant to which the New Investment Manager will be appointed as the new investment manager of the Company with effect from 1 January 2014. The New Management Agreement is conditional upon both the Discontinuation Resolution being voted down and the granting of a licence to the New Investment Manager under applicable Guernsey legislation

Details of the New Investment Manager are set out in section 3.3 and the terms of the New Management Agreement are described in section 3.4.

If the Discontinuation Resolution is not voted down or the New Management Agreement does not become unconditional, the Existing Management Agreement will remain in place (as amended as described in section 3.2 below).

3.2 Amendment to, and termination of, the Existing Management Agreement and Existing Keyman Undertaking

The terms of the Existing Management Agreement inadvertently omitted a provision for the payment of a performance fee to the Existing Investment Manager on existing investments in the event that its appointment was terminated. The Board, its advisers and the Existing Investment Manager have agreed that this omission should be rectified through an amendment to the Existing Management Agreement.

As a consequence, the Existing Management Agreement has been amended so that performance fees will be payable following termination in respect of investments made prior to the date of termination. The post-termination performance fees will be calculated on the same basis as the current performance fee save that the Adjusted Net Asset Value used to calculate the post-termination performance fee shall only be the part of the Adjusted Net Asset Value that is attributable to existing investments at the time of the termination of the Existing Management Agreement. Performance hurdles and a "highwater" mark will continue to apply to the post-termination performance fee in a similar manner to those used prior to termination although certain adjustments have had to be made to reflect that the performance fee is only calculated in respect of part of the Company's investment portfolio.

Further details of the terms of the original Existing Management Agreement are set out in the Admission Document, which is available on the Company's website at http://www.juridicainvestments.com

Subject to the Discontinuation Resolution being voted down, the Company will serve notice to terminate the Existing Management Agreement with effect from 31 December 2013. Upon termination of the Existing Management Agreement, all amounts in the clawback trust account representing performance fees earned by the Existing Investment Manager under such agreement will be released to the Existing Investment Manager (further details regarding the clawback trust arrangements are set out in the Admission Document). The Company will retain its ownership interests in the Existing Investment Manager and as such will collect its share of the performance fees due to the Existing Investment Manager from investments made as at 31 December 2013 to the extent that such performance fees are distributed by the Existing Investment Manager to its shareholders.

Termination of the Existing Management Agreement also automatically terminates the Existing Key Man Undertaking which was entered into at the time of Admission by Richard W. Fields, the key employee of the Existing Investment Manager and details of which are set out in the Admission Document. A New Keyman Undertaking has been entered into conditional upon the New Management Agreement taking effect, details of which are set out in section 3.5 below.

The Existing Management Agreement and the Existing Keyman Undertaking have also been amended to permit Richard W. Fields to undertake, prior to termination, investment and advisory services for other persons investing in, or intending to invest in, any litigation fundraising activities so long as co-investment and investment cost-sharing arrangements and additional staffing of the Existing Investment Manager are, where agreed by the Board and Richard W. Fields, put in place and Richard W. Fields continues to devote sufficient time and efforts to enable the Existing Investment Manager to meet its obligations under the Existing Management Agreement.

3.3 New Investment Manager

The New Investment Manager is Fields Capital Management Limited, a new company incorporated in Guernsey on 6 August 2013. It is currently anticipated that Fields Capital Management Limited will change its name to Juridica Asset Management Limited from 1 January 2014.

The New Investment Manager is wholly owned by Fields Asset Management LLC, a Delaware formed limited liability company. Fields Asset Management LLC is controlled by Richard W. Fields. Richard W. Fields is a licensed lawyer in the District of Columbia and New York with 30 years of legal professional experience. He is currently the key employee of, and shareholder in, the Existing Investment Manager. The New Investment Manager has applied to be licensed by the GFSC to carry on certain controlled investment business pursuant to The Protection of Investors (Bailiwick of Guernsey) Law 1987 as amended. Unlike the Existing Investment Manager, in which the Company holds a minority ownership interest, it is not currently proposed that the Company will invest in the capital of the New Investment Manager.

The Company has been informed that the New Investment Manager intends to raise new funds (which may include both a public fund and a private fund or managed account) with similar investment objectives to the Company in the short to medium term.

