TAU.L Regulatory News (TAU)

Tau Capital plc

("the Company" or "Tau")

Posting of Notice of Annual General Meeting ("AGM")

The Company announces that it has today posted to shareholders a circular, containing notice of the Annual General Meeting ("AGM") to be held at IOMA House, Hope Street, Douglas, Isle of Man on 24 July 2012 at 9.00 am. 

An extract from the circular is as follows:

The proposed Extraordinary General Meeting

As noted in the Company's announcement dated 1 June 2012, the Company received a requisition from HSBC Global Custody Nominee (UK) Limited acting as nominee for LIM Asia Multi-Strategy Fund Inc (the "Requisitioning Shareholder"), a holder of in excess of 10 per cent. of the share capital of the Company, to call an extraordinary general meeting of the Company ("EGM").

The purpose of the proposed EGM was to consider resolutions (the "Requisitioned Resolutions") regarding:

·; the appointment of Mr Nicholas Paris and Mr Terence Mahony as directors of the Company and for the removal of Mr Michael Sauer as a director of the Company;

·; a change in the investment policy of the Company; and

·; a review of the investment management agreement between the Company and Compass Asset Management Limited (the "Manager"), including as to whether it should be terminated.

Following discussions with the Requisitioning Shareholder regarding the Requisitioned Resolutions, the Requisitioning Shareholder has agreed to withdraw its request for an EGM to be held to consider the Requisitioned Resolutions provided that the Company puts to shareholders the resolutions numbered 5, 6, 7 and 8 in the Notice of Annual General Meeting as summarised in paragraphs 5, 6 and 7 below and recommends them to shareholders. The Company has agreed to do so and welcomes the constructive way in which discussions were held with the Requisitioning Shareholder regarding these matters.

The Requisitioning Shareholder has confirmed that it intends to vote in favour of each of the resolutions to be put to the Annual General Meeting.

Report and accounts and re-appointment of auditors

As with previous annual general meetings of the Company, resolutions will be put to shareholders to receive and adopt the annual report and audited accounts of the Company for the year ended 31 December 2011, together with the directors' and auditor's reports thereon, to re-appoint Deloitte LLP as auditors of the Company and to authorise the Directors to determine the remuneration of Deloitte LLP as auditors of the Company.

Re-election of Director

In accordance with Article 88 of the Company's Articles, Mr Richard Horlick is to stand for re-election as a director at the Annual General Meeting.

Having considered the performance of and contribution made by Mr Horlick, the Directors remain satisfied that his performance continues to be effective and demonstrates commitment to the role and the Directors therefore recommend his re-election at the Annual General Meeting.

Appointment of new Directors

As noted above, the Company received a requisition fromthe Requisitioning Shareholder to call an EGM to consider, inter alia, the appointment of Mr Nicholas Paris and Mr Terence Mahony as directors of the Company and for the removal of Mr Michael Sauer as a director of the Company. On 15 June 2012, Mr Sauer resigned as a non-executive director of the Company with immediate effect. On behalf of the Board I would like to reiterate my thanks to Michael for his guidance and commitment to the Company since his appointment and to wish him well in the future.

In light of Mr Sauer's resignation and the Requisitioned Resolutions proposing Mr Mahony and Mr Paris as directors, the Board proposes that Mr Terence Mahony and Mr Nicholas Paris, each of whom has confirmed his willingness to act, be appointed as a director at the Annual General Meeting in accordance with Article 82 of the Company's Articles.

The Directors believe that each of Mr Mahony and Mr Paris has the requisite skills and expertise required of non-executive directors of an AIM listed company.

A brief biography of Mr Mahony is set out below:

Mr Mahony is a recognised leader in emerging markets investing, with an extensive global financial career spanning over 40 years. Mr Mahony first worked with the Bank of London and South America in London and Zurich, followed by broking positions at White Weld and Paine Webber. Mr Mahony's fund management experience began in Boston with the Baring Puma Latin American fund which he launched in 1991 for Barings as Director and CIO for Latin America. After Barings, he returned to Hong Kong in 1993 as the first CIO of HSBC's new Global Emerging Markets strategy. At HSBC he launched HSBC's first Global Emerging Markets Fund. From 1996 to 1999 he was Managing Director for Emerging Markets Equities, CIO of Global Emerging Markets Equity strategy and President of Trust Company of the West (TCW) Asia Limited. From 2000 to 2008, he was a director and member of the investment committee of Investment Manager Selection (IMS) Limited in London. In 2008, as a member of the Board, he was asked to fill in as interim CIO for Indochina Capital. Mr Mahony is Chairman of VinaCapital, the largest asset management company in Vietnam with 3 closed ended funds listed on AIM. In addition he serves on the boards of various investment funds as a non-executive director, namely: Advance Developing Markets Fund Ltd, Pacific Assets Trust plc, Impax Asian Environmental Markets plc, LIM Asia Special Situations Fund, CITIC Capital Investment Management, Polunin Capital EM Active Fund, Caddis Emerging Markets and Vietnam Azalea Fund Ltd.

Mr Mahony is resident in Hong Kong.

A brief biography of Mr Paris is set out below:

Mr Paris is a Managing Partner of Purbeck Advisers LLP and he leads the Investment Advisory and Distribution and Marketing team. He has extensive experience in launching and marketing specialist funds to professional investors worldwide. Prior to founding Purbeck Advisers, Mr Paris was Global Head of Hedge Fund Sales at American Express Alternative Asset Management (US$1bn managed in Single Strategy Hedge Funds) and he was also the Head of Marketing at Coronation International in London (US$1.2bn managed in Funds of Hedge Funds). Prior to these roles, Mr Paris had extensive experience in corporate finance advice on the new issue of closed end Country Funds and Specialist Investment Trusts.

Mr Paris is a Chartered Alternative Investment Analyst, a Fellow of the Institute of Chartered Accountants in England and Wales (FCA) and a Fellow of the Chartered Institute for Securities and Investment in the UK (FCSI). Additionally, Mr Paris is an Authorised Representative approved by the Financial Services Authority in the UK.

Mr Paris is resident in the UK.

The Isle of Man does not have its own rules governing independence of directors. The Company seeks to comply with the provisions of the UK Corporate Governance Code insofar as it is appropriate and practicable for a company of its size and nature, as well as ensuring that a majority of the Board at all times consists of directors who are independent of the Manager.

Under the UK Corporate Governance Code, a board should determine whether a director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director's judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director:

·; has been an employee of the company or group within the last five years;

·; has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;

·; has received or receives additional remuneration from the company apart from a director's fee, participates in the company's share option or a performance-related pay scheme, or is a member of the company's pension scheme;

·; has close family ties with any of the company's advisers, directors or senior employees;

·; holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;

·; represents a significant shareholder; or

·; has served on the board for more than nine years from the date of their first election.

The Directors have been advised that Purbeck Advisers LLP (of whom Mr Paris is the Managing Partner) is engaged to provide investment advice on Asian closed end funds exclusively to the Requisitioning Shareholder and its affiliates. Accordingly, the Board considers that Mr Paris, by virtue of his existing relationship with the Requisitioning Shareholder via Purbeck Advisers, would not be deemed to be independent of a significant shareholder and therefore would not meet the test of independence set out in the UK Corporate Governance Code.

The Directors note that Mr Mahony is (amongst other directorships) a director of LIM Asia Special Situations Fund, an affiliate of the Requisitioning Shareholder. Mr Mahony is also a director of Pacific Assets Trust plc, on whose board Richard Horlick also sits. Given this existing relationship with the Requisitioning Shareholder who is a significant shareholder and the cross-directorship with Richard Horlick, who is also deemed not to be independent, the Directors consider that Mr Mahony would not be deemed to be independent for the purposes of the UK Corporate Governance Code.

Accordingly if each of Mr Mahony and Mr Paris are appointed, the Board will comprise three independent directors and three non-independent directors (including Richard Horlick).