Rationale for New Investment Manager

Whilst the management structure of the Existing Investment Manager has served the Company well, the Board is of the view that the Company will benefit from receiving services from the New Investment Manager which will, as compared to the Existing Investment Manager, have increased resources and capacity as a result of its ability to undertake multiple mandates.

The New Investment Manager is expected to have employees with a diverse range of skills and experience enabling it to undertake detailed due diligence and monitoring of both proposed and existing investments. In addition, the investment cost sharing and co-investment opportunities that may be offered to the Company arising out of the New Investment Manager's other mandates may result in a broader range of investment opportunities being available to the Company than would otherwise be the case.

Having regard to the fact that the Company is unlikely to remain the sole client of the New Investment Manager, the Board has sought to mitigate the potential risks associated with this through various contractual protections. For example, the New Management Agreement includes an obligation requiring the New Investment Manager to to agree high level staffing requirements with the Board having regard to the number of other mandates relating to litigation funding that it has taken on.

3.4 The New Management Agreement

3.4.1 Mandate

The New Management Agreement mandates the New Investment Manager to identify, procure, evaluate, negotiate, complete, monitor and manage investments on behalf of the Company. The Board (or a committee of the Board) will be required to approve all investments proposed by the New Investment Manager as is currently the case. The New Investment Manager will also inherit management of, and assume responsibility for, the Company's existing investments from the Existing Investment Manager.

With the written consent of the Company, the New Investment Manager may sub-contract or delegate all or any of its functions or obligations under the New Management Agreement at its own cost to third parties (not being employees of the Investment Manager or competitor investment managers). As at the date of the Circular, the New Investment Manager does not intend to delegate or sub-contract its rights or obligations.

3.4.2 Main Differences between the Existing Management Agreement (as amended) and the New Management Agreement

The New Management Agreement is substantially similar to the Existing Management Agreement, subject to the following:

· under the Existing Management Agreement there is a tiered performance fee structure that is calculated by reference to the amount by which the Adjusted Net Asset Value exceeds the higher of a performance hurdle and a high water mark. Under the New Management Agreement, the performance fee is the sum of: (i) 20 per cent. of the amount by which the Adjusted Net Asset Value that is not attributable to investments made under the Existing Management Agreement exceeds the Preferred Return; less (ii) the aggregate amount of performance fees earned in respect of prior accounting periods by the New Investment Manager. This change provides that the New Investment Manager's performance fee will be approximately equal to 20 per cent. of the amount by which total returns on the Company's investments exceed the Preferred Return from time to time

· under the Existing Management Agreement, the management fee is 2.5 per cent. per annum of the Adjusted Net Asset Value of the Company at the end of the relevant accounting period. Under the New Management Agreement, the management fee has been reduced to 2 per cent.;

· the performance fees in the New Management Agreement will be calculated and paid in US Dollars; and

· no part of the performance fee payable pursuant to the New Management Agreement will be held in a clawback trust account.

Further details of the New Management Agreement are set out below.

3.4.3 Term and termination

The New Management Agreement has an initial term of three years and will be automatically renewed for separate and successive three year periods thereafter, unless terminated by either the Company or the New Investment Manager giving to the other not less than six months' prior written notice of its intent not to renew at the end of the initial term or any renewal term.

The New Management Agreement may also be terminated where, amongst other things, there is a commencement of a winding-up of one of the parties or any other similar event of insolvency or if the other party is in material breach of the New Management Agreement and such breach is not remedied within 60 days' notice to remedy such breach. The Company may also terminate the New Management Agreement:

· where either the New Investment Manager or Richard W. Fields is unable to perform its or his services to the Company and/or New Investment Manager and (in the case of Richard W. Fields only) no person(s) acceptable to the Company have been found to replace him within six months;

· if the Company is unable to carry on a material portion of its business activities because of a significant legal prohibition and such prohibition shall not have been removed within six months of its having come into effect;

· if the New Investment Manager, Richard W. Fields or the New Investment Manager's delegates are found to have been responsible for gross mismanagement in the nature of fraud, wilful default or gross negligence, and they shall not have corrected the matter in question within thirty days of receipt of notice from the Company in a manner acceptable to the Company;

· should the Company's investments decline to a Net Asset Value (adjusted to take account of distributions made to Shareholders) of less than 50 per cent. of the Net Asset Value immediately following the appointment of the New Investment Manager becoming effective; or

· following a Shareholder special resolution to wind-up the Company being approved, by giving not less than six months' notice in writing to the New Investment Manager at any time after such Shareholder vote.

3.4.4 Management fees

The New Investment Manager will be entitled to an annual management fee from the Company at the rate of 2 per cent. per annum of the Adjusted Net Asset Value of the Company at the relevant year end. An estimated fee will be calculated at the start of the relevant period based on the budgeted Adjusted Net Asset Value for that period and paid quarterly in advance. There will then be an adjustment at year end to the extent that the actual management fee payable differs from the estimated management fee already paid.

3.4.5 Performance fees

In addition, the New Investment Manager will be entitled to an annual performance fee. The performance fee will equal the sum of 20 per cent. of the amount by which the Adjusted Net Asset Value of the Company (that is not attributable to investments made under the Existing Management Agreement) exceeds an annual compounding hurdle of 8 per cent. (the "Preferred Return") less the aggregate amount of performance fees previously paid pursuant to the New Management Agreement. The Preferred Return calculation will be subject to certain adjustments in order to properly take account of additional capital being made available for investment by the New Investment Manager and the payment of performance fees in prior accounting periods.

The Adjusted Net Asset Value for the purposes of calculating the performance fee payable to the New Investment Manager will exclude the value of investments made prior to the appointment of the New Investment Manager. As described in section 3.2 above, the Adjusted Net Asset Value attributable to those investments will be used to calculate the post-termination performance fee that may be payable pursuant to the amended Existing Management Agreement. Further, the Adjusted Net Asset Value will be increased by the amount of any cash distributions made in the accounting period in respect of which the performance fee is being calculated.

The New Investment Manager will not be entitled to enhanced performance fees above 20 per cent. as provided under the tiered structure contained in the Existing Management Agreement.

The performance fee calculation in the New Management Agreement as described above has been formulated to provide that the New Investment Manager's performance fee will be approximately equal to 20 per cent. of the amount by which total returns on the Company's investments exceed the Preferred Return from time to time.

The New Management Agreement also provides for a performance fee to be paid to the New Investment Manager following termination. The post-termination performance fee will be payable in respect of investments made prior to the date of termination of the New Management Agreement. The post-termination performance fee will be calculated on the same basis as the performance fee payable prior to termination save that adjustments to the Adjusted Net Asset Value and performance hurdle similar to those described in paragraph 3.2 above will be made.

3.4.6 Fee Option

In the event that the New Investment Manager launches an additional fund that pays management and performance fees calculated on a different basis from that provided for in the New Management Agreement, the Company will have the option (which it will not be re quired to exercise) to amend the New Management Agreement so that the fees it pays will be calculated on the same basis as the other fund. If the other fund is a private fund that offers different fees to different investors, the fees payable in respect of that fund which will be offered to the Company will be calculated on a blended basis. In the event that the Company ever exercises such an option, the revised management and performance fees would apply with effect from the first full accounting period of the Company commencing after the option is exercised.

3.4.7 Other costs and expenses

The Company will reimburse the New Investment Manager (or advance monies to the New Investment Manager where appropriate) in respect of due diligence costs (being costs for specialist services not within the expertise of the New Investment Manager or its delegates), reasonable out of pocket expenses and certain other expenses incurred by the New Investment Manager in carrying out its duties under the New Management Agreement.

3.4.8 Restrictive covenants

The New Management Agreement does not restrict the New Investment Manager from undertaking other investment management or advisory services for any person investing in, or intending to invest in, any litigation funding activities, subject to the New Investment Manager and the Company agreeing, where appropriate, to co-investment, investment cost sharing and additional staffing arrangements in connection with the third party services provided by the New Investment Manager and Richard W. Fields continuing to be able to meet his obligations under the New Keyman Undertaking (see section 3.5 below).

The Company will continue to be prevented from making a distribution to Shareholders where such distribution would result in the Net Asset Value falling below the sum of the total gross proceeds received by the Company pursuant to the issue of Ordinary Shares conducted by it from time to time less the total amount paid by the Company to acquire or redeem the Ordinary Shares from time to time (such amount being, as at the date of the Circular, £108,880,000).