Proposed amendments to the Company's Investing Policy

The Directors have monitored the investment opportunities for the Company based on its existing investment policy and the returns being generated by the Company's investments. Following discussions with major shareholders, including the Requisitioning Shareholder, the Directors are of the view that continued investment through the Fund will not be in the long term interests of shareholders. Accordingly, the Directors consider that it is appropriate to amend the Company's investing policy and commence an orderly run-off of Tau (Cayman) LP (the "Fund"). It is also proposed that the current investment management agreement (the "Management Agreement") with the Manager is terminated in conjunction with such change in investing policy (see paragraph 7 below).

The Directors are therefore proposing that an orderly divestment of the Fund's investments be undertaken in the following manner and over the following periods:

·; no new investments in Private Equity investments (as defined in the Company's admission document dated 3 May 2007) will be made from the date of the meeting;

·; no new investments in Public Equities (as defined in the Company's admission document dated 3 May 2007) will be made by the Manager on behalf of the Fund from the date of the meeting without the prior approval of the Board;

·; the liquid part of the portfolio of Public Equities (as defined in the Company's admission document dated 3 May 2007) to be sold within a period of three months;

·; the remainder of the portfolio of Public Equities to be sold within a period of three to six months; and

·; the portfolio of Private Equity investments to be sold within a period of 12 to 24 months,

with the periods relating to sales of investments to start as from the date that a new investment manager is appointed and with the Board having the discretion to extend any such period as appropriate in respect of any specific investment. The Directors propose that the selection of a new investment manager is completed within one month after the Annual General Meeting (see paragraph 7 below).

As interests in the Public Equities and Private Equity portfolio are divested, the Directors intend to return the resulting cash to shareholders. This will allow for an orderly disposal of the Company's investments and minimise the potential impact that the Company's exit from such securities could have on their price.

The means by which any cash arising from the run-off of the Fund will be returned to shareholders has not yet been determined, but may include a combination of the purchase of own shares, a tender offer for the Company's shares and/or dividend payments. In order to simplify the means by which the cash can be returned, the Company proposes to amend its corporate form so as to become a company incorporated under the Isle of Man Companies Act 2006 (see paragraph 8 below).

The amendment of the Company's investing policy will require the approval of shareholders in general meeting in accordance with the requirements of the AIM Rules. Accordingly, the Directors propose that the resolution to amend the investing policy of the Company and implement the orderly run-off of the Fund is proposed as an ordinary resolution as required by the AIM Rules.

Proposed termination of the Management Agreement and entry into a new investment management agreement

In conjunction with the proposal to run-off the Fund and amend the investing policy, and taking into account the nature of the Requisitioned Resolutions, one of which proposed whether the Management Agreement should be terminated, the Directors are seeking approval from shareholders for the termination of the Management Agreement.

If shareholders approve such termination, the Company proposes to appoint a new investment manager and enter into a new investment management agreement to implement the sale process of the Public Equities and assist the Directors in the disposal of the Private Equity portfolio. The Directors propose to seek proposals from up to four potential Managers (including the existing investment manager) to act as successor to the existing investment manager. The Directors propose that the selection of a new investment manager is completed within one month after the Annual General Meeting.

The terms of the new investment management agreement, including remuneration of the successor investment manager and rights of termination, will be negotiated with the successor investment manager following their selection and taking into account the new investing policy of the Company. Details of the terms of the investment management agreement will be announced in due course, but it is not proposed that there is a separate shareholder approval of the terms of appointment of the successor investment manager.

The Management Agreement contains an exclusivity arrangement, whereby the Company may not appoint any other adviser or manager to act jointly with the Manager, as a replacement for the Manager or otherwise act as investment manager during the term of the Management Agreement. The Management Agreement currently provides that the Company must give not less than 180 days' notice of termination in writing. The Management Agreement may also be terminated if the shareholders of the Company approve the winding up or liquidation of the Company and a duly authorised liquidator is appointed within three months of the date of such resolution by shareholders. The approval of the disposal of the Fund's investments contemplated in paragraph 6 above would not allow the Company to exercise this additional right of termination.