3.4.9 Indemnity

The New Management Agreement contains an indemnity from the Company in favour of the New Investment Manager and its employees in respect of claims against the New Investment Manager by third parties except where the relevant loss arises from the gross negligence, wilful default or fraud of any director, officer, employee, agent or subsidiary delegate of the New Investment Manager. The New Investment Manager will not be liable for any act or omission of any of its delegates (other than delegates which are subsidiaries of the New Investment Manager) which constitutes judicially determined fraud, wilful default or gross negligence provided the New Investment Manager has exercised reasonable skill, care and good faith in the selection, supervision and monitoring of such person as a delegate.

3.5 New Keyman Undertaking

The Existing Keyman Undertaking will automatically terminate upon termination of the Existing Management Agreement. A New Keyman Undertaking has been entered into conditional upon the New Management Agreement taking effect. Save as described below, the New Keyman Undertaking will impose similar restrictions on Richard W. Fields as did the Existing Keyman Undertaking.

Under the New Keyman Undertaking entered into between Richard W. Fields, the Company and the New Investment Manager, Richard W. Fields:

· gives certain undertakings to the Company and the New Investment Manager, including to using the level care, diligence and skill expected of an individual having similar experience and qualifications as him in rendering the services required of him under his service agreement with the New Investment Manager and the services required of the New Investment Manager under the New Management Agreement, and to perform his duties well and to faithfully serve the interests of the Company and the New Investment Manager;

· undertakes, represents and warrants to the Company and the New Investment Manager that he will hold and maintain all the authorities necessary for the purposes of carrying out the obligations of the New Investment Manager under the New Management Agreement and in relation to Fields Law Firm;

· agrees to devote such time to the provision of the services as is required to ensure the proper performance of such services; and

· agrees, if so required by the Board, to attend meetings of the Board at such times as the Board may reasonably require.

The New Keyman Undertaking does not restrict Richard W. Fields providing any advisory or management services to any person provided appropriate co-investment, investment cost sharing and staffing arrangements (where such arrangements are agreed with the Company as described above) are put in place and he continues to provide a sufficient amount of his time and efforts towards the New Investment Manager to enable it to satisfy its obligations under the New Management Agreement. Richard W. Fields has undertaken to procure that the New Investment Manager complies with the staffing arrangements agreed pursuant to the terms of the New Management Agreement.

Richard W. Fields will not be liable to the Company or the New Investment Manager under or pursuant to the New Keyman Undertaking, his service agreement with the New Investment Manager or the New Management Agreement for:

· the success or failure of the investment policy pursued or any loss or failure to take profit or advantage incurred in relation to the retention, purchase or sale of any investments or the failure or write-off of any investment;

· the taxation consequences of the retention, purchase or sale of any investment;

· any error of fact, law or judgment or any action lawfully taken or omitted to be taken by Richard W. Fields or the New Investment Manager in good faith on the advice of legal, tax or accounting advisers of the appropriate jurisdiction; or

· the allocation of investment opportunities by the New Investment Manager in accordance with the terms of the New Management Agreement,

except to the extent that the Company or the New Investment Manager suffers loss as a result of judicially determined fraud or wilful default or gross negligence on his part.

3.6 Related party transactions

The amendment to and termination of the Existing Management Agreement, the appointment of the New Investment Manager, the entry into the New Management Agreement and the entry into the New Keyman Undertaking are all related party transactions for the purposes of Rule 13 of the AIM Rules.

For the purposes of Rule 13 of the AIM Rules, the Directors, all of whom are independent for the purposes of Rule 13 of the AIM Rules, having consulted with the Company's nominated adviser, Cenkos Securities, believe that the terms of such proposals are fair and reasonable, in so far as Shareholders are concerned.

5. Resolution and recommendation

The resolution proposing that the Company be voluntarily wound up is to be proposed at the Extraordinary General Meeting as a special resolution.

The Board believes that the Discontinuation Resolution is not in the best interests of the Company or its Shareholders as a whole, and unanimously recommends that Shareholders vote AGAINST THE RESOLUTION at the Extraordinary General Meeting.