If the Company is unable to agree to a shorter notice period with the Manager to terminate the Management Agreement and/or make a payment in lieu of notice, the Company would be in breach of the Management Agreement if it unilaterally terminated the agreement and/or appointed a new manager within one month of the date of the Annual General Meeting. The Directors therefore consider that such termination should be approved by shareholders pursuant to an ordinary resolution.

The Directors note that the Requisitioned Resolutions proposed to consider the termination of the Management Agreement as a special resolution, but the Directors consider that an ordinary resolution is sufficient to ratify any decision to terminate the Management Agreement and this has been agreed with the Requisitioning Shareholder.

Proposed conversion to a 2006 Company

In light of the proposed run-off of the Fund and amendment to the Company's investing policy, the Directors have considered the means by which the proceeds from the sales of investments might be distributed to shareholders. Regardless of the actual means by which such return of funds will be implemented, the Directors have concluded that it would be in the best interests of the Company and the Shareholders to propose a special resolution at the Annual General Meeting approving the following additional matters:

(a) the re-registration of the Company as a company governed by the Isle of Man Companies Act 2006 (as amended) (the "2006 Act") (it is currently incorporated under the Isle of Man Companies Acts 1931-2004) (the "Re-registration"); and

(b) the adoption of a new memorandum of association (the "New Memorandum") and new articles of association (the "New Articles") suitable for a company governed by the 2006 Act.

The 2006 Act updates and modernises Isle of Man company law and, amongst other things, abolishes a number of traditional company law formalities including the requirement to maintain capital (subject to solvency). Accordingly, subject to the Re-registration becoming effective, it should be easier for the Company to return funds to its shareholders (including following the disposal of the Fund's interests in Public Equities and Private Equity investments). Part 1 of the Schedule to this letter contains a brief explanation of the key characteristics of companies incorporated under the 2006 Act.

As part of the Re-registration the Company proposes to adopt the New Articles, which the Company considers are appropriate for a company incorporated under the 2006 Act the shares of which are admitted to AIM. The proposed New Articles are substantially the same as the Company's existing articles of association; those changes considered significant which have been incorporated in to the New Articles are listed in Part 2 of the Schedule to this letter.

Copies of the New Memorandum and the New Articles are available for review from the Company's registered office at any time before the Annual General Meeting; in addition, copies of the New Memorandum and the New Articles will be available on the Company's website at www.taucapitalplc.com and at the Annual General Meeting.

On the basis that the Re-registration proceeds, the 2006 Act provides that the Company will be the same legal entity as exists at present and Re-registration will not serve to prejudice or affect the continuity of the Company. On the date the Registrar of Companies in the Isle of Man issues a certificate of re-registration in respect of the Company, the Company shall cease to be a company incorporated under and subject to the Companies Acts 1931-2004 (as amended); instead the Company shall be subject to the 2006 Act.

Authority to purchase own shares

As with previous annual general meetings, the Directors are proposing to renew the Company's authorisation to make market acquisitions of its Shares, up to a maximum of 14.99% of the Company's issued share capital. For information purposes, the current authorised share capital of the Company is 350,200,000 Ordinary Shares and at the date of this document the total issued share capital is 222,308,464 Ordinary Shares.

In light of the proposed amendment of the Company's investing policy, the Directors consider that the Company may take advantage of this authorisation during the 12 months following the Annual General Meeting.

As the market purchase authority will only be required if the Company remains subject to the Isle of Man Companies Acts 1931 to 2004 (as amended), the resolution will only be effective if the Re-registration and the adoption of the New Memorandum and New Articles is not approved at the Annual General Meeting. If the Re-registration and the adoption of the New Memorandum and New Articles are approved at the Annual General Meeting, this resolution will not be put to the meeting.

A copy of the circular and the notice of AGM together with the proposed new Memorandum and Articles of Association are available from the Company's website, http://www.taucapitalplc.com/

Further information, please contact: